Theory of constraint

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Theory of constraint

  1. 1. The Theory of Constraints Now that we know the Goal, how do we use it to improve our system? 8/27/04 Paul A. Jensen Operations Research Models and Methods Copyright 2004 - All rights reserved
  2. 2. The Theory of Constraints <ul><li>Step 1: Identify the system's constraint(s). </li></ul><ul><li>Step 2: Decide how to exploit the system's constraint(s). </li></ul><ul><li>Step 3: Subordinate everything else to the decisions of Step 2. </li></ul><ul><li>Step 4: Elevate the system's constraint(s). </li></ul><ul><li>Step 5: If a constraint is broken in Step 4, go back to Step 1. </li></ul>
  3. 3. Step 1: Identify the system’s constraint(s). <ul><li>What is the Goal? </li></ul><ul><li>What is Throughput? </li></ul><ul><li>What is Inventory? </li></ul><ul><li>What is Operating Expense? </li></ul>
  4. 4. Step 2: Decide how to exploit the system’s constraint(s). <ul><li>What is the constraint? </li></ul><ul><li>How do we get as much throughput as possible? </li></ul>
  5. 5. Step 3: Subordinate everything else to the decisions of Step 2 <ul><li>Throughput? </li></ul><ul><li>Inventory? </li></ul><ul><li>Operating Expense? </li></ul>
  6. 6. Step 4: Elevate the system’s constraint(s). <ul><li>Throughput? </li></ul><ul><li>Inventory? </li></ul><ul><li>Operating Expense? </li></ul>
  7. 7. Step 5: If a constraint is broken in Step 4, go back to Step 1. <ul><li>What might happen if the constraint is elevated? </li></ul>
  8. 8. Summary: The Theory of Constraints <ul><li>Step 1: Identify the system’s constraint(s). </li></ul><ul><li>Step 2: Decide how to exploit the system’s constraint(s). </li></ul><ul><li>Step 3: Subordinate everything else to the decisions of Step 2. </li></ul><ul><li>Step 4: Elevate the system’s constraint(s). </li></ul><ul><li>Step 5: If a constraint is broken in Step 4, go back to Step 1. </li></ul>
  9. 9. Application in Manufacturing
  10. 10.
  11. 11. Step 1: Identify the system’s constraint(s). <ul><li>What is the Goal? </li></ul><ul><li>What is Throughput? </li></ul><ul><li>What is Inventory? </li></ul><ul><li>What is Operating Expense? </li></ul>
  12. 12. To Identify the Resource Constraint <ul><li>Compute the load on each production resource assuming market demands. </li></ul><ul><li>Compare the resource loads with the resource capacities. </li></ul><ul><li>Those resources for which the loads exceed the capacities are constraints (bottlenecks). </li></ul><ul><li>If no production resource load exceeds its capacity, </li></ul><ul><ul><li>the market demands are the constraints. </li></ul></ul><ul><ul><li>the constraints are external to the manufacturing system. </li></ul></ul>
  13. 13. Compute the loads and compare with capacities. <ul><li>Production P=100, Production Q=50 </li></ul><ul><li>A: Load =2000, Capacity = 2400 Minutes </li></ul><ul><li>B: Load =3000, Capacity = 2400 Minutes </li></ul><ul><li>C: Load =1750, Capacity = 2400 Minutes </li></ul><ul><li>D: Load =1250, Capacity = 2400 Minutes </li></ul><ul><li>What is the constraint? </li></ul>
  14. 14. Step 2: Decide how to exploit the system’s constraint(s).
  15. 15. Exploiting the constraint <ul><li>Assume a single constraint is identified. </li></ul><ul><li>Rank the products in order of the ratio: </li></ul><ul><ul><li>Throughput dollars per minute of constraint use. </li></ul></ul><ul><li>Select the product mix so that the products with greater ratios are produced in preference to the products with smaller ratios. </li></ul><ul><li>What goal is this method trying to achieve? </li></ul><ul><li>How does this method achieve the goal? </li></ul>
  16. 16. What and how much to produce? <ul><li>P: TP/Unit = 45, B Min/Unit=15 </li></ul><ul><li>Q: TP/Unit = 60, B Min/Unit=30 </li></ul>
  17. 17. Calculate Solution <ul><li>Produce as much P as possible </li></ul><ul><li>Use the remainder of the constraint resource for Q </li></ul><ul><li>What is the profit for this product mix? </li></ul>
  18. 18. Step 3: Subordinate everything else to the decisions of Step 2.
  19. 19. Subordinating Production <ul><li>Production P=100, Production Q=30 </li></ul><ul><li>A: Load =1800, Capacity = 2400 Minutes </li></ul><ul><li>B: Load =2400, Capacity = 2400 Minutes </li></ul><ul><li>C: Load =1650, Capacity = 2400 Minutes </li></ul><ul><li>D: Load =1150, Capacity = 2400 Minutes </li></ul><ul><li>What determines the load on the non-constraints? </li></ul>
  20. 20. Step 4: Elevate the system’s constraint(s). <ul><li>Where should process improvements be focused? </li></ul><ul><li>What is the benefit of elevating the constraint? </li></ul><ul><li>What is the benefit of elevating a non-constraint? </li></ul>
  21. 21. Step 5: If a constraint is broken in Step 4, go back to Step 1. <ul><li>What might happen if the constraint is elevated? </li></ul><ul><li>What happens if there are no more internal constraints? </li></ul>
  22. 22. Say we add another machine of type B. <ul><li>Production P=100, Production Q=50 </li></ul><ul><li>A: Load =2000, Capacity = 2400 Minutes </li></ul><ul><li>B: Load =3000, Capacity = 4800 Minutes </li></ul><ul><li>C: Load =1750, Capacity = 2400 Minutes </li></ul><ul><li>D: Load =1250, Capacity = 2400 Minutes </li></ul><ul><li>How much should we produce? </li></ul><ul><li>What is the new constraint? </li></ul><ul><li>How do we elevate the new constraint? </li></ul>
  23. 23. Summary: The Theory of Constraints <ul><li>Step 1: Identify the system’s constraint(s). </li></ul><ul><li>Step 2: Decide how to exploit the system’s constraint(s). </li></ul><ul><li>Step 3: Subordinate everything else to the decisions of Step 2. </li></ul><ul><li>Step 4: Elevate the system’s constraint(s). </li></ul><ul><li>Step 5: If a constraint is broken in Step 4, go back to Step 1. </li></ul>

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