Successfully reported this slideshow.

# Theory of Constraints

## More Related Content

### Theory of Constraints

1. 1. For those of us who need brushing up on our language<br />Presented by <br />Bonnie Aumann, algorithmics<br />At <br />Agile Philly<br />Primer on the Theory of Constraints<br />
2. 2. To Do List<br />The Production Dice Game<br />
3. 3. To Do List<br />The Production Dice Game<br />Dependency<br />Statistical Variation<br />
4. 4. To Do List<br />The Production Dice Game<br />Dependency<br />Statistical Variation<br />Speechifying<br />
5. 5. To Do List<br />The Production Dice Game<br />Dependency<br />Statistical Variation<br />Speechifying <br />Theory in a Nutshell<br />
6. 6. To Do List<br />The Production Dice Game<br />Dependency<br />Statistical Variation<br />Speechifying <br />Theory in a Nutshell<br />The Flow Game<br />
7. 7. To Do List<br />The Production Dice Game<br />Dependency<br />Statistical Variation<br />Speechifying <br />Theory in a Nutshell<br />The Flow Game<br />Phases, Iterations, and Flow<br />
8. 8. A visceral experience<br />Of <br />Reading The goal<br />The Production Dice Game<br />
9. 9. Ship 14 Knives in 4 Days<br />The Game<br />Each round represents a day’s work<br />Roll the dice to see what you produced<br />Each operation is dependent on the upstream operation for input<br />Play for 4 days<br /> Why 14? The average roll of a dice is 3.5 * 4 = 14<br />
10. 10. The limits of my language are the<br /> limits of my mind.<br />Speechifying<br />
11. 11. The Goal<br />Make money now and in the future<br />
12. 12. The Goal<br />Make money now and in the future<br />Sales* NOT Production<br />*Sales minus all money not generated by the co. (materials, commissions, etc.)<br />
13. 13. What prevents us from achieving The Goal?<br />Constraints<br />
14. 14. What is a Constraint? <br />Anything that limits the system’s performance<br />
15. 15. Internal<br />External<br />Bottlenecks <br />Policies<br />Market Demand<br />Raw Materials<br />Constraint is Anything that Limits the System<br />
16. 16. Bottleneck<br />A Special Kind of Constraint<br />≥<br />Demand<br />on an operation or resource<br />Capacity<br />of the resource<br />
17. 17. Capacity Constraint Resource <br />A Special Kind of Bottleneck<br />Limits the entire system’s throughput.<br />
18. 18. Balance is Doom<br />Balanced Operations<br />Dependency & Statistical variation<br />Floating Bottlenecks<br />
19. 19. Floating Bottlenecks<br />Floating Bottlenecks are…<br />Unpredictable<br />
20. 20. Floating Bottlenecks<br />Floating Bottlenecks are…<br />Unpredictable<br />aka<br />Unmanageable<br />
21. 21. Floating Bottlenecks<br />Floating Bottlenecks are…<br />Unpredictable<br />aka<br />Unmanageable<br />aka<br />Doom<br />
22. 22. The 3 Global Measures<br />Throughput - Money flowing In<br />Rate at which a system generates money through sales (not through production).<br />
23. 23. The 3 Global Measures<br />Throughput - Money flowing In<br />Rate at which a system generates money through sales (not through production).<br />Inventory - Money inside company<br />Product inventories are liabilities, not assets. Liability: Something that frustrates achievement of the goal.<br />
24. 24. The 3 Global Measures<br />Throughput - Money flowing In<br />Rate at which a system generates money through sales (not through production).<br />Inventory - Money inside company<br />Product inventories are liabilities, not assets. Liability: Something that frustrates achievement of the goal.<br />Operating Cost - Money flowing Out<br />All the money a system spends in turning inventory into throughput (e.g. Managers)<br />
25. 25. Profit?<br />Throughput<br />Operating Costs<br />Net Profit<br />
26. 26. Increasing Profit<br />Increase Throughput<br />
27. 27. Increasing Profit<br />Increase Throughput<br />Decrease Assets (including inventory)<br />Avoid Throughput and Operating expense<br />
28. 28. Increasing Profit<br />Increase Throughput<br />Decrease Assets (including inventory)<br />Avoid Throughput and Operating expense<br />Decrease Operating Expense<br />Avoid Throughput and Assets<br />
29. 29. Increasing Profit<br />TOC’s order of importance<br />Increase Throughput<br />Decrease Assets (including inventory)<br />Avoid Throughput and Operating expense<br />Decrease Operating Expense<br />Avoid Throughput and Assets<br />Traditional Model puts this in #1 slot<br />“Cost Center Disease”<br />
30. 30. Exploiting Constraints<br />Examples throughput<br />Reduce set-up time<br />Relieve workers so there is no idle time at the CCR<br />Sub-contract or outsource bottleneck resource<br />Add capacity to the constraint<br />
31. 31. Exploiting Constraints<br />Examples throughput<br />Reduce set-up time<br />Relieve workers so there is no idle time at the CCR<br />Sub-contract or outsource bottleneck resource<br />Add capacity to the constraint<br />
32. 32. Exploiting Constraints<br />Examples throughput<br />Reduce set-up time<br />Relieve workers so there is no idle time at the CCR<br />Sub-contract or outsource bottleneck resource<br />Add capacity to the constraint<br />
33. 33. Exploiting Constraints<br />Examples throughput<br />Reduce set-up time<br />Relieve workers so there is no idle time at the CCR<br />Sub-contract or outsource bottleneck resource<br />Add capacity to the constraint<br />
34. 34. Tell me how you will measure me and <br />I will tell you how I will behave.<br />Why?<br />
35. 35. Traditional<br />Theory of Constraints<br />Inventory = Profit<br />Overproduction<br />Busy = Efficient<br />Operational Costs #1<br />Sub-system optimization<br />Cost Center Disease<br />Inventory = Profit<br />Sell inventory<br />Extra work discouraged<br />Throughput #1<br />Systemic optimization<br />Continuous Improvement<br />Implications<br />
36. 36. via Karl J Scotland<br />http://availagility.co.uk/2010/07/16/the-flow-experiment/<br />The Flow Game<br />
37. 37. Drum – Buffer – Rope <br />Drum<br />The CCR (Capacity Constrained Resource). <br />Purpose: Its production rate sets the production rate for the entire plant, downstream & upstream.<br />Buffer<br />Placed in front of the drum (upstream) to keep it busy for a specified time. <br />Purpose: No throughput disruption.<br />Rope <br />Actions taken to tie the rate at which material is released into the plant (at the first operation) to the production rate of the drum (CCR). <br />Purpose: Ensure WIP inventory doesn’t exceed the level needed for the buffer.<br />
38. 38. TOC <br />JIT<br />Job shop<br />3 Global Measurements<br />Kanban authorizations<br />Flow based<br />Local, non-financial measurements e.g. cycle time<br />Drum-Buffer-Rope<br />TOC vs. JIT<br />
39. 39. Most Comprehensive Reference Ever<br />Questions to lead your discovery<br />http://maaw.info/TOCquestions.htm<br />Chapter by Chapter summary of The Goal<br />http://maaw.info/ArticleSummaries/ArtSumTheGoal.htm<br />KanBanDev Yahoo Group<br />