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TOC for Smart Production-Excerpts of Invited Lecture Delivered at the Colloquim of Production Engineers, 26th Indian Engineering Congress-2011, Ban Galore, India

TOC for Smart Production-Excerpts of Invited Lecture Delivered at the Colloquim of Production Engineers, 26th Indian Engineering Congress-2011, Ban Galore, India

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Published by Shridhar Lolla
The document gives an overview of Theory of Constraints, TOC and describes its application to the Production System. Focusing mechanism being the basis of TOC, the document emphasises, how it makes a Production System more responsive to the rapidly changing business conditions. It also highlights TOC as a management technique, that allows the organization to dramatically improve its performance and deliver astounding results quickly, without taking too much of risk and without exhausting crucial resources.
The document gives an overview of Theory of Constraints, TOC and describes its application to the Production System. Focusing mechanism being the basis of TOC, the document emphasises, how it makes a Production System more responsive to the rapidly changing business conditions. It also highlights TOC as a management technique, that allows the organization to dramatically improve its performance and deliver astounding results quickly, without taking too much of risk and without exhausting crucial resources.

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Published by: Shridhar Lolla on Dec 23, 2011
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Copyrights ©2011, Shridhar Lolla, All rights reserved. 1
 
TOC for Smart Production
Shridhar Lolla, PhDlolla@cvmark.com CVMark Consulting, Bangalore, India
Transcript of Guest Lecture delivered at the Colloquium of Production Engineers, in the 26 
th
  Indian Engineering Congress- 2011, at Bangalore, India, on 16 
th
Dec 2011.
 Abstract:
The document gives an overview of Theory of Constraints, TOC and describes its application to theProduction System. Focusing mechanism being the basis of TOC, the document emphasises, how itmakes a Production System more responsive to the rapidly changing business conditions. It alsohighlights TOC as a management technique, that allows the organization to dramatically improve itsperformance and deliver astounding results quickly, without taking too much of risk and withoutexhausting crucial resources.The document also summarizes status of TOC implementation in India. As, India and other EmergingEconomies struggle with unpredictable macro-economic conditions, managing the TOC way, isproposed as a strong antidote, in realizing their dreams of reaching up to the prosperity of developednations.
Keywords
Theory of Constraints, TOC, Focusing Mechanism, Eli Goldratt, Goal- the process of ongoingimprovement, TOCICO, Thinking Process, Production, More on Less, Process of Improvement,Operation Excellence, Management Effectiveness, Productivity, Indian Engineering Congress-2011,TOC in India, Manufacturing, New Manufacturing Policy, Emerging Economies, Sustainable Growth
1.
 
The Need
In order to be competitive, it is imperative that organizations become more responsive indealing with rapidly changing and frequently unpredictable business environment. Asignificant degree of responsiveness
or the „rate‟ of 
delivering value to customers, is provided
 by an organizational function or process called „Operations‟. Operational Excellence is
therefore, increasingly becoming central to the main strategy of organizations.
2.
 
The Role of a Production System
Production being a dominant subsystem of Operations, has a direct responsibility inimproving responsiveness of the organization. Therefore, the prime role of Production is to
ever improve the rate of flow
of goods and services.While throughput is its prime measurement, a Production System must have a direction thatis decided by the demand in the market. The direction is set by the specific scale and scope of supplies required by the market. In order to be more effective, Production must, by design,
 
Copyrights ©2011, Shridhar Lolla, All rights reserved. 2
 
deal with the changes taking place in the market place. This is fundamental to understandingof a responsive Production System.Translation of above fundamentals into shop floor (production area) language means that aProduction System must process only those work orders that are required by the market, andmust not process, those not required. Producing what is not required NOW, instead of producing what is required NOW, only delays the response time of what is needed in the
market. Given the short „window of time‟ of operati
ons (one lead time), it demands fromProduction, a behaviour to avoid wasting its capacity by not processing what is not required.This also avoids chaos that could otherwise further slow down its response time.However, with time, the
„specifics‟ of 
urgency of the market changes and so, the completeProduction System must be aligned to buffer and/or steer itself with specific changes. Inorder to achieve such flexibility, the system must operate with a single priority system andavoid creating local optima that might otherwise, prevent the organization from respondingfaster to urgencies, and prevent it from making the difference in the marketplace. A prioritysystem that helps in meeting a distinctive promise (e.g. due date, availability etc.) made tocustomers, is a good priority system.Of course, a smart Production System must operate with minimum urgencies, thoughurgencies due to statistical fluctuations and sometimes due to Murphy and Black Swan Effectcannot be avoided.As Production is aligned in the direction of changes in the market, it would reach a level of effectiveness, beyond which a
conscious
effort to seek 
„improve
ment
in the performance, isneeded. Lean, Six Sigma, TQM, 5S, SPC, Kanban, SMED, Poka Yoke, Agile Manufacturing,MRP, ERP, Digitization, Automation, Outsourcing, Vendor Managed Inventory etc. providespecific tools and techniques to improve Production System. All of these and many moretools have delivered excellent results to organizations across the world, across industries.However,
with such a mind boggling number of tools and techniques available acrossdisciplines, an organization must know, which tool must be applied for what purpose and when.
It also means that organizations need a methodology that allows them to naturallyidentify suitable tools necessary for carrying out improvements, it is ready to take on.
3.
 
 Apparent Complexity in Improving Production System
Consider a Production System, where manufacturing has over 500 resources and over 2500employees. It is normal for executives to know and be impressed by one of severalimprovement techniques; and start an implementation initiative in the organization. Forexample, improving performance of a production system may mean, crashing setup time, stoptime and process time in manufacturing.Going
with Adam Smith‟s golden rule,
 
“A system is sum of parts, and therefore, improving
all parts improves
the complete system”,
one tries to deploy the technique across 500resources. Doing so, in fact, becomes overwhelming in terms of effort, time and resources tobring the change. It becomes daunting. And at the end of prolonged implementation exercise,
 
Copyrights ©2011, Shridhar Lolla, All rights reserved. 3
 
the organization somehow showcases, a 2-3% improvement in its performance, that does noteven account for the stress the organization goes through and the risk it takes. Not for nothingthat over 80% of initiatives promising all round transformation despite using well proventools and techniques, either fail to deliver results or are stopped mid ways. And, organizationswhich fall into the cultural backlash of resisting every subsequent improvement initiative , arenot fewer in numbers.One of the best way to understand the psychology of apparent complexity behindimprovements, is to ask managers, which of the following two systems, is more complex toimprove.
Figure 1. Traditional way of looking at a
n organization, as “Sum of 
parts
. However, trying to makeimprovement in all areas does not improve the performance of the system significantly and often leads to chaos.
 The usual answer is,
Obviously, the second one. It contains 50% more components, it willrequire more resources, more people, more time, more effort, more money, more attention.To improve it, there will be more improvement projects.
 
4.
 
Inherent Simplicity and TOC
One of the key issues, Managers realize during implementation of improvement programs, isthat Production is a system comprising a number of interrelated subsystems. Andimprovement in one area affects improvement goals of other areas adversely; thus creatingsignificant conflicts, chaos and resistance to change. And despite making an all out attempt todeploy even simple tools to improve all areas, the system (organization) as a whole does notmake significant headway.Whether there are 50 or 500 building blocks of a system, different blocks of the system areinterrelated and connected by cause and effect logic. They influence each other.
Fundamentals of system dynamics says, “W
hen the interconnections are too many, the degreeof freedom is dramatically low.
As a matter of fact, the improvement in performance of the

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