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Theory of Constraints

By:

Eka Darmadi L – 3094802 May Eka S – 3094814 Steven Auryn H - 3105812

Introduction What is TOC ?

Introduction
• What is TOC ??

Introduction
• TOC Focus on 3 Activities
– Throughput – Inventory – Operating Expense

Introduction
• In TOC we Increase
– Throughput

Introduction
• In TOC we Minimizing
– Inventory

Introduction
• In TOC we Decreasing
– Operating Expense

Introduction
• After we …

Throughput

Inventory

Operating Expense

Introduction
• After we … The Result …
1. Financial Performance Profit 2. Return on Investment 3. Cash Flow

Introduction
• Traditional View point
– Pressing in Increasing Throughput – Decreasing Operating Expense – Minimize inventory are not important

Introduction
• TOC Recognize lowering Inventory Help:
– Better Product – Lower Price – Responsiveness to Customer needs

TOC Steps (Preview Only)

TOC Step by Step
• TOC Step:
1) 2) 3) 4) 5) Identify the organization Constraint(s) Exploit the binding Constraint(s) Subordinate everything (step 2) Elevate the binding Constraint(s) Repeat the process

TOC Step by Step
1. Identify the organization Constraint(s)
– External Constraints – Internal Constraints – Loose Constraints – Binding Constraints

TOC Step by Step
2. Exploit the binding Constraint(s)

TOC Step by Step
3. Subordinate everything (step 2)
“We are no longer think about efficiency”

“Assume that the grinding process by the maximum of it’s capacity”
it will add number of work in process to the drilling process, since the capacity of processing in the drilling process is lower than the grinding process.

TOC Step by Step
4. Elevate the binding Constraint(s)
“We Try to continue to improve”

“Adding more production can be solved by adding more shift in the drilling process.”

TOC Step by Step
5. Repeat the process
“Try to evaluate the whole process”

“Because the TOC objective is to continually improve the performance by manage the constraint”

TOC Illustration of Constraints (Video)

Illustration of “Constraints”

Theory of Constraints Case Study

Background

Background

• Founded in • Company Type • Product

:1970 : Manufacturing : Semiconductor, Fiber Optic, Fiber Cable.

The Problem
1. How Lucent become more productive ? 2. How Lucent improve their performance ? 3. How Lucent can Increase their profit ?

Case Study Problem Simulation

TOC Implementation

Source: Tocca.com

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

TOC Implementation

Step 1: Identify Constraints

TOC Implementation

Step 2: Squeeze or exploit the constraint

TOC Implementation

Step 3: Subordinate to the constraint “Remove all excessive WIP”

TOC Implementation

Step 3: Subordinate to the constraint

TOC Implementation

Step 4: Elevate the constraint

TOC Implementation

Step 5: Repeat the process

TOC Implementation

After Implementing TOC Throughput from : 10 / Day Become : 14 / Day

TOC Result “Lucent”

1. 2. 3.

The Product can developed twice Fast The Project can be completed on time Increase in profit

TOC Summary

TOC Summary

– “Theory of Constraints” (TOC) is good theory for factory . – TOC main idea is buffer and rope

Question and Answer

Thank You
For Your Attention