Theory Of Constraints

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Theory Of Constraints
Your Experience
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Theory Of Constraints
General Experience
"...mimic Alex Rogo's actions in The Goal. These
efforts usually will be rewarded with almost
immediate improvements in Operations and in
profits at virtually no cost".
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Theory Of Constraints
Complex, large environments dominated by high
uncertainty.
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Theory of ConstraintsandLean Thinking
Maintenance Center, Albany, GA
The Honorable Diane K. Morales Deputy Under
Secretary of Defense (Logistics and Materiel
Readiness)
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Goals

• Increase Throughput
• Decrease Costs
• Decrease Work In Process (WIP)

• Reduce Repair Cycle Time (RCT)
• Make Schedule 90 of
• the Time

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Implementation, Repair Cycle Time, and Work In
Process (WIP)
jCritical Chain kSimplified Drum Buffer Rope
lRepresents entire LAV line. mNo current
production line. nProduction line completed.
oAAV hull repair and assembly after receipt of
hull from UDLP. pThe AAV critical chains have
been established to cover the work performed
after the hull has been modified by UDLP.
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LAV
Output Per Month, Cumulative
Data Source Master Work Schedule vs. Completions
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Accomplishments

• Ahead of or on schedule for all production lines
• Reduced Repair Cycle Time by at least 50
• Reduced Quantity of Assets in Maintenance by up
  to 50

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MILTON KEYNES GENERAL HOSPITAL
2002-03 Hospital Activity Summary Accident
Emergency Attendances Total Attendances 66,633
Beds availability Available 399 Occupancy
87 Operating Theatres 8 Outpatient
Attendances Total Attendances 127,115 Ward
Attendances Total Attendances 9,977
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BUCKINGHAMSHIRE HOSPITALS
Stoke Mandeville Hospital
Wycombe Hospital
2000-01 Hospital Activity Summary Accident
Emergency Attendances Total Attendances
49,704 Beds availability Available 475
Occupancy 87 Operating Theatres 7 (2
dedicated)
2003 Hospital Activity Summary Beds
availability Available 406 Operating Theatres
11 Outpatient Attendances 74000
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AE Patients Waiting lt 4Hours as a Percentage of
Attendances
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DIDCOT COMMUNITY HOSPITAL, OXFORDSHIRE
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Theory Of Constraints
Facts
HOW CAN IT BE?
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Theory Of Constraints
THE STARTING POINT
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Theory Of Constraints
COMPLEXITY
How complex is your system?
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Theory Of Constraints
The conventional way of dealing with complex
systems
What are the drawbacks?
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Theory Of Constraints
SYSTEM A
SYSTEM B
Which system is more complex?
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Theory Of Constraints
INHERENT SIMPLICITY
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?
Eliyahu M. Goldratt 2003
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Assumption
A resource standing idle is a major waste!
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Let's examine this assumption on a generic
operation environment.
Check if the characteristics fit your environment.
Operation's first generic characteristic
F
Reality is not simple

more than one resource is
needed in order to deliver the product/service.
Does this characteristic fit your operation
environment?
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Operation's second generic characteristic
F
Reality is not so chaotic

A general direction of flow can be identified.
Does this characteristic fit your operation
environment?
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Operation's third generic characteristic
F
Reality is not predictable

