Constraints Management

Intro to the Theory of Constraints

(A lecture introducing a portion of the Physical
side of the Theory of Constraints)
James R. Holt, Ph.D., PE
Associate Professor
Engineering Management

holt@vancouver.wsu.edu
http://www.cea.wsu.edu/engrmgt/

Washington State University-2004

The Goal by Eliyahu Goldratt

The goal of a manufacturing company?

Make money!

Measuring the goal

Net profit
Cash
Return on Investment (ROI)
For a manufacturing enterprise, the goal can also
be measured by
Throughput
Inventory
Operating expenses

Definitions
Throughput: The rate at which the system
generates money through sales.

Note that the money is generated through sales

and not production because if you produce
something and dont sell it, you have not really had
throughput. (Youve just put it into inventory).

Inventory: All the money that the system has

invested in purchasing things which it
intends to sell.
Operational Expense: All the money the
system spends in order to turn inventory into
throughput.
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Note that all the definitions have

money in them
Throughput: The rate at which the system
generates money through sales.
Inventory: All the money that the system has
invested in purchasing things which it
intends to sell.
Operational Expense: All the money the
system spends in order to turn inventory into
throughput.

Definition
Bottleneck: Any resource whose capacity is

equal to or less than the demand placed upon

it.
Optimization of a plant: Balance flow, not
capacity.

Definition
Types of elapsed time:

Setup time The time a part spends waiting for a

resource, while the resource is preparing itself to
work on the part.
Process time The amount of time the part
spends being modified into a new, more valuable
form.
Queue time The time the part spends in line for
a resource while the resource is busy working
something else ahead of it.
Wait time The time the part waits, not for a
resource, but for another part so that they can be
assembled together.
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The Theory of Constraints (TOC)

TOC IS:
A set of Proven Solutions
Drum Buffer Rope (DBR), Critical Chain Project
Management (CCPM), Replenishment,
Sales/Marketing, Human Behavior, Measurements,
Strategy

An Approach to Problems
Five Steps of Continuous Improvement

Tools for Discovery of New Solutions

What to Change, What to Change to, How to Cause
the Change (The Thinking Process Tools)
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Process Theory
Input

Larger Process

Input

Input

Process

Output

Process

Input

Process

Output

Output

Output

Input

Process

Output

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

10

There is a Weakest Link

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.
An exactly balanced chain (system) is
stronger than a non-homogeneous chain,
but when close to the breaking point, all
links must be managed

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11

Interconnections are
non-Trivial
Every System has relatively few constraints
To operate at maximum efficiency, the generic problem
with physical systems must be identified
The Five Focusing Steps help identify and improve the
constraint (called The Generic Physical Solution)

Physical and Non-Physical Processes

Flow system structures: straight line (I), assembly (A),
one material divided into several products (V), a
product given minor changes at the end (T)
Distribution and Supply Chain
Management control of these systems
12

Flow System Structures

RM

FG

Raw Material

Linear or I system

Aircraft assembly
is more of an A
Plant

Finished Goods

FG

RM
RM

RM

RM
RM
RM

RM
RM
RM

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Interconnections are Non-Trivial

A simple chain over-simplifies reality

Link 1 may have a relationship with Link 5
Link 5 may have a different relationship with 1

1 2 3 4 5 6 7 8 9

14

Management of the Links Vs.

Linkages
Maybe the Simple Chain isnt 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!

15

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
16

We Measure Operational
Efficiency
Work flows from left to right through
processes with capacity shown.

Process

FG

RM
Capability
Parts
per Day

Market
Request
11

Too Much Overtime

Chronic Complainer
Excellent Efficiency--Near 100%
17

Reward Based on Efficiency

Work flows from left to right.
Process

FG

RM
Capability
P/D

Both found ways to look busy and

appear to have a capacity of 5 parts/day.

18

In reality...
Processes A and B wont produce
more than Process C for long.

Process

FG

RM
Potential
P/D

Reality

19

Then Variability Sets In

Processing times are just
AVERAGE Estimates

Process

FG

RM
Reality

52

52

52

52

52

20

Whats an Average? 50%

Half the time there are 5 or more per day at
each process--Half the time less
Process

FG

RM
Reality
Probability
Two at a time:
Over all:

52
0.5
0.25

52
0.5

52
0.5

52
0.5

52
0.5

0.25
3% Chance of 5 per day
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Previous Solution: Inventory

Put a day of inventory at each process!
WIP
5
Process A

5
B

5
C

5
D

Total 25

FG

RM

Variable
Process

52

52

52

52

52

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System Variability Takes Over-Chaos

Inventory (WIP) quickly shifts position.
Inventory manager/expediter tries to smooth it out.
Distribution problems result. Costs go up.
Process
WIP

A
3

B
0

C
10

D
8

E
4

Total 25

FG

RM
Variable
Process

52

52

52

52

52

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System Variability Takes Over-Chaos

An Average of 5 means sometimes 3 and some times 7
Process
WIP

A
3

B
0

C
10

D
8

E
4

Total 25

FG

RM
Variable

52

52

52

52

52

Process
Shifting work-in-process creates large queues at some
locations. This makes work wait longer to be processed.

