Fundamental Exam Review The Theory of Constraints Fundamental Exam Review TOC Philosophy Segment James R. Holt, Ph.D., PE Professor Engineering Management jholt@wsu.edu http://www.engrmgt.wsu.edu/ © Washington State University-2010
© Washington State University-2010 Process Theory Larger Process Input Output Process Input Output Input Process Output © Washington State University-2010
© Washington State University-2010 Systems Concepts Organizations / Systems exist for a purpose That purpose is better achieved by cooperation of multiple, independent elements linked together Each Inter-linked event depends in some detail upon the other links. The system owner determines purpose © Washington State University-2010
There is a “Weakest Link” 100 Different link capabilities, normal variation and changing workload make it impossible to balance everything. One element of the system is more limited than another. When the whole system is dependent upon the cooperation of all elements, the weakest link determines the strength of the chain. © Washington State University-2010
Interconnections are non-Trivial Every Systems have relatively few constraints The generic problem with physical systems The Five Focusing Steps The Generic Physical Solution Physical and Non-Physical Processes Flow systems (I, A, V, T structures / combinations) Distribution and Supply Chain Management control of these systems © Washington State University-2010
Interconnections are non-Trivial A simple chain over simplifies reality Link 1 has a relationship with Link 5 Link 5 has a different relationship with 1 1 2 3 4 5 6 7 8 9 © Washington State University-2010
Management of the Links Vs. Linkages Maybe the Simple Chain isn’t so simple Link 8 and 9 can combine to push on both Link 6 and Link 7 Link 1 and 2 can get together and lean on Link 3 or Link 8 1 2 3 4 5 6 7 8 9 There are 40,000 first order effects and 1,000,000+ second and higher order effects! © Washington State University-2010
Traditional Approach: Divide and Conquer Division of Labor breaks down linkages complex systems into manageable chunks. Which is harder to manage? Left or Right? Left Right © Washington State University-2010
Complexity Simplicity Controlling many independent parts requires many independent control mechanisms. Controlling many interconnected parts only requires controlling the one part (for few parts) that determine the resulting actions of the rest of the parts (Steering, Accelerator and Brake). Find the Constraint to the System and Every System is Simple. © Washington State University-2010
The Five Focusing Steps Step 1. Identify the system’s constraint. Step 2. Decide how to Exploit the system’s constraint. Step 3. Subordinate everything else to the above decision. Step 4. Elevate the system’s constraint. Step 5. WARNING, WARNING! If a constraint is broken, go back to Step 1. But don’t allow Inertia to become a constraint. © Washington State University-2010
The Problem: People Measure Operational Efficiency Work flows from left to right through processes with capacity shown. Market Request 11 Process A B C D E RM FG Capability Parts 7 9 5 8 6 per Day Excellent Efficiency--Near 100% Chronic Complainer Too Much Overtime © Washington State University-2010
Reward Based on Efficiency Work flows from left to right. Process A B C D E RM FG Capability P/D 7 9 5 8 6 Both found ways to look busy and appear to have a capacity of 5 parts/day. © Washington State University-2010
What Happens In Reality... Processes A and B won’t produce more than Process C for long. Process A B C D E RM FG Potential P/D 7 9 5 8 6 Reality 5 5 5 5 5 © Washington State University-2010
Then, Variability Sets In Processing times are just AVERAGE Estimates Process A B C D E RM FG Reality 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2 © Washington State University-2010
Over all: 3% Chance of 5 per day What’s an Average? 50% Half of the time there are 5 or more per day at each process--Half the time less Probability of being 5 or more on the same day: Process A B C D E RM FG Reality 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2 Probability 0.5 0.5 0.5 0.5 0.5 0.25 Two at a time: 0.25 Over all: 3% Chance of 5 per day © Washington State University-2010
