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Are we managing the current chip shortage as per TOC principles?
The constraint in many industries like automotive has shifted from market demand to the key input component… the semiconductor chip. How should we manage the supply chain planning and execution in such a scenario?
TOC provides specific guidelines when the system constraint is an input component. While we should try to source as much of this component as the market demands, the supplies are going to be limited in the medium term. The next step should be to subordinate the entire supply chain planning and execution to this constraint.
Are we using these semiconductors to produce only those finished goods where we have pending demand? We should do it. A key indicator of this principle is the inventory of finished goods. Have they used this constraint component and the finished goods are waiting to be sold? Why?
Proper planning and execution would ensure that finished goods inventory in such a scenario is zero.