Theory of constraints Slovak University of Technology Faculty of Material Science and Technology in Trnava

AKA Synchronized Manufacturing Based on the fact that a system’s outputs are determined by its constraints. Deals with factors limiting company’s ability to achieve goals Theory of Constraints

Limits throughput in operations There are two basic type of constraints:  Physical Example: physical capacity of a machine, raw material  Non-physical Example: demand for a product, corporate procedure, individual’s paradigm for looking at the world Theory of Constraints

Constraints fall into three categories:  Internal Resource Constraint Example: Machines, raw materials, worker  Market Constraint Example: Market demand less than production capacity  Policy Constraint Example: No overtime, dictates rate of production Theory of Constraints

Two types of performance measures are used:  Financial (net profit, ROI, cash flow, productivity, turnover)  Operational Throughput - rate at which money is generated by sales Inventory - money system has invested in materials Operating Expenses - Money the system spends to turn Inventory into Throughput (labor, overhead, other expenses) Theory of Constraints

Examples of financial measurements:  Net Profit = Throughput - Operating Expenses  ROI = (Throughput - Operating Expenses) / Inventory  Productivity = Throughput / Operating Expenses  Turnover = Throughput / Inventory

Theory of Constraints A Five Step Process Identify the system’s constraints. Decide how to exploit the system’s constraints. Subordinate everything else to the above decision. Elevate the system’s constraint. If, in the previous step, a constraint has been broken, go back to step 1 but do not allow inertia to cause a new constraint.

Have less capacity than prior or following work centers Limit production output Remedies  Increase capacity of bottleneck  Develop other routings or subcontract  Schedule throughput to match bottleneck © 1995 Corel Corp. Bottleneck Work Centers

Techniques for Dealing With Bottlenecks Increase capacity of the constraint Ensuring well-trained and cross-trained employees are available to operate and maintain this constraint Developing alternate routings, processing procedures, or subcontractors

Techniques for Dealing With Bottlenecks Moving inspections and tests to a position just before the constraint Scheduling throughput to match the capacity of the bottleneck

Optimized Production Technology OPT Software developed in Israel in the early 1970s by Eliyahu Goldratt Premise - Production bottlenecks are basis for scheduling and planning capacity

Optimized Production Technology OPT Bottleneck Resource - Resource that is scheduled to maximize utilization Non-bottlenecks - Resources with capacity greater than the demand placed on it Capacity Constrained Resource - Resource whose utilization is close to one and could become a bottleneck if not scheduled properly

Optimized Production Technology OPT OPT Rules: 1 Do not balance the capacity -- balance the flow. 2 The level of utilization of a non-bottleneck. resource is not determined by its own potential but by some other constraint in the system. 3 Utilization and activation of a resource are not the same. 4 An hour lost at a bottleneck is an hour lost for the entire system.

Optimized Production Technology OPT OPT Rules: 5 An hour saved at a non-bottleneck is a mirage. 6 Bottlenecks govern both throughput and inventory in the system. 7 The transfer batch may not, and many times should not, be equal to the process batch 8 A process batch should be variable both along its route and in time 9 Priorities can be set only by examining the system’s constraints. Lead times are the result of a schedule.

Drum-Buffer-Rope (DBR) Drum-Buffer-Rope (DBR)is a production control technique to implement the exploiting, subordinating, and elevating steps of TOC. If a system has a bottleneck, its production rate controls the pace of the system, its beat drives the system, hence the name drum for this control point.

Drum-Buffer-Rope (DBR) A buffer is placed in front of the bottleneck to protect the bottleneck from fluctuations and variations in the feeding rate to the bottleneck. The buffer size is measured in standard time required for the bottleneck to process all items in the buffer (rule 6 of OPT: bottlenecks govern both throughput and inventory in the system).

Drum-Buffer-Rope (DBR) The buffer is connected to the raw material dispatching point via a feedback loop called the rope. The dispatching point will release only that amount that will keep the buffer inventory built up.

Drum-Buffer-Rope (DBR) DBR Flow