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Theory of Constraints: A look at the Drum-Buffer-Rope and Critical Chain Project Management approach EMGT 364 Term Paper Jesse Crispino and Ryan Saulsbury.

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Presentation on theme: "Theory of Constraints: A look at the Drum-Buffer-Rope and Critical Chain Project Management approach EMGT 364 Term Paper Jesse Crispino and Ryan Saulsbury."— Presentation transcript:

1 Theory of Constraints: A look at the Drum-Buffer-Rope and Critical Chain Project Management approach EMGT 364 Term Paper Jesse Crispino and Ryan Saulsbury

2 Theory of Constraints zDeveloped by Eliyahu M. Goldratt zA systems management philosophy developed in the 1980s zBoost process performance by looking at the entire process zIdentifying and reducing “bottlenecks” zOften applied in conjunction with TQM, JIT and ABM

3 Theory of Constraints zProject managers have always analyzed individual components of a process zMaximizing components may not improve the process zGoldratt views the entire process and finds the weakest link--Capacity Constrained Resource (CCR) zAll projects contain one, but not many CCRs

4 Theory of Constraints: Principles zIf a system is performing as well as it can, only one of its component parts will be. zIf all parts are performing as well as they can, the system as a whole will not be. zInertial is the worst enemy of a process of ongoing improvement. Solutions develop weight that resists change. zIdeas are not solution.

5 Theory of Constraints: Steps zGoldratt’s Five Steps yIdentify the systems constraints yDecide how to exploit the constraints ySubordinate everything else to the exploitation of constraints yElevate the systems constraint yIf any constraints have been violated, repeat the process

6 Theory of Constraints: Defined zConstraint: Anything that limits a system’s performance relative to its goal zInventory: All the money used to purchase things the system intends to sell zOperating expense: The money a system spends to turn inventory into throughput zThroughput accounting: An accounting system used to measure TOC operations

7 Theory of Constraints: Defined zThroughput: the difference between net revenues and direct material cost ylimited by internal constraints (plant capacity) ylimited by external constraints (market demand) zTwo critical assumptions: yThe goal of product or customer mix and volume should be to maximize throughput yAssumes that once a certain capacity exists, operating expenses are fixed

8 Theory of Constraints: Applied zSoldier analogy: zGaps appear due to yDependent events yStatistical fluctuation zDrum-Buffer-Rope (DBR) system links first “soldier” with the slowest one

9 Drum-Buffer-Rope (DBR) zLogistical tool that balances flow of a system zDrum: A schedule for capacity of the constraint zBuffer: Built in time for parts to reach the constraint early (in process inventory) zRope: A schedule, or information connection, for releasing raw materials

10 Drum-Buffer-Rope: Implementing zIdentify CCRs-Pareto’s Rule may help zSchedule CCRs to capacity (drum) zProtect from statistical fluctuations with time buffers (buffer) zMonitor CCRs to ensure the timely release of materials “upstream” (rope) zMonitor Buffer--Buffer Management (BM)

11 Drum-Buffer-Rope: Case Study #1 zOregon Freeze Dry: Four step process ywash/prepare food yfreeze food in cold room ydry food to remove ice crystals (sublimation) ypackaging/shipping zDifficulty finding space in cold room-- wash/preparation was very quick zConsidered buying new cold room

12 Drum-Buffer-Rope: Case Study #1 zReduced the amount of raw food going into wash phase zCold room scheduled by using a BTU calculation for max efficiency zLess product in cold room created faster freezing rates. zOregon Freeze uses only 30% of cold room capacity and produces a higher quality product

13 Drum-Buffer-Rope: Case Study #2 zWendell August Forge: Hand-hammered aluminum commemorative items zSix production cells zExpected hammering to be drum zWalk on shop floor showed buffing backup to be CCR zUnion mandated breaks

14 Drum-Buffer-Rope: Case Study #2 zBreak schedule staggered--exploitation zCapacity immediately increased 12% zImplemented a Rope to limit raw materials zWork in progress inventories decreased zManagers educated on TOC attitudes zCapacity up 27% by years

15 Critical Chain Project Management zTraditional project management, Critical Path Method (CPM) used for over 40 years zDoD projects: 100-200% more expensive, and exceeded duration 40-50% of the time zCommercial projects: 70% more expensive, and exceeded duration 40% of the time zGoldratt’s 1997 book Critical Chain--new paradigm for PMs zPeople plan and execute projects

16 Critical Chain Project Management zAccounts for human nature factors yIndividuals always desire a safety buffer yGoldratt’s “student syndrome” yParkinson’s law--Work expands to fill the time allotted yPM multi-tasking reduces efficiency and penalizes the highest priority yNo early finishes

