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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
slide24
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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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