the goal by eliyahu goldratt
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© Washington State University-2004 1
Intro to the Theory of Constraints
(A lecture introducing a portion of the Physical side of the Theory of Constraints)
Constraints Management
holt@vancouver.wsu.eduhttp://www.cea.wsu.edu/engrmgt/
James R. Holt, Ph.D., PEAssociate Professor
Engineering Management
3
Measuring the goal
• Net profit
• Cash
• Return on Investment (ROI)
For a manufacturing enterprise, the goal can also be measured by
• Throughput
• Inventory
• Operating expenses
4
Definitions
Throughput: The rate at which the system generates money through sales.• Note that the money is generated through sales
and not production because if you produce something and don’t sell it, you have not really had throughput. (You’ve just put it into inventory).
Inventory: All the money that the system has invested in purchasing things which it intends to sell.
Operational Expense: All the money the system spends in order to turn inventory into throughput.
5
Note that all the definitions have “money” in them
Throughput: The rate at which the system generates money through sales.
Inventory: All the money that the system has invested in purchasing things which it intends to sell.
Operational Expense: All the money the system spends in order to turn inventory into throughput.
6
Definition
• Bottleneck: Any resource whose capacity is equal to or less than the demand placed upon it.
• Optimization of a plant: Balance flow, not capacity.
7
Definition
• Types of elapsed time: Setup time ― The time a part spends waiting for a
resource, while the resource is preparing itself to work on the part.
Process time ― The amount of time the part spends being modified into a new, more valuable form.
Queue time ― The time the part spends in line for a resource while the resource is busy working something else ahead of it.
Wait time ― The time the part waits, not for a resource, but for another part so that they can be assembled together.
8
The Theory of Constraints (TOC)
• TOC IS: A set of Proven Solutions
• Drum Buffer Rope (DBR), Critical Chain Project Management (CCPM), Replenishment, Sales/Marketing, Human Behavior, Measurements, Strategy
An Approach to Problems• Five Steps of Continuous Improvement
Tools for Discovery of New Solutions• What to Change, What to Change to, How to Cause
the Change (The Thinking Process Tools)
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Larger ProcessInput Output
Input Process Output Input Process OutputInput Process Output
Process Theory
Input Process Output
10
Systems Concepts
• Organizations / Systems exist for a purpose
• That purpose is better achieved by cooperation of multiple, independent elements linked together
• Each Inter-linked event depends in some detail upon the other links.
• The system owner determines purpose
11
There is a “Weakest Link”
• Different link capabilities, normal variation and changing workload make it impossible to balance everything.
• One element of the system is more limited than another.
• When the whole system is dependent upon the cooperation of all elements, the weakest link determines the strength of the chain.
• An exactly balanced chain (system) is stronger than a non-homogeneous chain, but when close to the breaking point, all links must be managed 100
12
Interconnections are non-Trivial
• Every System has relatively few constraints
To operate at maximum efficiency, the generic problem with physical systems must be identified
The Five Focusing Steps help identify and improve the constraint (called The Generic Physical Solution)
• Physical and Non-Physical Processes
Flow system structures: straight line (I), assembly (A), one material divided into several products (V), a product given minor changes at the end (T)
Distribution and Supply Chain
Management control of these systems
13
Flow System Structures
RM FG
Aircraft assembly is more of an “A” Plant
RMRM
RMRM
RM
RM
RMRM
RM
FGLinear or “I” systemRaw Material Finished Goods
14
Interconnections are Non-Trivial
• A simple chain over-simplifies reality
• Link 1 may have a relationship with Link 5
• Link 5 may have a different relationship with 1
1 2 3 4 5 6 7 8 9
15
Management of the Links Vs. Linkages
1 2 3 4 5 6 7 8 9
• Maybe the Simple Chain isn’t so simple
Link 1 and 2 can get togetherand lean on Link 3 or Link 8
Link 8 and 9 can combine to push on both Link 6 and Link 7
There are 40,000 first order effects
and 1,000,000+second and higher
order effects!
