The Goal

Managing Processes: Theory of Constraints Movie based on the book, “The Goal,” by E. Goldratt, North River Press. Context in the book is a manufacturing plant but watch and see how the concepts can be applied to any process. Two stories – the other is also interesting.

Take a few minutes to answer the following questions. Why were the robots not helpful to Alex Rogo? How can this concept be extended to other situations? What is a bottleneck? Are there bottlenecks in a service company? A service process? What can be done to help the bottleneck move faster and add capacity?

Cost World vs Throughput World Cost can be improved by reducing the cost of any subprocess Throughput can be improved only by improving the bottleneck

Throughput World’s Decision Making Process Step 1: Identify the system’s constraints Step 2: Decide how to exploit the system’s constraints Get the maximum out of the constraints Step 3: Subordinate everything else to the above decision Non-constraining operations should support the constraint

Decision Making Process (cont.) Step 4: Elevate the system’s constraints Get more of it: use overtime, off-load some work Step 5: If a constraint has been broken, go back to step 1 Focus energy on the new constraint

Exercise The plant makes two products, P and Q. The market potential (maximum sales) for P is 100 units/week and the market potential for Q is 50 units/week. The plant has an operating expense of $6000/week (workers and managers salaries, utilities, interest, etc.). There are four workers, A, B, C, and D, with non-interchangeable skills, each working for 2400 minutes/week. The time taken by each worker, the selling prices, and the raw material costs are given in the table below. What is the net profit this company is capable of earning per week?   Time on A Time on B Time on C Time on D Raw Material Selling Price P 15 45 90 Q 10 30 5 40 100

Key Concepts from the Goal. Bottleneck: any resource whose capacity is less than the demand placed upon it. Bottlenecks control the rate of output for the organization. If you want to speed up a process, speed up the bottleneck. An hour lost on the bottleneck is an hour lost for the entire system.

Key concepts (cont.) A non-bottleneck running faster than the bottleneck creates excess inventory and take capacity that could otherwise be redirected. Any time saved at a non-bottleneck is a mirage. Optimize the system, not isolated parts.