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System Variability Takes Over-Chaos

Process
WIP

A
3

B
0

C
10

D
8

E
4

Total 25

RM

FG

Variable
52
52
52
52
52
Process
Shifting work-in-process creates large queues at some
locations. This makes work wait longer to be processed.
Other workstations can be starved for work. The work they
could be doing is delayed because it is not there. They
cant take advantage of their extra capability. So...

25

System Variability Takes Over-Chaos

Process
WIP

A
3

B
5

C
10

D
8

E
4

Total 25

RM

X 30
FG

Variable
52
52
52
52
52
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!
26

Attempts to Control WIP

Put a lid on it-Use Kanban Cards-JIT
WIP
5
Process A

5
B

5
C

5
D

Total 25

RM

FG

Variable
52
52
52
52
52
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?
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Effects of Inventory Limits on

Production
What does a Kanban card of 5 Mean?
WIP
5
Process A

5
B

5
C

5
D

Total 25

FG

RM
Variable
Process

52

Before
Kanban
5+/-2
Average = 5

52

52
After
Kanban

52

52

Cant
exceed
5

5+/-2
Average = 3.5
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Operations Dilemma

Produce a lot

Increase
work-inprocess

Manage
production
effectively
Costs &
delivery in
control

Decrease
work-inprocess

Assumption:
We cant both
increase WIP and
decrease WIP at the
same time.

Injection: Put a large inventory where its needed and

low everywhere else!
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TOC Steps to

Continuous Improvement
Step 0. Identify the Goal of the System/Organization
Step 0.5 Establish a way to measure progress to Goal

Step 1. Identify the systems constraint.

Step 2. Exploit the systems constraint.
Step 3. Subordinate everything else to the above
decision.
Step 4. Elevate the systems constraint.
Step 5. If a constraint is broken (that is, relieved or
improved), go back to Step 1. But dont allow
inertia to become a constraint.
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Five Steps Applied to Flow

Operations
12

WIP
A

Total
C

12

RM

FG
7

X 5.5
5
XXX
7

Five Focusing Steps

Step 1. Identify the Constraint (The Drum)
Step 2. Exploit the Constraint (Buffer the Drum)
Step 3. Subordinate Everything Else (Rope)
Step 4. Elevate the Constraint ($?)
Step 5. If the Constraint Moves, Start Over
31

Understanding Buffers
WIP

Total 12parts/5parts per day=2.5 Days

FG

RM
7

The Buffer is Time!

In general, the buffer is the total time from work release
until the work arrives at the constraint.
Contents of the buffer ebb and flow within the buffer
If different items spend different time at the constraint, then
number of items in the buffer changes
but Time in the buffer remains constant.
32

We need more than one Buffer

Raw Material
Buffer

Finished Goods
Buffer

FG

RM
7

There is variability in the Constraint.

To protect our delivery to our customer we
need a finished goods buffer.
There is variability in our suppliers.
We need to protect ourselves from unreliable
delivery.
33

Buffer Time is ConstantPredictable

Raw Material
Buffer

Finished Goods
Buffer

FG

RM
Raw Material
Buffer
2 Days

Constraint
Buffer
2.5 Days

Finished Goods
Buffer
1 Day

Processing Lead Time is Constant

34

Buffer Management
Constraint Buffer WIP

Total 12/5=2.5 Days

RM

FG
7
WO21
WO20
WO19
WO18

9
WO17
WO16
WO15
WO14

WO13
WO12
WO11
WO10

2.5 Days

The Constraint is scheduled

very carefully
Buffer Managed by location
Individual activities in the
buffer are not scheduled

Time until Scheduled at Constraint

35

Problem Identification
RM

RM
WO19
Delayed
Parts

FG
7
WO21
WO20
WO19
WO18
2.5 Days

9
WO17
WO16
WO15
WO14

6
Constraint schedule
is in jeopardy!
(Red Zone Hole)

WO13
WO12
WO11
WO10

Watch WO14 (Yellow)

0

WO19 OK (Green)
Green

Time until Scheduled at Constraint

36

Additional Buffers
Constraint Buffer (as we discussed)
Protects the Constraint from running out of work

Finished Goods Buffer

Protects customer delivery from Constraint variation

Raw Material Buffer

Protects the Release of material from suppliers

Assembly Buffer
Facilitates speedy flow of products

37

Additional Buffers
Buffer Types:
Constraint
FG
RM
Assembly

Ropes
WIP
Constraint
Finished goods
A

RM

FG
7

RM
Assembly

Raw Material
38

Manufacturing
is an integrating discipline
TOC
Thinking
Processes
Physical
Systems
Behavior

Finance
Capital Projects
Uncertainty
Investment
Measures
People
Organizations
Performance
Measurement
Assignments
Quality

Projects
Full Theory
Scheduling
Manage
Quality
Design for
Experiments

Operations
Optimization
Simulation
Decisions
Reliability
Supply Chain
Strategy
Corporate
Departmental
Subordination
Focus
39

Thank You
Manage the constraints.

Washington State University-2004

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