16
Traditional Approach:Divide and Conquer
• Division of Labor breaks down linkages complex systems into manageable chunks.
• Which is harder to manage? Left or Right?
Left Right
17
We Measure Operational Efficiency
• Work flows from left to right through processes with capacity shown.
Process A B C D E
RM FG
CapabilityParts 7 9 5 8 6per Day
Excellent Efficiency--Near 100%Chronic Complainer
Too Much Overtime
MarketRequest
11
18
Reward Based on Efficiency
• Work flows from left to right.
Process A B C D E
CapabilityP/D 7 9 5 8 6
Both found ways to look busy and appear to have a capacity of 5 parts/day.
RM FG
19
In reality...
Process A B C D E
PotentialP/D 7 9 5 8 6
Reality 5 5 5 5 5
• Processes A and B won’t produce more than Process C for long.
RM FG
20
Then Variability Sets In
• Processing times are just AVERAGE Estimates
Process A B C D E
Reality 5±2 5±2 5±2 5±2 5±2
RM FG
21
What’s an Average? 50%
Process A B C D E
Reality 5±2 5±2 5±2 5±2 5±2Probability 0.5 0.5 0.5 0.5 0.5
• Half the time there are 5 or more per day at each process--Half the time less
Two at a time: 0.25 0.25
Over all: 3% Chance of 5 per day
RM FG
22
Previous Solution: Inventory
WIP 5 5 5 5 5 Total 25ProcessA B C D E
Variable 5±2 5±2 5±2 5±2 5±2Process
• Put a day of inventory at each process!
RM FG
23
System Variability Takes Over--Chaos
Variable 5±2 5±2 5±2 5±2 5±2Process
WIP 3 0 10 8 4 Total 25
RM FG
Process A B C D E
Inventory (WIP) quickly shifts position.Inventory manager/expediter tries to smooth it out.Distribution problems result. Costs go up.
24
System Variability Takes Over--Chaos
WIP 3 0 10 8 4 Total 25
Variable 5±2 5±2 5±2 5±2 5±2
ProcessShifting work-in-process creates large queues at somelocations. This makes work wait longer to be processed.
RM FG
An Average of 5 means sometimes 3 and some times 7
Process A B C D E
25
System Variability Takes Over--Chaos
WIP 3 0 10 8 4 Total 25
Variable 5±2 5±2 5±2 5±2 5±2ProcessShifting work-in-process creates large queues at somelocations. This makes work wait longer to be processed.Other workstations can be starved for work. The work theycould be doing is delayed because it is not there. They can’t take advantage of their extra capability. So...
RM FG
Process A B C D E
26
System Variability Takes Over--Chaos
WIP 3 5 10 8 4 Total 25
Variable 5±2 5±2 5±2 5±2 5±2ProcessSo… Management Helps! Management puts in more work(Inventory) to give everyone something to do! Result: It takes longer and longer from time of releaseuntil final shipping. More and more delay!
RM FG
Process A B C D E
X 30
27
Attempts to Control WIP
WIP 5 5 5 5 5 Total 25ProcessA B C D E
Variable 5±2 5±2 5±2 5±2 5±2ProcessJust-In-Time uses Kanban Cards to limit the queuesbuilding in the system. No more than 5 parts are allowed at any station.Looks good, but is it?
• Put a lid on it-Use Kanban Cards-JIT
RM FG
28
Effects of Inventory Limits on Production
WIP 5 5 5 5 5 Total 25ProcessA B C D E
Variable 5±2 5±2 5±2 5±2 5±2Process
• What does a Kanban card of 5 Mean?
RM FG
5+/-2Average = 5
BeforeKanban
5+/-2Average = 3.5
Can’t exceed
5
AfterKanban
29
Operation’s Dilemma
Injection: Put a large inventory where its needed and low everywhere else!
