Alex Rogo Consulting publishes a quarterly report on our current thinking, works and topics of interest. Your input is greatly appreciated!

1. Alex Rogo Consulting April 2015
Tips For Weathering the Storm
No matter the economic environment, variability is
inherent in any supply chain. Most manufacturing
companies that are not 100% make-to-order (and
some of those as well) operate, at least partially, upon a
sales forecast. Times of economic turbulence injects
even more chaos into already unreliable production
forecasts.
So what can you do to weather the storm?
www.alexrogoconsulting.com 1
April 2015
THE ROGO REPORT
Recession Proof
Your Business Recession Proofing Your
Business: Tips for
Weathering the Storm.
What can TOC do for
you? A Case Study.
Is the Media to blame for
recession? The Herd
Mentality & Self-Fulfilling
Prophesy.
Alex Rogo Consulting
Announces Upcoming
Events Schedule.
Welcome to The Rogo Report!
The Rogo Report is published quarterly by Alex Rogo Consulting, an applied research and
management consulting firm.
Its purpose is to let clients, industry partners and other interested parties know our latest thinking,
research, and findings relative to the world of business and continuous improvement.
If there is a particular topic that you would like to see discussed, please do not hesitate to let us know.
We are always looking for fresh ideas and application areas, so your input is very much appreciated.
(Continued on page 2)
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2. Alex Rogo Consulting April 2015
www.alexrogoconsulting.com 2
Downturns (or recessionary periods) are a
natural part of the economy. That doesn't meant
that there is nothing we can do to insulate
ourselves from the impact.
“Those of you operating in the supply chain will
not feel the full impact of this downturn if you
keep an eye on your inventories and stay poised
for the rebound,” said Alan Beaulieu, a senior
analyst and principal with the Institute for Trend
Research.
One of the problems manufacturing companies
face is that they rely heavily on a demand
forecast to drive their manufacturing plans. In
the best of times the one thing that can be
counted on relative to a forecast is that it will be
wrong. In more uncertain times, demand
forecast can be drastically misleading.
This typically leads to a manufacturing plan
which produces far too much of what is not
needed and far too little of what is needed.
As a consequence, a company has lost sales
because they do not have the right product to
sell, and in addition to that they have money
(the life blood of a company, particularly in
uncertain times) tied up in inventory they can’t
sell.
How can they avoid this and run a “tighter ship”?
Simple - stop producing to a forecast.
In many companies, the actual manufacturing
lead time quoted to a customer is significantly
longer than the actual touch time required to
produce the product.
What this means is that if a company can
implement the steps to decouple their
manufacturing plan from their sales forecast,
they can transition from make to forecast or
make to stock environment to a make to order
company.
This graph is from
an actual custom
metal fabrication
client in the mid-
west US.
When Alex Rogo
Consulting (ARC)
began working
with them, they
were experiencing
stagnant sales
levels, eroding
margins, and on-
time delivery
performance hovering around 50% - even while
utilising significant overtime. Their most recent
fiscal year
performance was
a six figure loss.
ARC performed a
quicke yet
thorough
assessment of the
company, their
market and supply
chain, sales,
marketing and
operational
scenarios,
including those
triage actions that had to be taken immediately to
stem the bleeding.
What can The Theory of Constraints Do For You?
(Continued on page 4)
(Recession Proof … Continued from page 1)

3. Alex Rogo Consulting April 2015
www.alexrogoconsulting.com 3
The thing I recall most vividly from the economics
courses I took in college and graduate school is, of
all things, a joke. A joke told by one of my
professors. On the first day of class he indicated
that if we recalled nothing else from his course,
that we should remember the following:
If you were to lay every economist in the
world head-to-toe in a straight line, they
would all point in different directions.
I found it humorous at the time. The more I have
thought of it over the years, however, the more I
realised he wasn't merely making a joke.
Economists make predictions (forecasts) based on
any number of trailing leading and other indicators
- even the length of women’s skirts. The one thing
that is reliable with any forecast is that it will be
wrong.
That is not to say that there is no reason to be
concerned about the economy. However, these
“predictions” can have a way of becoming self-
fulfilling if we are not careful.
What is meant by self-fulfilling? Let’s say that I am
watching the news one morning and I hear that the
economists are predicting a recession. This scares
me so I decide that I had better start saving money
(spending less) in case a recession does happen.
So what happens?
Suddenly there is a significant fall off in the amount
of money being spent on consumer goods. After
all, why would I buy a new car or furniture or
electronic equipment if I may need that money to
buy food if a recession were to occur.
Of course, now that millions of people have
significantly cut back on their spending, orders for
all kinds of goods go down. As demand falls,
companies decide they have excess capacity and
Is the Media to Blame for Economic
Downturn?
Herd Mentality and the Self-Fulfilling Prophesy
(Continued on page 4)

