THEORY OF CONSTRAINTS,Nikhil Acharya Chinweike Eseonu Ganapathy Natarajan Chaitanya Polumetla,AGENDA,TOC Introduction Statistical Fluctuations and Dependent Events TOC Measurements TOC VS Push, Pull and ConWIP TOC in Project Management,INTRODUCTION,TOC Business Philosophy TOC is the invention of Dr Eliyahu Goldratt, an Israeli Physicist, Educator, and Management specialist. Problem Solving and Management/Decision-Making Tools called the Thinking Processes (TP).,Introduction to “THE GOAL”,“The Goal” 1992 Synchronous Manufacturing (techniques) Alex Rogo- Plant Manager (UniCo plants ) Jim Peach Division Head The Scout Troop Analogy Application Of Jonahs measurements Turn around of the plant,SYSTEM-ATIC APPROACH,Where do you put yourself?,Default Thought: Break Problems into fragments to solve it Makes complex tasks manageable. We dont see the consequences of actions Loose intrinsic sense of connection of the larger picture,TOC is applied to logically and systematically answer these 3 questions essential to any process of ongoing improvement,“What to change?“ “What to change to?“ “How to cause the change?“,HOW TO START?,DETAIL AND DYNAMIC COMPLEXITY,Detail complexity The sort where there are very many different variables to consider. Dynamic complexity The sort where cause and effect are subtle and the effect over time is not obvious.,DETAIL COMPLEXITY,17 different ways to grind a drill shank ? When someone tells you there are 3000 stock items, again they are telling you about ?!,DYNAMIC COMPLEXITY,When an action has different effects over the short run and the long run Consequences locally - different from consequences in another part of the system The real leverage in most management situations lies in understanding dynamic complexity, not detail complexity.” (Cause and effect dependency and variation),Dynamic and Detail complexity with the Global Objective VS Local objective,DEPENDENCY AND VARIATION,Playing Cards-Example done in class,Scout Troup Example,Herbie moved (Bottleneck) Global Optimization,THE PROBLEM,Variations in Individual processes! Variability Compounds Increases Inventory (Distance between the scouts),SYNCHRONOUS SYSTEM,Working synchronously considering the weakest link (bottleneck Herbie),Work at the weakest links pace (Herbie placed at start of line) Importance of systemic approach (consider entire line) The last kid completing the hike is the throughout,SYSTEM STRENGTH,THE STRENGHT OF THE CHAIN = STRENGHT OF THE WEAKEST LINK,Management Measures,Return of Investment (ROI) Maintain Cash flow Net profit,TOC Measurements,Throughput :The rate at which the system generates money through sales (The Quantity Sold not produced) Inventory : The money the system has spent on things which it intents to sell (Minimize WIP and Finished goods) Operating Expense : Money Used to convert Inventory to Throughput (Minimize material, labor and overhead),All the costs in a manufacturing company can be expressed in the terms of above Measurements,Plant is an Inventory by itself Machine depreciation value is an Operational expense Maintainance is Operational Expense Labor is Operational Expense and so on we can express any cost in the terms of Measurements.,TOC Measurements Applied to Scout Example,Throughput = When the last scout reaches the finish line Inventory = The Gap between the scouts Operating Expense = Energy Spent by the scouts,Solution for Scout Example,Place Herbie in the front Take some weight off from Herbie Scouts to hold hands,TOC Principles,Balance flow (synchronize) Local Optimization not enough, Optimize Globally Dynamically identify bottlenecks Bottlenecks limit throughput An hour lost at the bottleneck is an hour lost in production (Bottleneck hour = System hour),What is the Goal ?,What is the Goal of a Manufacturing Company ? To produce as many products as you can ? Utilize all the machines in the factory to their maximum capacity?,The Goal is:,Maximize Throughput Minimize Inventory Minimize Operating Expense Doing one of the above is not enough, all the goals should be achieved at the same time. To Sum up the Goal is to MAKE MONEY,How to achieve the Goal,Identify the Bottleneck (Constraint) Exploit the Bottleneck Subordinate the other processes Elevate the Bottleneck Repeat if new bottlenecks appear,Identify the Bottleneck,Finding Largest WIP Inventory. Observing where the shortage of parts takes place. Remember it could be dynamic.,Exploit the Bottleneck,Find more capacity. Use the bottleneck only if necessary. Put measures like QC before bottleneck. Load to 100%.Do not keep the bottleneck idle, keep it running Give Maintenance High Priority,Subordinate Other Tasks,Schedule based on the bottleneck Synchronize production to bottleneck Small lots Smooth flow Inventory only to support bottleneck,Elevate the Bottleneck,Improve equipment Reduce statistical variations Reduce dependencies,Repeat the Steps,New Bottleneck Emerges Repeat the Steps and continue improving the system.,