"TP is the absolute difference between Unit Sale Price and Unit Variable Cost. Thus, TP is the single parameter which takes care of both "The Top Line" and "The Bottom Line", the parameters around which each and every business revolves," said Mahkotia. "OE and Investments, especially the dead investments-such as, Slow Moving and Non Moving Inventories-are to be constantly monitored so that they do not go up drastically. OTIF in general means delivery efficiency-it measures how well we respond when some product is being ordered; the order should be supplied in full quantity on time."
"These four key indicators or parameters broadly covered all our functions," said Mahkotia, adding that all four "were to be measured week by week for achieving the overall business objective."
IT and business leaders at Sheela Foam, naturally, gave prime importance to TP. "TP is the main performance indicator and all other existing performance parameters were required to be aligned with it," said Mahkotia, who went on to explain their choice to run with weekly reports on the indicators. "From a monthly review mechanism we shifted to a weekly monitoring system. This was done with the objective of bringing focus on a shorter period, so that necessary corrections can be done."
A pre-existing system did prove to make TOC adoption substantially easier for Sheela Foam's managers. "Implementation of this concept was possible for us due to the tight integration between each function through our inhouse ERP [enterprise resource planning] system known as 'greatplus', which stands for a growth-oriented, reliable, economical, anchored and trustworthy business tool," says Mahkotia, before elaborating on the metrics for their four key performance indicators.
"TP for each transaction is calculated at the order level. The order is not released for further processing if the TP is below the defined percentage. A special approval is taken if the order with lower TP percentage is to be processed. Management reports have been developed that highlights cases generating lower TP than the set parameters. In accordance with this, we have also developed business intelligence (BI) for the same," Mahkotia says. "The OTIF for each transaction is calculated right up to the dealer level, so that the product is made available in the market without any delay."
The new setup leveraged 'greatplus' to ensure that the entire Sheela Foam organisation was kept apprised of how well the company was doing, even down to performance of the individual employee. "TP and other supporting parameters have been brought on the homepage 'greatplus'. Whenever, any employee of the organisation logs-on to 'greatplus', TP, OTIF and his performance is available to him on his homepage. Each employee's performance has been aligned with TOC parameters which are linked automatically with the appraisal system in 'greatplus'," says Mahkotia, who then highlights what is arguably an even more effective method of keeping people informed. "We update the entire management team and other associated employees about TP and other supporting performance parameters through an auto generated 'Morning SMS'. The SMS is auto generated through 'greatplus', which updates each individual about 'Throughput generated during the week, Growth achieved over last year, Material Despatched on the previous day, outstanding orders (pendency), OTIF, OE and Investments'."
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