“To realize value, bottom-line value, technology is NECESSARY but NOT SUFFICIENT.”
This Eli Goldratt quote highlights a crucial truth for manufacturers:
New technology alone won’t drive the profitability or operational excellence you’re looking for.
Why? Because new technology can’t drive the kind of organizational change that translates to bottom line results – only system-wide business management methodologies and behavioural shifts can do that for you.
At Montera, we see this situation time and time again.
Say, for example, that you want to improve inventory management: your goal is to increase inventory turns and improve availability to sell more and increase profitability.
Here are the questions we recommend you explore before you pull the trigger:
6 questions to evaluate a tech investment
- What is the main power of the technology?
- What current limitations does the new tech eliminate or vastly reduce?
- What usage rules and behaviours exist today that accommodate the limitation?
- What rules and behaviours need to change to benefit from the new technology?
- What new tech application will enable the change, without causing resistance?
- How will the tech be used to build on and sustain the business?
To continue our inventory management example, let’s consider how our Roadrunner Rx software addresses those questions:
- The main power of the technology is to calculate material requirements.
- The limitation Roadrunner Rx eliminates is the need for a forecast (because forecasts are inherently inaccurate.)
- The behaviours that accommodate that limitation is that buyers and planners must get involved in the process at the last minute to make adjustments based on their intuition and experience.
- The rules and behaviour change needed are to switch to a Demand-Driven Replenishment approach and to follow the inventory buffer signal.
- To implement and sustain this change, this methodology is built right into the software: staff don’t need to be TOC / Constraint Management experts, they only need to know how to use the Roadrunner dashboard for daily “what to buy” and / or “what to make” recommendations.
- Over time, inventory drops and availability goes up, lowering costs while increasing sales and profitability.
Read Necessary But Not Sufficient for a deeper dive
For more on this topic, dig into Goldratt’s book Necessary But Not Sufficient, which describes why most ERP investments, while often necessary, are not sufficient to deliver sustainable business results, and how DDR and production management approaches can turn things around.
If you’d like a free copy, grab yours here.
Thanks for reading!
— Jack Warchalowski, Montera CEO