1

Synchronous Manufacturing and

Theory of Constraints

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Managing Constraints
 Constraints are factors that limit performance
 Capacity is the maximum rate of output
 A bottleneck is any resource whose capacity limits
the organization’s ability to meet volume, mix, or
fluctuating demand requirements

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Theory of Constraints
(TOC)
 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

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Goldratt’s Rules of Production

Scheduling
 Do not balance capacity-balance the flow
 The level utilization of a nonbottleneck
resource is not determined by its own potential
but by some other constraint in the system
 Utilization and activation of a resource are not
the same
 An hour lost at a bottleneck is an hour lost for
the entire system
 An hour saved at a nonbottleneck is a mirage

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 5

Goldratt’s Rules of Production

Scheduling (Continued)
 Bottlenecks govern both throughput and
inventory in the system
 Transfer batch may not and many times
should not be equal to the process batch
 A process batch should be variable both
along its route and in time
 Priorities can be set only by examining the
system’s constraints and lead time is a
derivative of the schedule

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Goldratt’s Theory of Constraints (TOC)

Involves implementation of these five steps:
Identify the system constraints (bottlenecks)

Decide how to exploit the system constraint(s) -

create schedules that maximize the throughput of
the bottleneck(s)
Subordinate everything else to step 2- non-
bottleneck resources should be scheduled to
support the schedule of the bottleneck(s)
Elevate the system constraints-increase the
capacity of the bottleneck(s)
If, in the previous steps, the constraints have been
broken, go back to Step 1, but do not let inertia
become the system constraint

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Theory of Constraints (TOC)

 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 total time per unit processed
2. 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

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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
 8

Goldratt’s Goal of the Firm

The goal of a firm is to make money

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 9

Performance Measurement:
Financial
 Net profit
– an absolute measurement in dollars

 Return on investment (ROI)

– a relative measure based on
investment

 Cash flow
– a survival measurement

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 10

Performance Measurement:
Operational
 1. Throughput
– the rate at which money is generated by the
system through sales
 2. Inventory
– all the money that the system has invested in
purchasing things it intends to sell
 3. Operating expenses
– all the money that the system spends to turn
inventory into throughput

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HOW THE FIRM’S OPERATIONAL MEASURES

RELATE TO ITS FINANCIAL MEASURES
Operational TOC View Relationship to Financial
Measures Measures

Inventory (I) All the money invested in a system in A decrease in I leads to an

purchasing things that it intends to sell increase in net profit, ROI,
and cash flow.

Throughput (T) Rate at which a system generates money An increase in T leads to an

through sales increase in net profit, ROI,
and cash flows.

Operating All the money a system spends to turn A decrease in OE leads to an

Expense (OE) inventory into throughput increase in net profit, ROI,
and cash flows.

Utilization (U) The degree to which equipment, space, An increase in U at the

or workforce is currently being used, bottleneck leads to an
and is measured as the ratio of average increase in net profit, ROI,
output rate to maximum capacity, and cash flows.
expressed as a percentage

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 12

Productivity
 Does not guarantee profitability
– Has throughput increased?
– Has inventory decreased?
– Have operational expenses
decreased?

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 13

Unbalanced Capacity
 In earlier chapters, we discussed
balancing assembly lines
– The goal was a constant cycle time
across all stations

 Synchronous manufacturing views

constant workstation capacity as a
bad decision

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The Statistics of Dependent Events

(Variable) (Constant) When
Process Time (A) Process Time (B) one
process
takes
10 longer
6 8 10 12 14
than the
(Constant) (Variable) average,
Process Time (B) Process Time (A) the time
can not
be made
10 up
6 8 10 12 14
 Rather than balancing capacities, the flow of product
through the system should be balanced

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 15

Capacity Related Terminology

 Constraint is 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

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 16

Capacity Example Situation 1

There
Thereisissome
someidle
idleproduction
productionin
inthis
thisset
setup.
up. How
Howmuch?
much?

Case A 25%
25%in
in YY

X Y Market

X Y
Bottleneck Nonbottleneck
Demand/month 200 units 200 units
Process time/unit 1 hour 45 mins
Avail. time/month 200 hours 200 hours

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Capacity Example Situation 2

Is
Isthere
thereisisgoing
goingto
tobe
beaabuild
buildup
upof
ofunnecessary
unnecessaryproduction
productionin
inY?
Y?

