Companies that have a real competitive advantage achieve this in probably one of only two broad approaches: firstly with unmistaken product leadership, and secondly through excellent supply chains. This article highlights some of the points from a paper that was presented by the author at the 2007 annual Sapics Conference.

By Dawid Janse van Rensburg, MD CargoSolutions, a Division of Cargo Carriers

The well known Theory of Constraints (TOC) body of knowledge has evolved substantially over the past decade or so, and is now a sure way of enabling companies to achieve that elusive decisive competitive edge. The TOC methodology is the brainchild of Dr Eli Goldratt, best-selling author of 'The Goal', and other TOC related books.

TOC is an overall management philosophy that aims to continually achieve more of the goal of a system. If that system is a for-profit business, then the goal becomes one of making more money, in the present as well as in the future - or, profitable growth. According to TOC, every organisation has one key constraint that limits the system's performance relative to its goal. At the higher supply chain level, these constraints can be broadly classified as either an internal constraint or a market constraint. If there is agreement that a competitive advantage ensures profitable growth, then it can be stated that this profitable growth is ensured by the requirement for the protection and increasing of sales (sell more), as well as an ability to reduce costs and inventory in the supply chain - the two key strategic objectives.
The requirement for increased sales leads to a strong focus on protecting and improving the system flow rate and time - effectiveness. Not surprisingly, the sales department will be the custodians of this focus. As can be guessed, an overemphasis of these actions will typically have very distinct undesirable effects, such as lower efficiencies, lower margins, and more.

On the other hand, a strong focus on the efficiencies in the supply chain will typically result in local optimisation initiatives, with high expediting costs and typically a loss in sales - chasing efficiencies. Very few companies manage to successfully resolve these internal conflicts. Evidence of this is the extent to which most companies seem to have a strategy that is based on the fact that the sum of the local optima will be greater than the overall system optima. Whilst this logic is certainly not the belief of competent managers, the challenge is to get interdepartmental co-operation to the extent that all departments and divisions in companies subscribe to the same strategy and the resulting tactics to achieve the goal of the company.
The result is most often that companies compromise in an effort to find a solution to the eternal internal conflict, resulting in giving more attention to one of the focus areas and as a result oscillation takes place, trapping the company in mediocre performance.

The way to deal with conflicts is not to find better compromises, but rather to break the conflict by finding the wrong assumption that blocks the win/win and achievement of more goal units. Finding a win/win solution to replace the compromises that underpin the traditional conflicts, liberates the company on a definite path to achieving increased sales as well as cost efficiencies. Such a company will typically be characterised by certain attributes:

• Lower costs/investment
• Better profits/ROI
• Happier shareholders
• More investment/cash
• Less customer complaints
• More sales (quantity and price)
• Less rework costs
• Higher profits/ROI.

A strong focus on the efficiencies in the supply chain will typically result in local optimisation initiatives

Realising the need for a 'roadmap' for the implementation of the various TOC solutions, Goldratt has developed the concept of Strategies and Tactics Trees (S&T Trees). Basically this is a four-level hierarchy of strategies and its associated tactics required to achieve the specific strategy. At the highest level, the strategy defines the ambitious goal of the company, for example an expression of the levels of profitability within a certain timeframe.
Strategy is the answer to the question: To what purpose (an objective or desirable effect)?', whilst a Tactic is the answer to the question: 'How to (a chosen mode
of operation) achieve the Strategy.' Therefore Strategy and Tactics entities always exist together and exist at each level. Over the years a series of S&T Trees have been developed (and are continuously being redefined), for different situations that are defined by the type of unique sales offering that the company needs to provide to its customers to ensure a decisive competitive edge.

For the Viable Vision, a global initiative from the International Goldratt Group, where the vision is 'to bring a company to make in less than four years, a net profit equal to its current turnover (total sales)', these S&T Trees are essential guidelines foe the achievement of this highly ambitious goal.
The Viable Vision projects are based upon two fundamental principles, namely growth and stability. Goldratt is a firm believer that growth must take place in a stable environment to ensure that it is sustainable.
On the principle of growth, for a company to attain its ambitious profit goals, the company must make sure that the throughput of the company grows (and continues to grow) much faster than operating expenses.

The Goldratt definition of the tactic that will ensure that the company achieves this strategy is an extremely well-defined statement covering all tenets of the approach and firmly grounded in the principles of growth and stability. The tactic is: Build a decisive competitive edge and the capabilities to capitalise on it, on big enough markets without exhausting the company's resources and without taking real risks.

In summary, the Goldratt Group has developed a comprehensive blueprint that enables the building of a decisive competitive edge (operational and logistics capability) and the capability to capitalise on it (a marketing and sales capability).
Over the past decade or more, dramatic results have been achieved with the implementation of a solution in a specific part of the business. Some typical benefits that have been documented include:

• Lead times - 70% reduction
• Due date performance - 44% improvement
• Inventory levels - 49% reduction
• Revenue - 63% increase

These figures represent the mean improvements of several hundred companies documented in an independent study, 'The World of Theory of Constraints,' by Victoria Mabin and Steven Balderstone.

Build a decisive competitive edge and the capabilities to capitalise on it, on big enough markets without exhausting the company's resources and without taking real risks.

However, it is the recent brainchild of Goldratt, the Viable Vision process, that has harnessed the various supply chain solutions in a holistic approach to develop and sustain a decisive competitive edge. Basically, the power of the process is encapsulated in the fact that this process centres on the alignment of the entire organisation to strive for the same vision and being measured on the same key performance indicators.
Whilst this may sound trivial, it is probably the single biggest obstacle that prevents most organisations from developing and harnessing a real competitive advantage - getting all departments to engage in optimisation projects that locally slot in with the optimisation of the bigger supply chain.

Viable Vision projects have already been embarked upon across the world and in industries covering the spectrum from steel manufacturing, fast moving consumer goods industries, footwear, plastic extrusion manufacturing and various other manufacturing sectors.

If there is agreement that a competitive advantage ensures profitable growth, then it can be stated that this profitable growth is ensured by the requirement for the requirement for the protection and increasing of sales (sell more), as well as an ability to reduce costs and inventory in the supply chain - the two key strategic objectives.