Traditional Solution: Add Inventory Put a day of inventory at each process! WIP 5 5 5 5 5 Total 25 Process A B C D E RM FG Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2 Process © Washington State University-2010
System Variability Takes Over--Chaos An Average of 5 means sometimes 3 and some times 7 Process A B C D E WIP 3 0 10 8 4 Total 25 RM FG Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2 Process Inventory (WIP) quickly shifts position. Inventory manager/expediter tries to smooth it out. Shifting work-in-process creates large queues at some locations. This makes work wait longer to be processed. Distribution problems result. Costs go up. © Washington State University-2010
System Variability Leads to Starvation Process A B C D E WIP 3 0 10 8 4 Total 25 RM FG Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2 Process Some workstations can be starved for work. Management hates to pay for idle resources. So... © Washington State University-2010
Starvation Leads to More Inventory Process A B C D E WIP 3 5 10 8 4 Total 25 X 30 RM FG Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2 Process So… Management Helps! Management puts in more work (Inventory) to give everyone something to do! Result: It takes longer and longer from time of release until final shipping. More and more delay! © Washington State University-2010
Attempts to Control WIP Put a Lid on It-Use Kanban Cards-JIT WIP 5 5 5 5 5 Total 25 Process A B C D E RM FG Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2 Process Just-In-Time uses Kanban Cards to limit the queues building in the system. No more than 5 parts are allowed at any station. Looks good, but is it? © Washington State University-2010
Effects of Inventory Limits on Production What does a Kanban card of 5 Mean? WIP 5 5 5 5 5 Total 25 Process A B C D E RM FG Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2 Process 5+/-2 Average = 3.5 Can’t exceed 5 After Kanban 5+/-2 Average = 5 Before Kanban © Washington State University-2010
Operation’s Dilemma Increase work-in- process Produce a lot Assumption: We can’t both increase WIP and decrease WIP at the same time. Manage production effectively Costs & delivery in control Decrease work-in-process Injection: Put a large inventory where its needed and low inventory everywhere else! © Washington State University-2010
The Five Focusing Steps Step 1. Identify the system’s constraint. Step 2. Decide how to Exploit the system’s constraint. Step 3. Subordinate everything else to the above decision. Step 4. Elevate the system’s constraint. Step 5. WARNING, WARNING! If a constraint is broken, go back to Step 1. But don’t allow Inertia to become a constraint. © Washington State University-2010
The Five Focusing Steps Applied to Flow Operations Step 3. Subordinate Everything Else (Rope) Step 2. Exploit the Constraint (Buffer the Drum) 12 WIP Total A B C D E Step 1. Identify the Constraint (The Drum) RM FG 7 9 5 8 6 Step 4. Elevate the Constraint ($?) X 5.5 Step 5. If the Constraint Moves, Start Over XXX 7 Five Focusing Steps © Washington State University-2010
Understanding Buffers WIP Total 12/5=2.5 Days A B C D E FG RM 7 9 5 8 6 The “Buffer” is Time! In general, the buffer is the total time from work release until the work begins work at the constraint. Contents (positions of the WIP) in the buffer ebb and flow over time. If different items spend different time at the constraint, then number of items in the buffer changes depending upon product mix. But, the “Time in the buffer remains constant”. © Washington State University-2010
We need more than one Buffer There is variability in our suppliers. We need to protect ourselves from unreliable delivery. Raw Material Buffer There is variability in the Constraint. To protect our delivery to our customer we need a finished goods buffer. Finished Goods Buffer A B C D E RM FG 7 9 5 8 6 © Washington State University-2010
Buffer Time is Constant-Predictable Raw Material Buffer Finished Goods Buffer A B C D E RM FG Raw Material Buffer 2 Days 7 9 5 8 6 Constraint Buffer 2.5 Days Finished Goods Buffer 1 Day Processing Lead Time is Constant! © Washington State University-2010