Case B Yes,
Yes,25%
25% in
inYY

Y X Market

X Y
Bottleneck Nonbottleneck
Demand/month 200 units 200 units
Process time/unit 1 hour 45 mins
Avail. time/month 200 hours 200 hours

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 18

Capacity Example Situation 3

Case C
Is
Isthere
theregoing
goingto
to Market Yes,
Yes,25%
25%in
inYY
be
beaabuild
buildup
upin
in
unnecessary
unnecessary Assembly
production
productionininY?
Y?

X Y

X Y
Bottleneck Nonbottleneck
Demand/month 200 units 200 units
Process time/unit 1 hour 45 mins
Avail. time/month 200 hours 200 hours
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 19

Capacity Example Situation 4

Yes,
Yes,25%
25%in
inYY
IfIfwe
werun
runboth
bothXX
and
andYYforforthe
the
same
sametime,
time, will
will Case D
we
weproduce
produceanyany Market Market
unneeded
unneeded
production?
production?
X Y
X Y
Bottleneck Nonbottleneck
Demand/month 200 units 200 units
Process time/unit 1 hour 45 mins
Avail. time/month 200 hours 200 hours
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 20

Time Components of Production

Cycle
 Setup time is the time that a part spends
waiting for a resource to be set up to work
on this same part
 Process time is the time that the part is
being processed
 Queue time is the time that a part waits for
a resource while the resource is busy with
something else

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 21

Time Components of Production Cycle

(Continued)
 Wait time is the time that a part waits
not for a resource but for another
part so that they can be assembled
together

 Idle time is the unused time that

represents the cycle time less the
sum of the setup time, processing
time, queue time, and wait time
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 22

Saving Time
What
What are
are the
the consequences
consequences of
of saving
saving time
time at
at
each
each process?
process?

 Rule:
Rule: Bottlenecks
Bottlenecks govern
govern both
both throughput
throughput
and
and inventory
inventory in in the
the system.
system.
 Rule:
Rule: An An hour
hour lost
lost at
at aa bottleneck
bottleneck isis an
an hour
hour
lost
lost for
for the
the entire
entire system.
system.
 Rule:
Rule: An An hour
hour saved
saved at at aa nonbottleneck
nonbottleneck isis aa
mirage.
mirage.

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 23

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, which is the rate at
which the bottleneck controls the throughput
of the entire plant

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 24

Drum-Buffer-Rope Systems
Drum-Buffer-Rope Systems
Constraint (Bottleneck)
Nonconstraint
Buffer

Material PROCESS A Time Buffer PROCESS B

Release Capacity Inventory Capacity
Schedule 800 units/wk 500 units/wk

Rope Buffer Drum

Shipping
Nonconstraint
Buffer

PROCESS C Finished Goods Market

Capacity Inventory Shipping
Demand
700 units/wk Schedule
650 units/wk

Figure 7.3 – Drum-Buffer-Rope Systems

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 25

Exhibit
Exhibit18.9
18.9
Drum, Buffer, Rope

Bottleneck (Drum)

A B C D E F Market

Inventory
Communication buffer
(rope) (time buffer)

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 26

Quality Implications
 More tolerant than JIT systems
– Excess capacity throughout system

 Except for the bottleneck

– Quality control needed before
bottleneck

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 27

Batch Sizes

 What is the batch size?

 One?

 Infinity?

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 28

Bottlenecks and CCRs:

Flow-Control Situations
 A bottleneck
– (1) with no setup required when changing from
one product to another
– (2) with setup times required to change from
one product to another
 A capacity constrained resource (CCR)
– (3) with no setup required to change from one
product to another
– (4) with setup time required when changing
from one product to another

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Inventory Cost Measurement:

Dollar Days
 Dollar Days is a measurement of the
value of inventory and the time it
stays within an area

Value of inventory
Dollar Days 
Number of days within a department

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 30

Benefits from Dollar Day

Measurement
 Marketing
– Discourages holding large amounts of
finished goods inventory
 Purchasing
– Discourages placing large purchase orders
that on the surface appear to take advantage
of quantity discounts
 Manufacturing
– Discourage large work in process and
producing earlier than needed

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 31

Comparing Synchronous
Manufacturing to MRP
 MRP uses backward
scheduling

 Synchronous manufacturing
uses forward scheduling

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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

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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, more frequent deliveries

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 34

Relationship with Other Functional

Areas

 Accounting’s influence

 Marketing and production

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