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**Now that we know the Goal, how do we use it to improve our system?
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Paul A. Jensen Operations Research Models and Methods Copyright 2004 - All rights reserved

8/27/04

**The Theory of Constraints
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Step 1: Identify the system's constraint(s). Step 2: Decide how to exploit the system's constraint(s). Step 3: Subordinate everything else to the decisions of Step 2. Step 4: Elevate the system's constraint(s). Step 5: If a constraint is broken in Step 4, go back to Step 1.

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What is the Goal? What is Throughput? What is Inventory? What is Operating Expense? 3 .Step 1: Identify the system’s constraint(s).

What is the constraint? How do we get as much throughput as possible? 4 .Step 2: Decide how to exploit the system’s constraint(s).

Step 3: Subordinate everything else to the decisions of Step 2 Throughput? Inventory? Operating Expense? 5 .

Step 4: Elevate the system’s constraint(s). Throughput? Inventory? Operating Expense? 6 .

Step 5: If a constraint is broken in Step 4. go back to Step 1. What might happen if the constraint is elevated? 7 .

Step 4: Elevate the system’s constraint(s). go back to Step 1.Summary: The Theory of Constraints Step 1: Identify the system’s constraint(s). Step 3: Subordinate everything else to the decisions of Step 2. Step 2: Decide how to exploit the system’s constraint(s). Step 5: If a constraint is broken in Step 4. 8 .

Application in Manufacturing 9 .

/U C 10 min./U A 10 min./U RM1 $20/U RM2 $20/U RM3 $20/U 10 .C.P A.B./U C 5 min./U B 15 min./U A 15 min./U Purchase Part $5/U D 5 min./U B 15 min.D: 1 each Available Time: 2400 Min/Wk OE not including RM: $6000 per wk $90/U 100 U/Wk Q $100/U 50 U/Wk D 10 min.

B.Step 1: Identify the system’s constraint(s)./U What is the Goal? What is Throughput? What is Inventory? What is Operating Expense? RM1 $20/U RM2 $20/U RM3 $20/U 11 .C./U A 10 min. P A./U C 10 min./U B 15 min./U C 5 min./U A 15 min.D: 1 each Available Time: 2400 Min/Wk OE not including RM: $6000 per wk $90/U 100 U/Wk Q $100/U 50 U/Wk D 10 min./U B 15 min./U Purchase Part $5/U D 5 min.

Compare the resource loads with the resource capacities. If no production resource load exceeds its capacity. the constraints are external to the manufacturing system. Those resources for which the loads exceed the capacities are constraints (bottlenecks). 12 . the market demands are the constraints.To Identify the Resource Constraint Compute the load on each production resource assuming market demands.

Capacity = 2400 Minutes C: Load =1750.Compute the loads and compare with capacities. Capacity = 2400 Minutes What is the constraint? 13 . Capacity = 2400 Minutes D: Load =1250. Production P=100. Capacity = 2400 Minutes B: Load =3000. Production Q=50 A: Load =2000.

/U A 15 min./U B 15 min./U C 5 min. P A.Step 2: Decide how to exploit the system’s constraint(s)./U RM1 $20/U RM2 $20/U RM3 $20/U 14 .C.D: 1 each Available Time: 2400 Min/Wk OE not including RM: $6000 per wk $90/U 100 U/Wk Q $100/U 50 U/Wk D 10 min./U Purchase Part $5/U D 5 min.B./U B 15 min./U A 10 min./U C 10 min.

Select the product mix so that the products with greater ratios are produced in preference to the products with smaller ratios. What goal is this method trying to achieve? How does this method achieve the goal? 15 .Exploiting the constraint Assume a single constraint is identified. Rank the products in order of the ratio: Throughput dollars per minute of constraint use.

B Min/Unit=15 TP/Min = 45 15 $3 / min Q: TP/Unit = 60. B Min/Unit=30 TP/Min = 60 30 $2 / min 16 .What and how much to produce? P: TP/Unit = 45.

OC = 100 45 30 60 3000 4500 1800 6000 300 17 .Calculate Solution Produce as much P as possible P 100 Use the remainder of the constraint resource for Q 2400 15 100 Q 900 30 30 30 What is the profit for this product mix? Profit = TP .

D: 1 each Available Time: 2400 Min/Wk OE not including RM: $6000 per wk $90/U 100 U/Wk Q $100/U 50 U/Wk D 10 min./U RM1 $20/U RM2 $20/U RM3 $20/U 18 . P A./U C 10 min./U B 15 min.B./U A 10 min./U C 5 min./U A 15 min./U B 15 min./U Purchase Part $5/U D 5 min.C.Step 3: Subordinate everything else to the decisions of Step 2.

Production Q=30 A: Load =1800.Subordinating Production Production P=100. Capacity = 2400 Minutes B: Load =2400. Capacity = 2400 Minutes D: Load =1150. Capacity = 2400 Minutes C: Load =1650. Capacity = 2400 Minutes What determines the load on the nonconstraints? 19 .

D: 1 each Available Tim e: 2400 Min/Wk OE not including RM: $6000 per wk $90/U 100 U/Wk D 10 m in.B./U B 15 m in./U A 15 m in./U Purchas e Part $5/U D 5 m in.Step 4: Elevate the system’s constraint(s)./U C 5 m in./U B 15 m in. P Q $100/U 50 U/Wk Where should process improvements be focused? What is the benefit of elevating the constraint? What is the benefit of elevating a nonconstraint? A./U C 10 m in./U RM1 $20/U RM2 $20/U RM3 $20/U 20 ./U A 10 m in.C.

C./U RM1 $20/U RM2 $20/U RM3 $20/U 21 ./U C 10 m in./U C 5 m in./U B 15 m in./U A 10 m in. go back to Step 1./U A 15 m in./U B 15 m in.D: 1 each Available Tim e: 2400 Min/Wk OE not including RM: $6000 per wk $90/U 100 U/Wk Q $100/U 50 U/Wk D 10 m in./U Purchas e Part $5/U D 5 m in. What might happen if the constraint is elevated? What happens if there are no more internal constraints? P A.Step 5: If a constraint is broken in Step 4.B.

Production Q=50 A: Load =2000.Say we add another machine of type B. Capacity = 4800 Minutes C: Load =1750. Capacity = 2400 Minutes B: Load =3000. Production P=100. Capacity = 2400 Minutes D: Load =1250. Capacity = 2400 Minutes How much should we produce? What is the new constraint? How do we elevate the new constraint? 22 .

go back to Step 1.Summary: The Theory of Constraints Step 1: Identify the system’s constraint(s). Step 2: Decide how to exploit the system’s constraint(s). Step 4: Elevate the system’s constraint(s). Step 5: If a constraint is broken in Step 4. 23 . Step 3: Subordinate everything else to the decisions of Step 2.

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