4. Alex Rogo Consulting April 2015
www.alexrogoconsulting.com 4
(what with the media fervour over
the impending recession) decide to
downsize work forces. Additionally,
as demand for their products fall, so
does the need for their raw
materials. So their level of buying
from their suppliers drops sharply as
well.
There is no impact on an economic
system that compares with the
multiplying effect of changes in
demand in an industrial economy.
No other type of economy (agrarian
or service) has the same level of
economic impact. For instance, if a
new restaurant opens, they generate
jobs, will buy office supplies, food,
dishes, etc. They will certainly have
an impact on the economy. That’s
great.
But if a manufacturing company
opens (or simply doesn’t close) not
only will they add jobs, buy office
supplies, etc., but they will buy raw
material from other companies,
manufacturing supplies,
transportation services, etc. That
generates demand and jobs
throughout (an often very long)
supply chain. The number of links in
a supply chain (economy) that
benefit from the creation of
manufacturing jobs is significantly
higher than in any other type of
economy.
Therefore the negative impact of
deterioration in that type of
economy is significantly worse.
If one thinks back to the Great
Depression, what was really lost?
People had already bought the
stock they owned - the cash was
already out of their pockets.
What was lost was liquidity – the
ability to quickly convert paper
back into cash.
The biggest issue contributing to
the Great Depression was panic.
Those with the liquidity to ride
out the crisis and who kept their
heads bought during the
depression rather than sold
through panic. Mostly, those
people came out immensely
wealthy when the economy
rebounded during World War II.
The country (and the world) is
certainly facing economic issues –
but if people keep their heads
and do not give into to a
panicked, herd mentality, the
depth (not to mention the length)
of any economic downturn could
be significantly mitigated.
The next step was to create, with the
executive management, a strategic plan
encompassing all functional areas of
the company – from which a
comprehensive implementation plan
was developed detailing all of the
actions required to make the strategic
vision become reality.
The strategy focused around two key
tactical objectives:
1. Implementing the TOC
production solution drum-
buffer-rope to get on-time
delivery to 100% every day and
eliminate over time.
2. Developing a mafia offer (an
offer a customer can’t refuse) to
exploit the new found capacity
and production capability and
translate into additional sales.
Once the drum-buffer-rope production
system was in place and generating
100% on time delivery daily, the
company went to market with the
reliable rapid response offer. Your
order will be shipped on time every
time – backed up with substantial
penalties for each day the order is late.
Additionally, for those who need it,
rapid and express orders – orders with
significantly shortened lead-times - also
backed up with penalties for lateness.
The rapid and express orders cost
more, but is a very valuable option for a
customer to have when needed.
(Herd Mentality … Continued from page 3) (What can TOC do… Continued from page 2)

5. Alex Rogo Consulting April 2015
www.alexrogoconsulting.com 5
This typically leads to a manufacturing plan which produces far too much
of what is not needed and far too little of what is needed.
As a consequence, a company has lost sales because they do not have
the right product to sell, and in addition to that they have money (the life
blood of a company, particularly in uncertain times) tied up in inventory
they can’t sell.
How can they avoid this and run a “tighter ship”? Simple – stop
producing to a forecast.
In many companies, the actual manufacturing lead time quoted to a
customer is significantly longer than the actual touch time required to
produce the product.
What this means is if a company can implement the steps to decouple
their manufacturing plan from their sales forecast, they can transition
from a make to forecast or make to stock environment to a make to order
company.
This means that a company can focus on buying only the raw material
they need to produce firm orders in the short-term, only commit resources
(labor, outsourcing, indirect, etc.) to producing product that will ship,
invoice and convert to cash in the short-term, and, essentially, significantly
lessen their vulnerability to market demand perturbations.
How can a company do this? Stop producing to a forecast!
By implementing the Theory of Constraints solution for operations, Drum-
Buffer-Rope, you can immediately:
1. Decouple your manufacturing system from your sales forecast.
2. Transition to a make to order system while maintaining 100% on
time delivery.
3. Free up cash otherwise consumed by unneeded inventory.
4. Develop an un-refusable offer based on reliability and rapid
response capability to significantly increase sales, throughput,
profit and cash flow.
5. Simplify your pricing and managerial account systems to
something usable in real-time.
In an economic time where “cash is king” – decoupling your manufacturing
system from a dart-board sales forecast will significantly improve
manufacturing and sales and profit – as well as minimise risk and exposure.
(Recession Proof … Continued from page 2) Upcoming Events Calendar:
Project Management: From
Art to Science
WEBINAR.
Project Management:
From Art to Science.
2 day Workshop
Executive Decision
Making: DBR Production &
Throughput Accounting.
2 day Workshop.
01 May ’15
Online
19-20 May ’15
Los Angeles
26-27 May ’15
Chicago
How Cost Accounting is
Driving the Fall of US
Manufacturing
WEBINAR.
08 May ’15
Online