Operations and production management
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Operations and Production Management. Group 6: Travis Lawrence David Evans Kerry Savoury. Operations and Production Management. THEORY OF CONSTRAINTS (TOC). What is TOC?.

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Operations and production management

Operations and Production Management

  • Group 6:

    • Travis Lawrence

    • David Evans

    • Kerry Savoury


Operations and production management1

Operations and Production Management

THEORY OF CONSTRAINTS (TOC)


What is toc

What is TOC?

  • “An approach to management that focuses on whatever impedes progress toward the goal of maximizing the flow of total value-added funds or sales, less discounts and variable costs”


History of toc

History of TOC

  • A relatively recent development (20 years)

  • Developed by Eliyahu Moshe Goldratt, an Israeli physicist, educator, and management specialist

  • Became involved to help a friend who operated a plant that made chicken coops to design a scheduling system


History of toc cont d

History of TOC (cont’d)

  • His system tripled the output of the plant

  • Goldratt released (1984) the philosophy underlying the scheduling algorithm in a book, The Goal: A Process of On­going Improvement


What is a constraint

What is a Constraint?

  • A constraint is anything in an organisation that limits it from moving toward or achieving its goal

  • For most business organisations the goal is to make money


Types of constraints

Types of Constraints

  • Two basic types of constraints:

    • Physical constraints

      • something like the physical capacity of a machine

    • Non-physical constraints

      • something like demand for a product or a corporate procedure


Types of constraints1

Types of Constraints

Examples of Constraints:

  • Demand Constraints

    • A constraint on output

    • Symptoms include:

      • large amounts of final product inventory

      • a production line running at a fraction of full capacity production


Types of constraints2

Types of Constraints

  • Demand Constraints (cont’d)

    • A demand constraint means that the system has excess capacity given the demand for its product

    • Possible problems for demand might include:

      • a problem with marketing in which the customers are unaware of the system’s high quality product

      • the system may have a low quality product

      • the system may be producing an obsolete product


Types of constraints3

Types of Constraints

  • Demand Constraints (cont’d)

    • In order to resolve the issue of excess capacity, each of the previous three problems need to be examined and resolved


Types of constraints4

Types of Constraints

  • Production Constraints

    • Production constraints are issues that impeded a systems ability to achieve its maximum capacity

    • In-process inventories between production steps is often a symptom of a production constraint


Types of constraints5

Types of Constraints

  • Production Constraints are categorised into three types:

    • Policy constraints

      • Company or union policies or practice create the constraint and impede its long-term solution

      • It is the most frequent constraint

    • Machine capacity constraints

      • When a single (or small number of machines) on a line form a bottleneck


Types of constraints6

Types of Constraints

  • Labour constraints

    • Insufficient labour (not having a skilled operator)

    • The general labour pool is insufficient to run a line to full capacity, including extra shifts if needed


Types of constraints7

Types of Constraints

  • Raw Material Constraints

    • Raw material constraints are shortages in the raw materials necessary in making the product

    • This is why a relationship with one's vendors is so important


Applying toc

Applying TOC

  • The Theory of Constraints has been used at three different levels:

    • Production Management

      • Initially applied here to solve problems of bottlenecks, scheduling, and inventory reduction


Applying toc1

Applying TOC

  • Throughput Analysis

    • TOC has caused a shift from “cost-based” decision making to decision making based on “continuous improvement of processes”

    • Some key elements are:

      • System throughput

      • System constraints

      • Statistically determined protective capacities at critical points


Applying toc2

Applying TOC

  • Logical Processes

    • A general application to attack a variety of process problems within organizations

    • It is applied:

      • To identify what factors are limiting an organization from achieving its goals,

      • To developing a solution to the problem,

      • To get the individuals in the process to invent the requisite changes for themselves


The process of change

The Process of Change

  • The traditional approach to a process change shows that local optimization does not work well for good of the overall system

  • A system can only operate as fast as it’s bottleneck


The process of change1

The Process of Change

  • Goldratt briefly outlined a process of change in 1990

  • He characterized it as:

    • What to change

    • What to change to

    • How to cause the change


The process of change2

The Process of Change

  • Approached by the 5 following rules:

    • Define the system.

    • Define the goal of the system.

    • Define the necessary conditions.

    • Define the fundamental measurements.

    • Define the role of the constraint(s).


Implementing toc

Implementing TOC

  • There are five steps involved in implementing TOC:

    • Identify

    • Exploit

    • Subordinate

    • Elevate

    • Repeat


Implementing toc1

Identify – find the neck in our hourglass

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Implementing TOC

  • Identify the system's constraints

    • Prioritize the processes so that just the constraints that really limit the system’s progress are identified


Implementing toc2

Implementing TOC

  • Decide how to exploit the system's constraints

    • Decide how to manage the constraint within the system

    • Then manage the resources to provide what is needed to match the output of the constrained resources

    • Never let them supply more output than is needed


Operations and production management

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  • Decide how to exploit the system's constraints

Expoit – remove any blockages from the neck

Exploit – improve the value of the output


Implementing toc3

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Implementing TOC

  • Subordinate everything else to the system’s constraint

    • The constraints are keeping us from moving toward our goal

    • Apply all of the resources that we can to assist in breaking the constraint

Subordinate – there is no point in forcing more in. It won’t come out any quicker


Implementing toc4

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Implementing TOC

  • Elevate the system's constraints

    • Continue to work toward breaking a constraint (also called elevating a constraint)

    • At some point the constraint will no longer be a constraint

    • The constraint will be broken

Elevate:Make the hole bigger!!


Implementing toc5

Implementing TOC

  • If the constraint is broken, return to Step 1

    • There will be another constraint, somewhere else in the system that is limiting progress to the goal


Implementing toc6

Implementing TOC

Concluding:

  • The process must be reapplied, perhaps many times

  • TOC does not try to eliminate all problems, only those that threaten the constraint

  • Excessive effort in problem elimination is a waste


Implementing toc7

Implementing TOC

  • Advantages:

    • Improves capacity

    • Avoids build-up of inventory

    • Avoids local optimization

    • Improves communication between departments


Implementing toc8

Implementing TOC

  • Disadvantages:

    • Negative impact on non-constrained areas

      • Diverts attention from other areas that may be the next constraint

    • The constraint must be kept operating at its full capacity


Operational measurements

Operational Measurements

  • TOC defines three operational measurements that measure whether operations are working toward that goal

    • Throughput

      • The rate at which the system generates money through sales


Operational measurements1

Operational Measurements

  • Inventory

    • All the money the system invests in things it intends to sell

    • This is the total system investment, which includes not only conventional inventory, but also buildings, land, vehicles, plant, and equipment


Operational measurements2

Operational Measurements

  • Operating Expenses

    • All the money the system spends in turning inventory into throughput

    • This includes all of the money constantly poured into a system to keep it operating, such as heat, light, scrap materials and depreciation


Current research

Current Research

  • It is currently being refined and expanded at the Avraham Y. Goldratt Institute (named after Dr. Goldratt's late father)

  • The Goldratt Institute publishes The Theory of Constraints Journal on an irregular, approximately quarterly, basis


Theory of constraints

Theory of Constraints

Thank You

Questions???


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