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Constraint Management

PowerPoint Slides
by Jeff Heyl
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

For Operations Management, 9e by
© 2010 Pearson Education


or fluctuating demand requirements Copyright © 2010 Pearson Education. 7–2 . Inc. Publishing as Prentice Hall. mix.Managing Constraints Constraints are factors that limit performance Capacity is the maximum rate of output Three types of constraints A bottleneck is any resource whose capacity limits the organization’s ability to meet volume.

Theory of Constraints TOC is a systematic management approach that focuses on actively managing those constraints that impede a firm’s progress toward its goal of maximizing profits and effectively using its resources It outlines a deliberate process for identifying and overcoming constraints TOC methods increase the firm’s profits by focusing on materials flow through the entire system Copyright © 2010 Pearson Education. Publishing as Prentice Hall. Inc. 7–3 .

Goldratt’s Goal of the Firm The goal of a firm is to make money 7–4 .

and is measured as the ratio of average output rate to maximum capacity. ROI. and cash flows. and cash flow. Throughput (T) Rate at which a system generates money through sales An increase in T leads to an increase in net profit. Operating Expense (OE) All the money a system spends to turn inventory into throughput A decrease in OE leads to an increase in net profit. ROI. or workforce is currently being used. 7–5 . Publishing as Prentice Hall. ROI. Copyright © 2010 Pearson Education.Theory of Constraints TABLE 7.1 | | HOW THE FIRM’S OPERATIONAL MEASURES RELATE TO ITS FINANCIAL MEASURES Operational Measures TOC View Relationship to Financial Measures Inventory (I) All the money invested in a system in purchasing things that it intends to sell A decrease in I leads to an increase in net profit. and cash flows. and cash flows. space. Inc. Utilization (U) The degree to which equipment. expressed as a percentage An increase in U at the bottleneck leads to an increase in net profit. ROI.

In contrast. The focus should be on balancing flow. an hour saved at a nonbottleneck resource is a mirage because it does not make the whole system more productive. not on balancing capacity. 7.1. and operating expense (OE). 3. 7–6 . which can be materials. or customers.Theory of Constraints TABLE 7. Copyright © 2010 Pearson Education. Maximizing the output and efficiency of every resource may not maximize the throughput of the entire system. Activating a nonbottleneck resource (using it for improved efficiency that does not increase throughput) is not the same as utilizing a bottleneck resource (that does lead to increased throughput). 4. Every capital investment must be viewed from the perspective of its global impact on overall throughput (T). inventory (I). Building inventories elsewhere should be avoided. documents. Publishing as Prentice Hall. 6. and in front of assembly and shipping points in order to protect customer schedules. Inventory is needed only in front of the bottlenecks in order to prevent them from sitting idle. Inc. 2. should be released into the system only as frequently as the bottlenecks need it. Bottleneck flows should be equal to the market demand. An hour lost at a bottleneck or a constrained resource is an hour lost for the whole system. Pacing everything to the slowest resource minimizes inventory and operating expenses. information to be processed. nor promote better performance on financial measures outlined in Table 7. 5.2 | SEVEN KEY PRINCIPLES OF THE THEORY OF CONSTRAINTS 1. Work. Activation of nonbottleneck resources cannot increase throughput.

Unbalanced Capacity Synchronous manufacturing views constant workstation capacity as a bad decision 7–7 .

The Statistics of Dependent Events (Variable) (Constant) Process Time (A) 6 8 10 12 Process Time (B) 10 14 (Constant) Process Time (B) 10 (Variable) Process Time (A) 6 8 10 12 14 When one process takes longer than the average. the flow of product through the system should be balanced 7–8 . the time can not be made up Rather than balancing capacities.

Capacity Related Terminology What is a Constraint?  Any factor that limits system performance and restricts its output. Capacity is the available time for production Bottleneck is what happens if capacity is less than demand placed on resource Nonbottleneck is what happens when capacity is greater than demand placed on resource Capacity-constrained resource (CCR) is a resource where the capacity is close to demand placed on the resource 7–9 .

 Rule: Rule: An An hour hour lost lost at at aa bottleneck bottleneck is is an an hour hour lost lost for for the the entire entire system.  7 – 10 . system.  Rule: Rule: An An hour hour saved saved at at aa nonbottleneck nonbottleneck is is aa mirage. mirage.Saving Time What What are are the the consequences consequences of of saving saving time time at at each each process? process? Bottleneck Nonbottleneck Rule: Rule: Bottlenecks Bottlenecks govern govern both both throughput throughput and and inventory inventory in in the the system. system.

Publishing as Prentice Hall. Identify the System Bottleneck(s) 2. Copyright © 2010 Pearson Education. Exploit the Bottleneck(s)-create schedules that max. 4. Subordinate All Other Decisions to Step 2-nonbottleneck resources should be scheduled to support the schedule of the bottleneck.Theory of Constraints TOC involves the implementation of these five steps 1. 7 – 11 . the throughput of the bottleneck 3. Inc. Elevate the Bottleneck(s)-increase the capacity of the bottleneck 5. Do Not Let Inertia Set In-steps 1-4 must be repeated.

Inc. Publishing as Prentice Hall.Theory of Constraints  Bottlenecks can both be internal or external to the firm and are typically a process or step with the lowest capacity  Throughput time is the total elapsed time from the start to the finish of a job or a customer being processed at one or more workcenters  A bottleneck can be identified in several different ways 1. If it has the highest average utilization and total workload 3. If a reduction of processing time would reduce the average throughput time for the entire process Copyright © 2010 Pearson Education. 7 – 12 . If it has the highest total time per unit processed 2.

Drum-Buffer-Rope Systems The bottleneck schedule is the drum because it sets the beat or the production rate for the entire plant and is linked to market demand The buffer is the time buffer that plans early flows into the bottleneck and thus protects it from disruption The rope represents the tying of material release to the drum beat. Publishing as Prentice Hall. which is the rate at which the bottleneck controls the throughput of the entire plant Copyright © 2010 Pearson Education. Inc. 7 – 13 .

7 – 14 . Publishing as Prentice Hall.3 – Drum-Buffer-Rope Systems Copyright © 2010 Pearson Education.Drum-Buffer-Rope Systems Constraint Buffer (Bottleneck) PROCESS A Capacity 800 units/wk Time Buffer Inventory PROCESS B Capacity 500 units/wk Rope Buffer Drum Nonconstraint Material Release Schedule Shipping Buffer Nonconstraint PROCESS C Capacity 700 units/wk Finished Goods Inventory Shipping Schedule Market Demand 650 units/wk Figure 7. Inc.

Batch Sizes What is the batch size? One? Infinity? 7 – 15 .

Comparing Synchronous Manufacturing to JIT JIT is limited to repetitive manufacturing JIT requires a stable production level JIT does not allow very much flexibility in the products produced 7 – 16 .

more frequent deliveries 7 – 17 .Comparing Synchronous Manufacturing to JIT (Continued) JIT still requires work in process when used with kanban so that there is “something to pull” Vendors need to be located nearby because the system depends on smaller.

Publishing as Prentice Hall. Inc.Copyright © 2010 Pearson Education. 7 – 18 .