Goldratt's Theory of Constraints (TOC)

The Goal The success of the manufacturing business comes from determining the aim of the business and then dealing with the constraints that make the goal more difficult to achieve. Goldratt states that the Goal of a manufacturing business is “to make money now and in the future”.

To make as much money as possible, the company must strive to increase throughput whilst minimising operating expense and inventory. The main avenue for development is in maximising throughput. Goldratt explains that the element that limits throughput is constraining the system.

Goldratt's perspective on managing the production system is … to identify the resource or "bottleneck" that limits throughput and then … to lessen its effects by scheduling the rest of the system in a way that prevents excess inventory and cost.

Bottlenecks and Constraints usually refers to machines Constraint Can refer to anything that limits Throughput (examples?)

"Bottleneck” or "constraint" It is important to understand that the constraint can be anywhere in the manufacturing system, not just at the output end.

If operations upstream of the constraint continue at their full speed, a queue of work will build up in front of the bottleneck. If operations downstream try to continue, they will be starved of material.

The manufacturing system has also been compared to a chain, which, proverbially, is only as strong as its weakest link. It makes no difference whereabouts in the chain the weakest link is located. If the weak link fails, the whole chain is ruined, and a disaster might result.

Goldratt’s principles - the manufacturing system must be considered as a whole; - the throughput of the whole system is limited by constraints; - constraints can be anywhere in the system; - production at operations upstream of the constraint resources may produce excess inventory, while production downstream will be starved.

The rules of production control based upon constraints The utilisation of a non bottleneck resource is not determined by its own potential but by some other constraint in the system Activating a resource is not the same as utilising it 3. An hour lost on a bottleneck is an hour lost to the entire system

The rules of production control based upon constraints An hour saved on a non bottleneck machine is a mirage 5. The transfer batch need not always equal the process batch 6. Process batch size should be variable not fixed

The rules of production control based upon constraints 7. Set the schedule by examining capacity and priority simultaneously Murphy is not an unknown and his damage can be isolated and minimised: buffers to protect bottlenecks from disruption 9. Balance the flow not the capacity

Goldratt's approach to dealing with constraints 1 - Identification of the constraint and the reduction as far as possible of its constraining effect. 2 - The production and execution of manufacturing schedules which achieve maximum throughput from the constraint and therefore the whole system, together with minimum inventory and operating cost.

Goldratt's approach to dealing with constraints Unfortunately, these are not independent, since different constraints appear indifferent schedules – the moving bottleneck. Key feature - the identification of constraints Effort is spent on scheduling these resources to produce a schedule that will be reliable.

Goldratt's approach to dealing with constraints Other factors that do not restrict production are controlled by a system of lead times known as buffers, and work lists to identify the sequence of work. Finer control is not required where excess capacity exists.

Goldratt’s five steps to deal with constraints 1. Identify the system's constraint(s) 2. Decide how to exploit the system's constraint(s) 3. Subordinate everything else to the above decision

Goldratt’s five steps to deal with constraints 4. Elevate the system's constraint(s) By "elevate", Goldratt means "lift the restriction". 5. If, in the previous steps, a constraint has been broken, go back to step one, but do not allow inertia to cause a system's constraint A new constraint will be restricting throughput, which will have increased to a new level.

Manufacturing control based on constraints Every effort must be made to ensure that maximum throughput is achieved on the bottleneck machines. At the same time, inventory and operating expenses must be reduced or minimised throughout the system.

Manufacturing control based on constraints Attention to the control of inventory means that non-bottleneck machines will sometimes stand idle. The whole production schedule is synchronised to the rate at which products flow through the slowest resource. Attention to operating expenses means carefully controlling the use of overtime.

Compared to MRP MRP (etc) systems treat all work centres as equally important, WHEREAS, Goldratt teaches us, they are not.

Compared to MRP MRP etc assume that high data accuracy can be maintained for all operations, and that data is used by the computer to derive appropriate decisions. WHEREAS Goldratt helps to identify the data that are important and ensures that the decisions are made by the users in an informed manner that relates to the key performance measures of the manufacturing business.

Reading Goldratt E and Cox J, 1984, The Goal, Gower, (later revisions North River Press) covers all the main ideas Goldratt E, 1990, The Haystack Syndrome, North River Press explains how a Goal based PPC system would work