The Demand Driven Adaptive Enterprise. Carol Ptak
Concerns about the impact of the collapsing housing and credit markets on the general U.S. economy caused the U.S. President to announce a limited bailout of the country’s housing market for homeowners who were unable to pay their mortgage debt. This spilled over into other markets. People simply did not have money to spend. The automotive industry was shocked by the bankruptcy of General Motors. GM was the world’s largest car maker and now it faced collapse because it no longer had sufficient cash to continue operation. It took the U.S. government stepping in to save a national icon and the jobs associated with it.
With the exploration of these two characteristics (coherence and resiliency) of a CAS, consider two pivotal questions:
Authors’ note: This is an extremely abbreviated description of complex adaptive systems. Readers seeking a deeper dive behind this science should consider reading Chapter 10 of Demand Driven Performance —Using Smart Metrics (Smith and Smith, McGraw-Hill, 2014) and the additional resources listed in that chapter.
Flow as an Objective and Purpose for Systems and Subsystems
What is the objective for every organization and a purpose for its subsystems to effectively tie to and drive that objective? Is there a basic fundamental principle to focus every business?
Now more than ever business is a bewildering and distracting variety of products, services, materials, technologies, machines, and people skills obscuring the underlying elegance and simplicity of it as a process. The required orchestration, coordination, and synchronization is simply a means to an end. That much is quite easy to grasp. What is more difficult for many organizations to grasp is what fundamental principle should underlie that orchestration, coordination, and synchronization.
The essence of any business is about flow. The flow of materials and/ or services from suppliers, perhaps through multiple manufacturing plants and then through delivery channels to customers. The flow of information to all parties about what is planned and required, what is happening, what has happened, and what should happen. The flow of cash back from the market to and through the suppliers.
Is this some sort of inspired revelation? No. Flow has always been the primary purpose of most services and supply chains. Very simply put, you must take things or concepts, convert or assemble them into different things or offerings and then get those new things or offerings to a point where others are willing to pay you for them. The faster you can make, move, and deliver all things and offerings, the better the performance of the organization tends to be. This incredibly simple concept is best described in what is known as Plossl’s Law.
Plossl’s Law
George Plossl was an instrumental figure in the formation and proliferation of Material Requirements Planning (MRP), the original planning and information system that would eventually evolve into modern-day Enterprise Resource Planning (ERP) products. He is commonly referred to as one of three founding fathers of these manufacturing systems; Joe Orlicky and Oliver Wight are the other two.
In 1975 Joe Orlicky wrote the book Material Requirements Planning—The New Way of Life in Production and Inventory Management. This book became the blueprint for commercial software products and practitioners alike. By 1981, led by Oliver Wight, Material Requirements Planning had evolved into Manufacturing Resources Planning (commonly referred to as MRP II). MRP II went well beyond the simple planning calculations used in MRP. It incorporated and used a Master Production Schedule, capacity planning and scheduling, and accounting (costing) data. Oliver Wight passed away in 1983 and Orlicky passed away in 1986. In 1994, George Plossl took up the torch to paint a vision for the future in the second edition of Joe’s seminal work, Orlicky’s Material Requirements Planning 2e.
Nineteen ninety-four, however, was an interesting and difficult time to write a book about the vision and implementation of technology. Mainframes had given way to client-server configurations and the birth of the Internet had people puzzled about its industrial application. But Plossl successfully navigated these difficulties by sticking to a key transcendent principle, one that had not been well articulated previously in manufacturing systems literature. He called it the First Law of Manufacturing. We now simply know it as Plossl’s Law.
All benefits will be directly related to the speed of flow of information and materials.
It should be noted that Plossl was focused on manufacturing centric entities. As such there is an obvious omission to the law about services. But providing services is also all about flow. For example, the process of obtaining a mortgage flows through a series of steps. The longer it takes, the more risk to the sale and more dissatisfied the customer. Having a surgical procedure at a hospital is about flow. The longer the process, the higher the cost and risk to the patient. Repairing a downed piece of equipment is about flow. The longer the repair takes, the less revenue that piece of equipment can generate. As such, consider an amended Plossl’s Law.
All benefits will be directly related to the speed of flow of information, materials, and services.
This statement is not just simple; it is elegant. It also requires a critical caveat in the modern services and supply chain landscape. We will get to that critical caveat in due time. First, let’s further explore the substance of Plossl’s Law.
“All benefits” is quite an encompassing statement. It can be broken down into components that most companies measure and emphasize. All benefits encompass: