Production System - Part 2 of 3

(TKI 3105):
4 Theory of Constraints (ToC)
Optimised Production Technology (OPT)
Andi Sudiarso & Colleagues
Mechanical & Industrial Engineering

Faculty of Engineering
Gadjah Mada University
 Introduction (1)
` Developing production planning and control would
be simple, except for the existence of random
problems, such as machine breakdown, worker
absenteeism, scrap and rework, lack of a part, and
order changes, and the fact that the operations are
linked one to another random fluctuations and
dependent events.
` MRP is to eliminate the dependence by having a
large inventory buffer at every work station.
` JIT is to eliminate the random problems by seeking
out the root cause of each problem and correcting
it, for example preventive maintenance to eliminate
machine breakdown.
 Introduction (2)
` Both MRP and JIT practitioners believe that an ideal
plant is a balanced plant, i.e. every resource has the
same output capability relative to the plans need.
` The ToC approach is to accept the existence of an
unbalanced plant, i.e. some resources have less
relative output capability than the others. The most
limited resource is called the constraint.
` ToC eliminates dependencies by creating a material
buffer, but only at the constraint. Non-constraint
resources have a capacity buffer, i.e. excess
capacity.
 Introduction (3)
` To add inventory to a non-constraint resource
causes lead time to increase and WIP inventory to
increase while providing little tangible benefits.
` ToC agrees with JIT that an inventory is a waste, if
the inventory is planned at a non-constraint
resource. However, by buffering the constraint
from random problems at other resources, an
inventory buffer at the constraint does add value
and hence it is not a waste.
` ToC does not eliminate all problems, only those
that threatens the constraint, in spite of the
constraints inventory buffer.
 Company goal

` The goal of a company is to make more

money, now and in the future.
` The means are: to increase sales, to increase
market share, to supply high quality
products, to develop new or improved
technology, etc.
` The means do not guarantee long-term
survival of the company.
 Company measures
` Financial measures:
Net profit
Return on Investment (RoI)
Cash flow

` Operational measures:
Throughput
the rate of making money through sales
Inventory
the total money invested as products for sales
Operating expense
the total money that spent by the company to
change the inventory to throughput
 Operational goal

` Operational goal:

To increase throughput by reducing the

inventory and operating expense.

Productivity: output per labor hour.

 A constraint
` A constraint may be defined as anything that prevents a
system from achieving higher performance relative to
the goal.
` Three categories of constraints: internal resource
constraints, market constraints, and policy constraints.
The constraint dictates the pace of production.
` Any station that has capacity less than other stations
and the market is called internal resource constraint.
` A market constraint exist when the market demand for
a product is less than the capacity of the machine
having the least capacity available to produce the
product.
` The policy constraint is, for example, the policy of
permitting only 100 units of WIP between the two
stations, incentives based performance, and so on.
 Definitions (1)
` Capacity: the available time to perform production
activities, time to produce a part, the number of
parts produced in an hour.

` Bottleneck resource (BR): a resource with capacity

smaller than the demand (or other resources).

` Non-bottleneck resource (NBR): a resource with

capacity greater than the demand (or BR).

` Capacity-constrained resource (CCR): a resource

with utilization level near to the capacity. It can be
a bottleneck if there is inefficiency (does not
properly managed).
 Definitions (2)

` Setup time: time spent by a part when a resource

that will process the part is still doing a set-up

` Processing time: time spent for processing a part

` Queuing time: waiting time of a part because the

machine is still busy processing another part or
doing another activity.
 Definitions (3)
` Waiting time: waiting time of a part because other
parts are not available yet for assembling.
` Idle time: unused time, i.e. cycle time minus total
time of setup, processing, queuing and waiting
time.
Definitions (4)
Basic manufacturing block (1)
 Basic manufacturing block (2)

15 mins 20 mins 10 mins 12 mins

4 units/hour 3 units/hour 6 units/hour 5 units/hour

How many output unit per hour? 3

 Basic manufacturing block (3)

a.

300 units 300 units

(200 hours) (150 hours)

X: 200/200 x 100% = 100%

Y: 150/200 x 100% = 75%

b.

Y works 75% or WIP (work in process) occurs

 Basic manufacturing block (4)
c.

Spare
parts
Y works 75% or spare parts pile up (on the assembly station)

d.

Finished
products
Y works 75% or finished products pile up (same demand assumed)
Number of bottleneck resources
` Is it possible to have more than one
bottleneck machine?

(1) 15 units/hr 20 units/hr 10 units/hr 12 units/hr 8 units/hr

(2) 15 units/hr 20 units/hr 10 units/hr 12 units/hr 10 units/hr

(1) How many bottleneck machine(s)? 1 machine

(2) How many bottleneck machine(s)? 2 machines
 Five Steps of ToC (OPT)
` 1. Identify the constraint.
` 2. Decide how to exploit the constraint to improve
system performance.
` 3. Subordinate everything else (part/resource) to
support the action taken in Step 2.
` 4. Elevate the constraint (elevate means to make
possible a higher performance relative to the
goal, usually by acquiring additional capacity at
the constraint).
` 5. If the constraint is eliminated, do not let inertia
becomes the new constraint. If a new constraint
occurs, go back to Step 1.
 Example (1)
For example, there is a company that produces
two products, P and Q. Demand for P is 100
units and Q is 50 units per week with the price
of $90 and $100 per unit respectively. To
produce these products, there are 3 raw
materials required, i.e. RM1, RM2 and RM3.
These materials are processed at 4 work
centers, i.e. A, B, C and D with the individual
capacity of 2400 minutes. The cost of raw
materials and their routings and processing
times are given in the following figure.
Example (2)
 Example (3)

` Step 1. Identify the constraint

Resource Required Capacity Capacity Load

(WC) Available Percentage

1500 3000

1000 1250

Work Centre (WC) B is the constraint, because of

the load percentage of more than 100%.
 Example (4)
` Step 2. Decide how to exploit the constraint
Type of product
Selling price ($)
Raw material cost ($)
Contribution to profit ($)
Processing time at WC B
Ratio contribution/time at B

ToC focuses on maximization of the use of

constraint resource to achieve the goal (making
money). Exploitation of WC B means maximizing
return of each minute of the use of WC B. This
means maximizing the production of P before
producing Q. Therefore, P = 100 units (1500
minutes) and the rest is to produce Q, i.e. Q=30
units (900 minutes).
 Example (5)
` Step 3. Subordinate part/resource to support the
action taken in Step 2.
DBR (drum-buffer-rope) technique.
At other case, forcing a resource to go idle if the
queue (WIP) is full (achieves maximum allowed).
` Step 4. Elevate the constraint by doing actions to
improve the system performance such as setup
reduction, increase capacity of WC B by having new
machine, reduce the machine breakdown, etc.
For example, if the demand P increases from 100
to 150 units then send product Q to another
resource (rerouting, outsourcing or having new
machine).
At other case, the constraint is then the market.
 Example (6)
` Step 5. If new constraint occurs, go back to Step 1.
For example, if the demand of product P and Q
increases become 132 and 66 units respectively
and by improving work method, processing time at
WC B becomes a third of original processing time
i.e. 5 minutes per unit, then:
Resource Load Percentage
A (1980+660)/2400 = 110
B (660+660)/2400 = 55
C (1980+330)/2400 = 96
D (1320+330)/2400 = 69
 Linear Programming (1)
` Max Profit: Z = 45P + 60Q
The constraints:

(1) 15 P + 10 Q 2400 (WC A)

(2) 15 P + 30 Q 2400 (WC B)
(3) 15 P + 5 Q 2400 (WC C)
(4) 10 P + 5 Q 2400 (WC D)
(5) P 100 (demand P)
(6) Q 50 (demand Q)
(7) P, Q 0 (non-negative constraints)
 Linear Programming (2)
` The optimum solution:
P=100, Q=30
Z = 6300 (total gross profit)
S1=600 (WC A is NBR)
S2=0 (WC B is BR)
S3=750 (WC C is NBR)
S4=1250 (WC D is NBR)
S5=0 (all demand P are fulfilled)
S6=20 (demand Q that are not fulfilled)

` The optimum solution is the same as the

solution obtained from the systematic steps
of ToC (OPT).
 Stock and Time Buffers
Stock buffer versus time buffer
` Stock buffer is to guarantee responsiveness
against the market by storing some products
as inventory (WIP or finished goods).
` Time buffer is to protect throughput from
internal disturbance that may occurs.

Buffer size: - of MLT (manufacturing lead

time).
 Constraint & Shipping Buffers
Constraint buffer versus shipping buffer
` Constraint buffer is the material that is scheduled
to be at the constraint at any point in time, to
protect the constraint.
` Shipping buffer is the material that is scheduled to
be at the shipping at any point in time, to protect
the promised due date delivery.

Moreover, assembly buffer stages non-constraint

parts with constraint part so that constraint parts
are never delayed for lack of non-constraint parts
at assembly points.
 DBR Technique (1)
` Drum: a constraint resource becomes the
resource that controls the system, develop
details schedule for the constraint.
` Buffer: calculate a buffer on the constraint
resource to overcome a minor fluctuation.
` Rope: balance the other resources against the
drum beat (the feedback rope), how much
time is to be allowed for material to move
from material release to the constraint and
for each end item, how much time should be
allowed for material to move from the
constraint to the shipping.
 DBR Technique (2)
Steps of DBR scheduling:
` Start from the constraint resource (BR).
` Then the operation is scheduled-back (backward)
from BR to the dispatching of raw materials.
` Next, forward scheduling toward the delivery
(forward scheduling for estimating delivery time).
` DBR scheduling is a combination of pull and push
systems.
` Dispatching material is decided by a pull system,
whereas the delivery is estimated by a push system.
 DBR Technique (3)
DBR scheduling consists of:
` Identify the constraint resource (BR).
` Sequence jobs on the constraint.
` Decide on the size of the constraint buffers (which
fixes the length of the rope from the constraint to
the material release).
` Decide on the size of the shipping buffers (which
forwards schedules material from the constraint to
the shipping and fixes the release date to the
customer).
DBR Technique (4)
 DBR (5)
Raw
material 1 2 m BN n Customers

Raw
material 1 2 m CCR n Customers
 Product Network
OPT
Resource Description

BUILDNET
Software (1)
OPT.SERVE Master
Engineering Network

Reports Initial Serve Analysis

(SERVE1)

SPLIT

OPT Network SERVE Network

OPT

Critical Resource Schdl SERVE2

Reports Non-Critical Resource

Schedule

Reports
 OPT Software (2)
` BUILDNET module: to develop final product
network based on the database of MRP II
system, including bill of material, routings,
inventories, work centers, and market
requirements.
` SERVE module: to calculate the load profile
and the average utilization for each resource.
` SPLIT module: to divide product network into
two groups: critical and non-critical
resources. It also allocates buffer at the
correct locations.
 OPT Software (3)
` OPT module: to create schedule (critical
resources are scheduled first) and reports,
load profile for BR (CCR) and NBR, and the
estimation of completion time.
 See you again

Good luck with your exam!