Capacity Constrained Resource Buffer Management Constraint Buffer WIP Total 12/5=2.5 Days A B C D E FG RM 7 9 5 8 6 WO21 WO17 WO13 The Constraint is scheduled very carefully Buffer Managed by location Individual activities in the buffer are not scheduled WO20 WO16 WO12 WO19 WO15 WO11 WO18 WO14 WO10 2.5 Days Time until Scheduled at Constraint © Washington State University-2010
Problem Identification RM Watch WO14 (Yellow) A B C D E Constraint schedule is in jeopardy! (Red Zone Hole) WO19 OK (Green) FG RM 7 9 5 8 6 WO19 Delayed Parts WO21 WO17 WO13 WO20 WO16 WO12 WO19 WO15 WO11 WO18 WO14 WO10 2.5 Days Time until Scheduled at Constraint © Washington State University-2010
The TOC Approach to Solving Problems The Five Focusing Steps are a Subset of the Three Main Questions What to Change? This question deals with finding the Constraint of the System. What to Change to? This question deals with what is needed to solve the problems. How to Cause the Change? The emphasis on the last question is ‘cause’. What few actions will we do to cause the system to change itself. © Washington State University-2010
© Washington State University-2010 Conflict Management Conflicts Exist. They are evidence improvement is needed (conflicts are problems). What to change? What to change to? How to cause the Change? A well worded Conflict is half the Battle. Conflict is based upon a mutually desirable Goal Conflict is based upon different Needs requiring different Actions The different Actions are opposites (The Conflict) © Washington State University-2010
© Washington State University-2010 The Evaporating Cloud B. My Need D. What I Want A. The Goal C. Other’s Need D’. What the Others Want © Washington State University-2010
Creating the Evaporating Cloud 1. What is it that I Want (that I’m having trouble getting)? D. What I Want © Washington State University-2010
Creating the Evaporating Cloud 1. What is it that I Want (that I’m having trouble getting)? D. What I Want D’. What the Others Want 2. What is it that the Others Want (that I don’t want them to have)? © Washington State University-2010
Creating the Evaporating Cloud 1. What is it that I Want (that I’m having trouble getting)? 3. Why do I want what I want? What Need am I trying to fulfill? B. My Need D. What I Want D’. What the Others Want 2. What is it that the Others Want (that I don’t want them to have)? © Washington State University-2010
Creating the Evaporating Cloud 1. What is it that I Want (that I’m having trouble getting)? 3. Why do I want what I want? What Need am I trying to fulfill? B. My Need D. What I Want C. Other’s Need D’. What the Others Want 4. Why do the Others want what they want? What Need do they have? 2. What is it that the Others Want (that I don’t want them to have)? © Washington State University-2010
Creating the Evaporating Cloud 1. What is it that I Want (that I’m having trouble getting)? 3. Why do I want what I want? What Need am I trying to fulfill? B. My Need D. What I Want 5. What Goal do we mutually share? Why are we still arguing? A. The Goal C. Other’s Need D’. What the Others Want Reading the Cloud: In order to <point> I must have <tail>. 4. Why do the Others want what they want? What Need do they have? 2. What is it that the Others Want (that I don’t want them to have)? © Washington State University-2010
Let’s Do Some Examples B. Learn a lot about what I wnat D. I want to ask a lot of questions A. We all are ready for the Fundamental Exam C. Get through all the topics D’. Depack doesn’t take over. © Washington State University-2010
The Approach to Solving Problems There are Three Main Questions What to Change? This question deals with finding the Constraint of the System. What to Change to? This question deals with what is needed to solve the problems. How to Cause the Change? The emphasis on the last question is ‘cause’. What few actions will we do to cause the system to change itself. © Washington State University-2010
