Theory of constraints

Theory of Constraints

Presented By Upma

Joshi

Mohd.Arish

TOC - History

1970s and 1980s– Increase in Computer Power– Tremendous effort in line balancing– More balanced => more problems– Dr. Eli Goldratt showed:

• How to perfectly balance line• That a perfectly balanced line led to bankruptcy

– Led to development of Theory of Constraints

Theory of constraints

Theory of Constraints (TOC) is an overall management philosophy introduced by Dr. Eliyahu M. Goldratt in his 1984 book titled The Goal, that is geared to help organizations continually achieve their goal.

The title helps in achieving more of its goal by a very small number of constraints, and that there is always at least one constraints.

Definitions

A bottleneck is any resource with a capacity equal to or less than the demand placed upon it

A constraint is anything that limits a system’s performance, relative to the system goal

Core of TOC

There is a constraint in the system

If you don’t impact the constraint, you have no

effectThe rest is commentary

Assumptions of Toc

The underlying assumption of Theory of Constraints is that organizations can be measured and controlled by variations on three measures:

ThroughputOperating expense inventory

TOC Terms of Productivity

Through

put

Inventory

Operating expense

Term of Productivity

ConstraintsA constraint is anything that prevents the system from achieving more of its goal. There are many ways that constraints can show up, but a core principle within TOC is that there are not tens or hundreds of constraints. There is at least one and at most a few in any given system. Constraints can be internal or external to the system.

Types of Constraints:

Constraints:

Logical Constraints

Physical Constraints

Fundamental Principlesof the Theory Of Constraints…

As a numerical example, consider the operation producing product A in Figure.

Steps of TOC

1. Identify the Constraint

2. Exploit the Constraint

3. Sub ordinate everythingto the Constraint

4. Elevate the Constraint

5. Repeat for the newConstraint

The TOC process seeks to identify the constraint and restructure the rest of the organization around it, through the use of the Five Focusing Steps:

Improving the Process using TOC Principles…

Identify the Constraint

This implies the need to examine the entire process to determine which process limits the throughput.

For example, in the example on slide 10, suppose the sales department was only selling the product output at the rate of 3 per hour.

Exploit the Constraint

Find methods to maximize the utilization of the constraint toward productive throughput.

For example, in many operations all processes are shut down during lunchtime or during breaks.

If a process is a constraint, the operation should consider rotating lunch periods so that the constraint is never allowed to be idle.

Subordinate Everything to the Constraint Effective utilization of the constraint is the most

important issue. Everything else is secondary.

Elevate the Constraint Essentially this means to find ways to increase the

available hours of the constraint, including adding more of it.

Once the constraint is a constraint no longer, find the new one and repeat the steps

As the constraint effective utilization increases, it may cease to be a constraint as another process becomes one.

In that case the emphasis shifts to the new process constraint.

It is also possible that a sales-related change in the product mix will cause a different process to become the constraint.

Understanding and Managing

The ConstraintsA system Optimal performance is not the sum of

local Optima.

Any system that is performing as well as possible usually implies that not more than one part of the

system is performing at an optimal level.

1. Identify And How To Exploit The System Constraint

2. Subordinate The Constraint

3. Elevate The System Constraint

Buffers

They appear as part of the EXPLOIT and SUBORDINATE steps of the five focusing steps.

Buffers are placed before the key constraint, thus ensuring that the constraint is never starved. Buffers used in this way protect the constraint and should allow for normal variation of processing time and the occasional upset before the constraint.

Multiple-time Buffers

Time buffers are used to make sure the constraint is not "starved," but other time buffers are also necessary.

An example may help to Illustrate:

Suppose you have a product made from three components.

Component 1 is processed from raw material and then assembled with component 2 after it is processed from raw material after that Processing Operation is start in component 3

Multiple-time Buffers…


The subassembly is then assembled with component 3 after it is processed from raw material.

The final product is then shipped to the customer.

The constraint in the system is located in the middle of the processing for component 1.


Component 1 has been processed on the constraint, its value to the system has risen significantly because constraint time has been invested.

Nothing should, therefore, impede the progress of component 1.

The problem could arise, however, that component 1 will arrive at the Assembly 1 area before component 2 because of some problem with component 2.

Multiple-time Buffers…• Since we would never want constraint-invested

material to wait for non-constrained material, we should stage a time buffer of material for component 2 before the Assembly 1 area.

• This is done by releasing it earlier-the amount earlier depending on the time buffer based on the time estimate needed to overcome any unanticipated shock in the system.

• In this case the time buffer is called an assembly time buffer, as opposed to the time buffer before the constraint, which is usually called a constraint time buffer.


The same argument applies to the Assembly 2 area.

The subassembly from components 1 and 2 have constraint time invested, so we would not want them waiting for component 3.

This calls for another assembly time buffer to be generated at the Assembly 2 area.

Unfortunately, the need for buffers has not been fulfilled.


It is possible that the final product with its constraint-invested material could be held up at shipping, since the processes that take place between assembly and shipping have not been part of the protection.

This implies an additional time buffer before the shipping area, referred to as a shipping time buffer.


PLANT TYPES

PLANT TYPES

I-Plant A-Plant V-Plant T Plant

Applications of Theory of Constraints

There are various applications of toc:

Operations Finance and accounting Project management Marketing and sales

Real business example• The Lessons plant of Baxter International makes medical products

such as sterile bags. Management of the plant is actually aware of the necessity to actively manage its constraints. For example, when materials are a constraint, management may go to a secondary vendor and purchase material at a higher cost than normal. When a machine is the constraint, a weekend shift is often added on the machine. If a particular machine is chronically the constraint and management has exhausted the possibilities of using it more effectively, then additional capacity is purchased. For example when the constraint was the plastic extruding machines, a new extruding machine was ordered. However even before the machine arrived, management had determined that the constraint would shift to the blenders once the new extruding capacity was added. Therefore a new blender was already planned. By thinking ahead and focusing on the constraints, management is able to increase the plant's real capacity at the lowest possible cost.

Conclusion

What is the Theory of Constraints and How Should it be Implemented?","Beyond The Goal". That is acknowledges the sources of information and inspiration for the Thinking Processes and Critical Chain methodologies. Theory of Constraints referenced foundational materials. "Standing on the Shoulders of Giants" .

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Theory of constraints