Manage productioneffectively
Produce a lot
Costs & delivery in
control
Increase work-in- process
Decrease work-in-process
Assumption:
We can’t both increase WIP and
decrease WIP at the same time.
30
TOC Steps to Continuous Improvement
Step 0. Identify the Goal of the System/OrganizationStep 0.5 Establish a way to measure progress to Goal
Step 1. IdentifyIdentify the system’s constraint.
Step 2. Exploit Exploit the system’s constraint.
Step 3. SubordinateSubordinate everything else to the above decision.
Step 4. ElevateElevate the system’s constraint.
Step 5. If a constraint is broken (that is, relieved or improved), go back to Step 1. But don’t allow inertiainertia to become a constraint.
31
Five Steps Applied to Flow Operations
A B C D E
7 9 5 8 6
WIP Total
Step 3. Subordinate Everything Else (Rope)
Step 4. Elevate the Constraint ($?)
X 5.5
Step 5. If the Constraint Moves, Start Over
XXX7
Five Focusing Steps
RM
Step 1. Identify the Constraint (The Drum)
FG
Step 2. Exploit the Constraint (Buffer the Drum)
12 12
32
FG
Understanding Buffers
A B C D E
7 9 5 8 6
RM
• The “Buffer” is Time! • In general, the buffer is the total time from work release
until the work arrives at the constraint.• Contents of the buffer ebb and flow within the buffer• If different items spend different time at the constraint, then
number of items in the buffer changes• but Time in the buffer remains constantTime in the buffer remains constant.
WIP Total 12parts/5parts per day=2.5 Days
33
We need more than one Buffer
FG
A B C D E
7 9 5 8 6
RM
There is variability in the Constraint. To protect our delivery to our customer we need a finished goods buffer.
Finished Goods Buffer
There is variability in our suppliers.We need to protect ourselves from unreliable delivery.
Raw Material Buffer
34
Buffer Time is Constant-Predictable
FG
A B C D E
7 9 5 8 6
RM
Finished Goods Buffer
Constraint Buffer
2.5 Days
Raw Material Buffer
Finished Goods Buffer1 Day
Processing Lead Time is Constant
Raw Material Buffer2 Days
35
FG
Buffer Management
A B C D E
7 9 5 8 6
RM
Constraint Buffer WIP Total 12/5=2.5 Days
Time until Scheduled at Constraint
0 2.5 Days
WO17
WO14WO15WO16
WO10WO11WO12WO13
WO18WO19
• The Constraint is scheduled very carefully
• Buffer Managed by location• Individual activities in the
buffer are not scheduled
WO21WO20
36
A B C D E
FG
Problem Identification
7 9 5 8 6
RM
Time until Scheduled at Constraint
02.5 Days
WO10
WO20 WO12WO13WO21
WO15WO16WO17
WO18
WO19Delayed
PartsWO11
WO14WO19
WO19 OK (GreenGreen)
Watch WO14 (Yellow)Yellow)
Constraint schedule is in jeopardy!
(RedRed Zone Hole)
RM
37
Additional Buffers
• Constraint Buffer (as we discussed) Protects the Constraint from running out of work
• Finished Goods Buffer Protects customer delivery from Constraint variation
• Raw Material Buffer Protects the Release of material from suppliers
• Assembly Buffer Facilitates speedy flow of products
38
Additional Buffers
Buffer Types:ConstraintFGRMAssembly
A B C D E
RM
FG
7 9 5 8 6
RM
F G H
8 7 6
ConstraintFinished goods
Raw MaterialAssembly
RopesWIP
39
Manufacturing is an integrating discipline
PeopleOrganizationsPerformanceMeasurementAssignmentsQuality
FinanceCapital Projects UncertaintyInvestmentMeasures
ProjectsFull TheorySchedulingManageQualityDesign for Experiments
OperationsOptimizationSimulationDecisionsReliabilitySupply Chain
StrategyCorporateDepartmentalSubordinationFocus
TOCThinking ProcessesPhysical SystemsBehavior
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