Communicating the Evaporating Cloud 5. And you WANT to meet your Need as well. 4. Point out that you also have a significant Need. B. My Need D. What I Want 1. Start the Mutual Goal. It is common ground. Both interested. A. The Goal C. Other’s Need D’. What the Others Want Reading the Cloud: In order to <point> I must have <tail>. 2. Recognize you understand the Other’s Need must be meet to reach the Goal. 3. Acknowledge the Other side Wants to act on meeting their Need. © Washington State University-2010
Evaporating the Evaporating Cloud Assumption: All machines must be keep busy all the time. Assumption: We are measured upon our Production Level B. Produce a Lot D. Increase the Work-In-Process Assumption: We can’t increase WIP and Decrease WIP at the same time. A. Manage Production Effectively C. Keep Costs and Delivery in Control D’. Decrease the Work-In-Process Assumption: Our profits are not high. Customers demand on-time delivery. Assumption: WIP is expensive. High WIP delays flow time. © Washington State University-2010
Projects Are Handled the Same Way Jobs Process Flow A B Type I A->B->C->D Type II C->A->B->D Type III A->B->B->D Type IV C->B->A->B C D Each Job type has four days of processing for the four resources. Hum? Release one job per day and every body is busy. Right? Resources A, B, C, D each receive work as it flows in different patterns © Washington State University-2010
Projects Are Handled the Same Jobs Process Flow A B Type I A->B->C->D Type II C->A->B->D Type III A->B->B->D Type IV C->B->A->B C D Internally, B is the constraint. We can treat it just like the product line There are 16 processes on the 4 job times but 6 of them go through B. C and D only have 3 processes. TDD=Effectiveness in Delivery IDD =Effective use of resources (and tracking improvements) © Washington State University-2010
Projects are Balancing Acts Quality and Scope Timing and Schedule Budgeted Costs © Washington State University-2010
© Washington State University-2010 Then things Combine Quality and Scope Timing and Schedule Budgeted Costs Precedence Structure Statistical Variation Human Behavior © Washington State University-2010
© Washington State University-2010 And Reality Sets In Quality and Scope Timing and Schedule Budgeted Costs Precedence Structure Statistical Variation Human Behavior Bumpy Road of Reality © Washington State University-2010
The Project Dilemma There is Always a Trade-Off Meet Commitment in Danger Compensate for Early Mis-Estimates Meet Original Commitments Not Jeopardize Other Original Commitments Not Compensate for Early Mis-estimates © Washington State University-2010
Resolving Project Problem Options Add more time&money and decrease scope Meet Commitment in Danger Compensate for Early Mis-Estimates Meet Original Commitments Not Compensate for Early Mis-estimates Not Jeopardize Other Original Commitments Use our Safety Buffer Correctly © Washington State University-2010
Consider the Aspects of Projects Good Statistics Central Limit Theorem (add enough things together and everything looks normal) © Washington State University-2010
Typical Activity Duration Normal Duration Time Standard Deviation Project Task Duration Time Mean Mean 50% Probable 85% Probable © Washington State University-2010
© Washington State University-2010 So, what is the Behavior? Empirical evidence shows most tasks complete on or after the due date Level of Effort Student Syndrome: “Why start now? It isn’t due until Friday?” (There is more urgent work/parties.) Engineering Pessimism: Estimate a safe value (85%) Engineering Optimism: I’m good, I can beat 50%. Assigned Date Time--> Parkinson's Law: Work Expands to full the time available (Just keep tweaking! More is better!) © Washington State University-2010
Engineering Perpetual Motion (overtime) Actual Work Load Level of Effort Normal Work Load Assigned Date Time--> © Washington State University-2010
The result is Bad Multi- Tasking Project Manager A A2 Ten Days Each Task B1 B3 B2 Project Manager B © Washington State University-2010
Politically Correct Schedule 30 Days Flow A1 A2 A3 B1 B2 B3 30 40 50 10 20 © Washington State University-2010
More Like Actual Schedule 40 Days Flow A1 A2 A3 B1 B2 B3 30 40 50 10 20 © Washington State University-2010
