S.C.O.P.E. 2016: Day 2: Wordsworth: ‘Theory of Constraints’- Mr. Neelanchal Panda, GM- Supply Chain, International Paper APPM Ltd.


This was a very interesting session on the ‘Theory of Constraints’. Mr. Panda started the discussion by explaining constraints i.e. any restriction that limits planning and then went on to explain the perennial conflict between the objective of planning & the inevitability of uncertainties in business situations. The objective of planning is to be able to mitigate the implications of uncertainties and attempt to predict the future based on available data. When applied to business situations, it could be about the difficulty with respect to forecasting customer demand & preferences. He also spoke about how this theory is of relevance practically in business. This world is full of uncertainties and one faces the situation of scarce resources in the business. The challenge is to be able to successfully manage these constraints & also retain customers. Resolving conflict between selling what the consumer wants & what is available is a challenge. Also, making products available to consumers through a complex chain of dealers, distributors & outlets is an example of Complexity. Thus, these are a vital part of the Theory of Constraints.

He also addressed the issue of why uncertainty exists. Reasons included a wide range of products & services demanded by customers, a shorter expected waiting period, product life-cycle getting shorter, among other things. Several personal examples were used to illustrate these points. Finally, a relevant solution to tackle issues of uncertainty, mainly, buffer management of inventory was discussed.  As per Mr Neelanchal, to reduce uncertainty, the proper flow of information is necessary between different stakeholders. Availability of appropriate information at the right time helps in proper planning which in turn reduces uncertainty. The 1/3rd Thumb Rule with respect to inventory was emphasised upon.  A certain amount of buffer should be kept to meet the uncertainty in demand. This will increase inventory costs, but will also be able to provide better customer service by meeting demand at the right time. He also explained how systems or departments working in silos lead to increased uncertainty and complexity. However, departments coordinating and working with each other tend to reduce uncertainty through proper planning. He also answered questions about effects of GST bill on Indian supply chain system.


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