Murphy exists!
From time to time a disturbance causes one of the
resources to work slower than average.
Does this characteristic fit your operation
environment?
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100
Bank
of work
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When Murphy strikes, the green resource eats into
the bank of work. Once the disturbance has been
overcome all upstream resources must rebuild the
bank while, at the same time, continuing to
supply work to the green resource. Conclusion
they must have more capacity than the
green resource has. They must have "PROTECTIVE
CAPACITY." They have to rebuild the bank before
Murphy strikes again! Conclusion they must have
CONSIDERABLE protective capacity.
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The protective capacity needed is not negligible!
So, if we want to exploit a certain resource to
100,
all other resources must have much more capacity
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they should have significant protective capacity.
What happens if we want to activate
them to their maximum capacity?
OK youre the boss
PC
100
Bank of work
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Theory Of Constraints
FROM
TO
THROUGHPUT WORLD
COST WORLD
IT IS A MAJOR PARADIGM SHIFT!
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THE THEORY OF CONSTRAINTS
Capitalizing on the Inherent simplicity of the
system
THE FIVE FOCUSING STEPS
Step 1 Identify the systems constraint(s)
Step 2 Decide how to exploit the systems
constraint(s)
Step 3 Subordinate everything else to the above
decision
Step 4 Elevate the systems constraint(s)
Step 5 If in the previous steps a constraint has
been broken, go back to step 1.
Warning Dont allow inertia to
cause a system constraint(s)
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Insights into
FINANCE AND MEASUREMENTS
By Eliyahu M. Avraham (Rami) Goldratt
Tell me how you measure me and I will tell you
how I will behave.
?
Eliyahu M. Goldratt 2003
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The easiest way to demonstrate the conceptual
distortion in calculating
product/service cost, is to set it in the frame
of calculating the net profit
of the company.
For that it is enough to use an extremely simple
example. In the following
example no tricks are involved, all the relevant
data are fixed and accurate.
In other words, all the common excuses are
eliminated.
Q
Product
Product

P
100/unit
90/unit
Here is the example...
50 u/week
100 u/week
D
D
15
5
min./U
min./U
Each resource is
B
C
C
P. part
available 5 days,
10
5
15
5/U
min./U
min./U
min./U
8 hours a day.
Operating expense
A
A
B
6000 per week.
15
10
15
min./U
min./U
min./U
RM1
RM3
RM2
20/U
20/U
20/U
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When the market is the constraint
IDENTIFY the system's constraint(s).
The market is
the constraint.
Excellent due date performance.
Decide how to EXPLOIT the system's
Short lead time.
Satisfactory quality.
TOC logistic applications
SUBORDINATE everything else to the above
decision.
Drum-Buffer-Rope Pull distribution
Critical Chain Dollar-Days measurements.
ELEVATE the system's constraint(s).
Unrefusable offers.
If in the previous steps a constraint has been
broken, GO BACK to step 1.
Strategy.
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Theory Of Constraints
VIABLE VISION
Time
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Insights into
DISTRIBUTION
By Eliyahu M. Avraham (Rami) Goldratt
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Eliyahu M. Goldratt 2003
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There is a business opportunity!
inventory of goods
Let's hold
close to the client.
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Replenishment time is as important as the level
of consumption.
The longer the replenishment time -
the more inventory the selling point should hold.
CONCLUSION The selling point should order
inventory to the target consumption within the
replenishment time. Notice The distribution
system has inventory on the way additional
inventory at the site.
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• Order lead time
• the time until an order is placed.

• Production lead time
• - the time it takes to process the order,
• - the time in queue to be produced,
• - the time to produce the order.

• Transportation lead time
• the time it takes to transfer the goods to
  the consumption point.

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BATCHING

• The production system uses large batches
• In order to improve on the measurement of
  efficiency (saving set-ups) operations use large
  batches when producing the goods. Thus orders are
  gathered until large quantities can be produced.
• The transportation system uses large batches
• In order to improve transportation cost the
  transportation of goods is done in large batches.
  Several orders are gathered until the
  transportation cost is justified.
• Points-of-sale batch orders for two main reasons
• Often the selling point is offered a lower price
  for the goods if large quantity
• orders are submitted.
• Since it requires significant time and attention
  to determine and submit
• orders the selling point often chooses to batch
  orders.
• Thus the selling point places orders according to
  some sort of batching mechanism
  it does not order until inventory goes down
  to 're-order point'/'minimum inventory level',
  then orders according to 'economical order
  quantity'/'maximum inventory level'.

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Theory Of Constraints
VIABLE VISION
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Theory Of Constraints
TOC INSIGHTS
www.toc-goldratt.com
VIABLE VISION
www.goldrattconsulting.com