Elements of the Project Management Solution Prioritize Don’t Schedule Conflicts Avoid Bad Multi-Tasking Don’t Release Too Early/Too Late Buffer Critical Chain Buffers: Project / Feeding / Resources Schedule 50% Estimate Completion Communicate “Time Remaining” Negotiate Capability Not Dates No Milestones © Washington State University-2010
© Washington State University-2010 TOC Flow Time 20 Days Flow A1 A2 A3 B1 B2 B3 50 30 40 10 20 © Washington State University-2010
Don’t Schedule Conflict Before After TOC Leveling © Washington State University-2010
Buffer the Project and NOT Individual Activities Before with 85% Estimates Task Buffer Actual 50% Estimates with Individual Buffers TOC Aggregated Buffer of Activities Task Task Task Task Buffer © Washington State University-2010
Protect the Critical Chain Project Buffer Feeding Buffer © Washington State University-2010
Buffer Resources on the Critical Chain Lt. Green be ready Buffer Blue be ready Green be ready Cyan Resource be ready Project Buffer Feeding Buffer © Washington State University-2010
The Simple Line Diagram Was Too Simplistic RM FG RM FG Aircraft assembly is more of an “A” Plant © Washington State University-2010
The “A” Plant Has Some Long Duration Processes RM FG © Washington State University-2010
Pull Tight the Longest Path (and Shake) Fastest Possible Flow Time (Critical Path) Critical Assembly Joins RM FG RM RM RM RM RM RM RM RM © Washington State University-2010
How Could we Fairly Measure Feeder Chains? RM FG RM RM RM RM RM TDD-On Missed Delivery to main line RM RM IDD-On Effective Use of Resources (and monitoring improvements) RM Hum? Could this also apply to suppliers? © Washington State University-2010
There is an Injection for Every Conflict Arrow Assumption Injection AB Productive Deliver Max Capacity AC Cost Effective Price on Value BD Busy Machines Keep Constraint 100% CD’ Expensive WIP Throughput Focus D/D’ Can’t do Both Buffer Constraint only Chosen Injection: Focus on the Capacity Constrained Resource. Release work to the system at the rate of the Capacity Constrained Resource a Buffer Time in Advance (no sooner, no later). Use Buffer Management to improve the system. © Washington State University-2010
The Key Points of TOC Solutions TOC only accepts Win-Win Solutions Win-Lose, Lose-Win, Lose-Lose are unacceptable. In the Evaporating Cloud, The Goal is achieved! Usually, both sides needs are met. Everyone is happy. Stake Holders, Employees, Customers, Economy, Ecology, Behaviors, Friendships (even competitors benefit). © Washington State University-2010
Sometimes TOC Solutions Are Counter Intuitive DBR: To get more out, put less in. CCPM: To finish project sooner, delay the Start. CCPM: To be safer, remove the safety. Replenishment: To get your products quicker to the customer, store them farther away. To Solve the Conflict, Ignore the conflict. To Make More Money, Sell at below Cost. If you can’t find an injection, then just do what is opposite of what everyone else is doing (and do whatever it takes to make it work). © Washington State University-2010
Wish to have a meaningful life This is Efrat’s logic diagram of The Choice as shown at the TOCICO International Conference in Tokyo, Japan, November 2009. Recorded by James Holt This is necessary based logic but the arrows are shown going in the opposite direction (because that is how most people would interpret them. “If you want (tail of arrow) you need to have (head of arrow).” Wish to have a meaningful life Enough meaningful successes Stamina to overcome failures Collaborate with people Opportunities Think clearly Overcome four obstacles Overcome perception that reality is complex Don’t accept conflicts Don’t think you know it all Avoid blaming Core TOC Concepts There is always a win-win solution Every situation can be substantially improved. Every situation is simple Every conflict can be removed
© Washington State University-2010 Next Topics TOC Thinking Processes TOC Applications Operations Project Management Replenishment TOC Finances and Measures Some TOC Philosophy will be blended into these additional topics. © Washington State University-2010