AN OVERVIEW OF THEORY OF CONSTRAINTS TOC

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AN OVERVIEW OF THEORY OF CONSTRAINTS (TOC)

• Chwen Sheu, Ph.D.
• Certified TOC Instructor
• Kansas State University

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INTRODUCTION TO TOC EVOLUTIONS

• Creative Output Inc., 1976
• The Goal An On-Going Improvement Process, 1984
• Avraham Y. Goldratt Institute (AGI), 1986
• Its Not Luck, 1994
• The Theory of Constraints Its Implications for
  Management Accounting, 1995
• Critical Chain, 1997
• Necessary but not Sufficient, 2000

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II. WHAT IS TOC?

• A. TOC is a management philosophy that emphasizes
  constraint identification and management as the
  keys for achieving an organizations goals.
• B. SYSTEMS, GOALS CONSTRAINTS
• The Goal of a company ?
• Productivity is nothing but

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II. WHAT IS TOC? (Contd)

• C. The Chain Analogy
• The strength of a chain is governed by its ...
• Local Global

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II. WHAT IS TOC? (Contd)

• D. Types of Constraints
• Physical constraints
• Nonphysical constraints

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III. TOC APPLICATIONS

• A. Production Scheduling
• B. Continuous Improvement Thinking Process (TP)
• C. TOC Performance Measurement
• D. Project Management the TOC Way
• E. Distribution

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THINKING PROCESS

• A. A generic approach for continuous
  improvement
• What to Change?
• To What to Change to?
• How to Cause the Change?
• B. the biggest obstacle to successful
  implementation is to overcome resistance to
  change.

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TP Westar Energy

• Dissatisfied New/Existing External Customers
• Backlog of new installations
• Lack of appropriate technology????? (What
  technology?)
• Difficult to use IVR????? (What is this for?)
• Lack of consistency in installation charges due
  to installation distance from the customers
  facility (business or home)
• Lack of consistency in customer contributions
• The Company tries to decide for the customer what
  they need????? (Need to be more specific)
• Too many power outages
• Customers complaining to field personnel (not
  customer service) on various issues (e.g. bills)
• Does not follow service priority systems
  especially with "whining" customers (Which
  operations? Installation?)
• Charging different rates for different customers
  causes customer complaints
• Unable to meet desired customer service dates
• Customers complain about unpredictably high bills
  due to excessive weather conditions
• Customers complain about loss of service due to
  excessive weather conditions
• Year-end budget cram takes away productive time
  from supervisors and therefore affects customer
  service
• Lack of consistent billing regulations
• Delayed installation (or monthly) billing to the
  customers
• Inaccurate installation (or monthly) charges to
  the customers
• Slow response to service calls

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4. Prerequisite tree What currently prevents the
implementation of the injection(s)?
1.Current Reality Tree Why is the system sick?
2. Evaporating Cloud What conflict is preventing
the cure
UDE
Injection
Injection
UDE
UDE
Obst.
Obst.
Obst.
injection
Clouds Objective
IO
IO
IO
UDE
Obst.
Obst.
opposite
Core Problem
IO
IO
IO
Obst.
DE
IO
DE
3. Future Reality Tree Will the injection lead
to all desired effects without creating new UDEs?
DE
Inj
5. Transition tree What actions does the
initiator have to take to effectively implement
the cure?
Objective
DE
IO
Inj
Initiators action
Injection
IO
Initiators action
Initiators action (which deals with Obstacle)
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TOC PERFORMANCE MEASUREMENT

• A. PQ Example
• B. Tell me how you measure me, and I will do as
  I am measured.
• C. Conventional cost accounting systems

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P Q EXAMPLE
100 unit/wk 90/unit
80unit/wk 100/unit
Mach A 10 min
Mach D 10 min
Mach C 10 min
Mach B 10 min
Mach C 5 min
Mach D 10 min
Mach B 10 min
Mach A 10 min
RM X 25
RM Y 20
RM Z 20
(1) One unit for each machine type 8 hrs/day 5
days/wk (2) Labor OH 6,000/wk.