Theory of Constraints

• Presented By Upma Joshi

Mohd.Arish

BabluRajib Lochan Sonalika

TOC - History

1970s and 1980s– Increase in Computer Power– Tremendous effort in line balancing– More balanced => more problems– Dr. Eli Goldratt showed:

• How to perfectly balance line• That a perfectly balanced line led to

bankruptcy

– Led to development of Theory of Constraints

Theory of constraints

Theory of Constraints (TOC) is an overall management philosophy introduced by Dr. Eliyahu M. Goldratt in his 1984 book titled The Goal, that is geared to help organizations continually achieve their goal.

The title helps in achieving more of its goal by a very small number of constraints, and that there is always at least one constraints.

Definitions

A bottleneck is any resource with a capacity equal to or less than the demand placed upon it

A constraint is anything that limits a system’s performance, relative to the system goal

Core of TOC

There is a constraint in the system

If you don’t impact the constraint, you

have no effect The rest is commentary

Assumptions of Toc

The underlying assumption of Theory of Constraints is that organizations can be measured and controlled by variations on three measures:

ThroughputOperating expense inventory

TOC Terms of Productivity

Throughput

Inventory

Operating expense

Term of Productivity

Constraints A constraint is anything

that prevents the system from achieving more of its goal. There are many ways that constraints can show up, but a core principle within TOC is that there are not tens or hundreds of constraints. There is at least one and at most a few in any given system. Constraints can be internal or external to the system.

Types of Constraints:

Constraints:

Logical Constraints

Physical Constraints

Fundamental Principlesof the Theory Of Constraints…

As a numerical example, consider the operation producing product A in Figure.

Steps of TOC

1. Identify the Constraint

2. Exploit the Constraint

3. Sub ordinate everythingto the Constraint

4. Elevate the Constraint

5. Repeat for the ne wConstraint

The TOC process seeks to identify the constraint and restructure the rest of the organization around it, through the use of the Five Focusing Steps:

Improving the Process using TOC Principles…

Identify the Constraint

This implies the need to examine the entire process to determine which process limits the throughput.

For example, in the example on slide 10, suppose the sales department was only selling the product output at the rate of 3 per hour.

• Exploit the constraint. Find methods to maximize the utilization of

the constraint toward productive throughput.

For example, in many operations all processes are shut down during lunchtime or during breaks.

If a process is a constraint, the operation should consider rotating lunch periods so that the constraint is never allowed to be idle.

Subordinate everything to the constraint. Effective utilization of the constraint is the most important issue. Everything else is secondary.

Elevate the constraint. Essentially this means to find ways to increase the available hours of the constraint, including adding more of it.

Once the constraint is a constraint no longer, find the new one and repeat the steps.

As the constraint effective utilization increases, it may cease to be a constraint as another process becomes one.

In that case the emphasis shifts to the new process constraint.

It is also possible that a sales-related change in the product mix will cause a different process to become the constraint.

Understanding and Managing

The ConstraintsA system optimal performance is not

the sum of local optima.

Any system that is performing as well as possible usually implies that not more than one part of the system is performing at an optimal level.

Buffers

They appear as part of the EXPLOIT and SUBORDINATE steps of the five focusing steps.

Buffers are placed before the key constraint, thus ensuring that the constraint is never starved. Buffers used in this way protect the constraint and should allow for normal variation of processing time and the occasional upset before the constraint.

Multiple-time BuffersTime buffers are used to make sure the

constraint is not "starved," but other time buffers are also necessary. An example may help to illustrate:

Suppose you have a product made from three components.

Component 1 is processed from raw material and then assembled with component 2 after it is processed from raw material.

Multiple-time Buffers…

Multiple-time Buffers…

The subassembly is then assembled with component 3 after it is processed from raw material.

The final product is then shipped to the customer.

The constraint in the system is located in the middle of the processing for component 1.

Multiple-time Buffers…Once component 1 has been processed on

the constraint, its value to the system has risen significantly because constraint time has been invested.

Nothing should, therefore, impede the progress of component 1.

The problem could arise, however, that component 1 will arrive at the Assembly 1 area before component 2 because of some problem with component 2.

Multiple-time Buffers…

• Since we would never want constraint-invested material to wait for non-constrained material, we should stage a time buffer of material for component 2 before the Assembly 1 area.

• This is done by releasing it earlier-the amount earlier depending on the time buffer based on the time estimate needed to overcome any unanticipated shock in the system.

• In this case the time buffer is called an assembly time buffer, as opposed to the time buffer before the constraint, which is usually called a constraint time buffer.

Multiple-time Buffers…The same argument applies to the

Assembly 2 area.

The subassembly from components 1 and 2 have constraint time invested, so we would not want them waiting for component 3.

This calls for another assembly time buffer to be generated at the Assembly 2 area.

Unfortunately, the need for buffers has not been fulfilled.

Multiple-time Buffers…

It is possible that the final product with its constraint-invested material could be held up at shipping, since the processes that take place between assembly and shipping have not been part of the protection.

This implies an additional time buffer before the shipping area, referred to as a shipping time buffer.

Multiple-time Buffers…

PLANT TYPES

PLANT TYPES

I-Plant A-Plant V-Plant T Plant

Applications of Theory of Constraints

There are various applications of toc:

OperationsSupply chain logisticFinance and accountingProject managementMarketing and sales

Real business example• The Lessons plant of Baxter International makes

medical products such as sterile bags. Management of the plant is actually aware of the necessity to actively manage its constraints. For example, when materials are a constraint, management may go to a secondary vendor and purchase material at a higher cost than normal. When a machine is the constraint, a weekend shift is often added on the machine. If a particular machine is chronically the constraint and management has exhausted the possibilities of using it more effectively, then additional capacity is purchased. For example when the constraint was the plastic extruding machines, a new extruding machine was ordered. However even before the machine arrived, management had determined that the constraint would shift to the blenders once the new extruding capacity was added. Therefore a new blender was already planned. By thinking ahead and focusing on the constraints, management is able to increase the plant's real capacity at the lowest possible cost.

Conclusion

• What is the Theory of Constraints and How Should it be Implemented?","Beyond The Goal". That is acknowledges the sources of information and inspiration for the Thinking Processes and Critical Chain methodologies. Theory of Constraints referenced foundational materials. "Standing on the Shoulders of Giants" .