17 Critical Chain Project Management zCPM: Tasks scheduled as soon as possible (ASAP) zCCPM: Tasks scheduled as late as possible (ASLP) yReduce work in progress yReduce up-front costs yPMs focus on first tasks yIncreased knowledge as project progresses

18 Critical Chain Project Management zALAP drawback: As the project progresses, all tasks become critical to project completion zGoldratt’s solution: Drum-Buffer-Rope logistical scheduling and consolidated safety buffers

19 CCPM: Re-define Your Paradigm zCCPM requires individual and organizational behavior changes zLocate and remove hidden safety buffers zEmbrace uncertainty vs attempting better estimates zA 50% change of completing a task on-time is acceptable--Do not measure against baseline z“Tell me how you will measure me and I will tell you how I will behave”

20 CCPM: Implementing zAssume all material and information for tasks are on-hand zResolve resource conflicts zLocate the Critical Chain--longest chain of tasks that consider both task and resource dependencies zCritical Path--longest chain of tasks based upon task dependencies

21 CCPM: Implementing zIndividual projects no longer have safety buffer zTwo types of safety buffers are inserted into the project as a whole yProject Buffer: protects against overruns on the critical chain yFeeding Buffer: protects against overruns on tasks that feed the critical chain

22 CPM vs CCPM zCPM: yTasks have scheduled start and finish dates yEarly finishes on critical path do not accumulate yProject is on time or late zCCPM: yRelay race analogy yTasks are scheduled by preceding tasks completion

23 CPM vs CCPM zCCPM will finish tasks faster zProject team’s moral and effectiveness will improve zProject teams/project managers can produce early finishes zOverall costs will decline

24 CPM StartFinish - Indicates critical path

25 CCPM Start Feeding Buffer Project Buffer Finish Resource Buffer - Indicates critical chain Rope

26 Critical Chain: Case Study #1 zHarris Semi-conductor: $250M new wafer fabrication plant zTypical construction time 54 months zCPM analysis yielded 6000 tasks zCritical chain analysis reduced to 150 tasks z40 day delay for weather z15 day delay for equipment problems

27 Critical Chain: Case Study #1 zBuffers allowed for project delays zProject completed 3 days ahead of schedule zPlant constructed in 13 months zOverall cost only 4% above estimate zWafer Fabrication plant able to produce products 40 months faster than the industry standard

28 Critical Chain: Case Study #2 zHabitat for Humanity: World Record attempt for building a house zOld record: 4hrs 39min, Nashville--1998 zCritical Chain method predicted 4 hours zBathroom finished 1 hour longer than estimated zOverall finishing time: 3hrs 44min

29 In Class Example: zYou are a new plant manager for LETZ GETZ BLITZED BREWING CO INC. zYou need to re-work the production line soon because your boss, CEO Always Hammered is getting thirsty for the profits so to speak. zYour Suppliers Bottle Cap Billy, and Hops McGee are consistently late. Your line supervisor Mr. Schmidt explains that those producers are from Denmark and the delays are due to rotten shipping.

30 In Class Example: zCurrent Situation: yThe Hops & Malt used in the brewing process is suppose to arrive on the 1st of each month but it can arrive 1 day late. yYeast is purchased in bulk and is delivered on the 4 th of the month. The line supervisor claims yeast requires 4 days of preparation before being added to the WORT. yPackaging is delivered on the 11 th of the month and requires imprinting and then fix/assembly (2days total) yYour bottles are delivered on the 15th. You can fix the labels and assemble the packaging after your bottles arrive. yBottle caps are suppose to arrive on the 16 th but lately they have been a day late. yYou are unable to obtain new suppliers because of existing contracts signed by the CEO.

31 In Class Example: zThe following is a general concept of how to make the beer in your factory: yStep 1: You can start by creating the WORT. A process that includes adding water, hops, malt and then a boiling/cooling process. ( 1 day) yStep 2: Transfer to the fermenter where the yeast is added yStep 3: Fermentation (10 days-Cannot be reduced) yStep 4: Final Preparation includes: Siphon beer to remove yeast sediment, Add Sugar-Bitters added to product to produce, and carbonation (4 days) yStep 5: Bottling/Packaging (2 days)

32 In Class Example CPM:

33 In Class Example CCPM: Develop a CCPM for the Beer Making Process Remember: Reduce the Critical Path by 50%, Project Buffer(5 days) Feeder Buffer(2 total)

34 Critical Chain vs Critical Path for Army/UMR? z Must teach both techniques y CCPM y CPM z Army constrained by resources y Operations difficult to apply y Maintenance has potential zKey differences y ASAP vs. ASLP y Buffer Management

35 Drum-Buffer-Rope & Critical Chain Method QUESTIONS ??

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