Constraint Management – Important Points – Summary – Krajewski – 12th Edition

The Theory of Constraints

  • Explain the theory of constraints.
Managing Bottlenecks in Service Processes
  • Identify and manage bottlenecks in service processes.
Managing Bottlenecks in Manufacturing Processes
  • Identify and manage bottlenecks in manufacturing processes.
Applying the Theory of Constraints to Product Mix Decisions
  • Apply the theory of constraints to product mix decisions.
Managing Constraints in Line Processes
  • Describe how to manage constraints in line processes and balance assembly lines.

5 CONSTRAINT MANAGEMENT

Microsoft Corporation Case

A constraint is any factor that restricts its output or performance. Capacity is the maximum rate of output of a process or a system. Due to constraint at any operation of a process, the overall performance of the system means overall output suffers. A bottleneck is a special type of a constraint that relates to the capacity shortage of a process and is defined as any resource whose available capacity limits the organization’s ability to meet the service or product volume, product mix, or fluctuating requirements demanded by the marketplace.  In case market demand in the not the limit, the output of a business system or a process is limited by its bottleneck.

The Theory of Constraints
Key Principles of the TOC

The theory of constraints (TOC) is a  management approach that  directs attention of the management to identifying and  actively managing those constraints that are limiating its  profits and effectively using its resources. The process focuses  on the efficiency of  bottlenecks that constrain the system as a whole. TOC methods increase the firm’s profits  by focusing on making materials flow rapid and convert it into sales instead of inventory.
The chief concept behind the TOC is that the bottlenecks should be given special attention and scheduled to maximize their throughput of services or products while adhering to promised completion dates.

SEVEN KEY PRINCIPLES OF THE THEORY OF CONSTRAINTS
1. The focus should be on balancing flow, not on balancing capacity.
2. Maximizing the output and efficiency of every resource may not maximize the throughput of the entire system.
3. An hour lost at a bottleneck or a constrained resource is an hour lost for the whole system. In contrast, an hour saved at a non-bottleneck resource is a mirage, because it does not make the whole system more productive.
4. Inventory is needed only in front of the bottlenecks to prevent them from sitting idle and in front of assembly and shipping points to protect customer schedules. Building inventories elsewhere should be avoided.
5. Work, which can be materials, information to be processed, documents, or customers, should be released into the system only as frequently as the bottlenecks need it. Bottleneck flows should be equal to the market demand. Pacing everything to the slowest resource minimizes inventory and operating expenses.
6. Activating a non-bottleneck resource (using it for improved efficiency that does not increase throughput) is not the same as utilizing a bottleneck resource (that does lead to increased throughput). Activation of non-bottleneck resources cannot increase throughput, nor promote better performance on financial measures.
7. Every capital investment must be viewed from the perspective of its global impact on overall throughput (T), inventory (I), and operating expense (OE).

Managing Bottlenecks in Service Processes

Where a bottleneck lies in a given service or manufacturing process can be identified in two ways. A workstation in a process is a bottleneck if (1) it has the highest total time per unit processed, or (2) it has the highest average utilization and total workload.

The variability in workload  creates floating bottlenecks. In one week,  the mix of work may make one operation  a bottleneck, and the next week  another operation.  This varying bottlenecks  increase the complexity of day-to-day scheduling. In this situation, firms requires  greater slack in various operations to absorb unexpected surges in demand.


Managing Bottlenecks in Manufacturing Processes
Identifying Bottlenecks
Relieving Bottlenecks
Drum-Buffer-Rope Systems

Identifying the bottlenecks becomes considerably harder when setup times are lengthy and the degree
of divergence in the process is greater in manufacturing.  When the setup time is large, the operation with the highest total time per unit processed would typically tend to be the bottleneck. Variability in the workloads will create floating bottlenecks.  In practice,  bottlenecks can also be determined by asking workers and supervisors in the plant where the bottlenecks might lie, and looking for piled up material in front of different workstations.

Relieving Bottlenecks

The key to preserving bottleneck capacity is to carefully monitor short-term schedules and keep bottleneck resource as busy as is practical. Managers should minimize idle time at the bottlenecks caused by delays elsewhere in the system and make sure that the bottleneck has all the inputs: materials, tools, spare parts etc. it needs to stay busy. When a changeover or setup is large at bottleneck, batch sizes have to be large to reduce number of setups.
The  capacity of bottleneck operations can be expanded through  Investments  in new equipment. The bottleneck’s capacity also can be expanded by operating it more hours per week,  and going from a one-shift operation to multiple shifts, or by hiring more employees and operating the plant six or seven days per week versus five days per week. The bottleneck can be redesigned by industrial engineers and process engineers. Industrial engineers do more periodic small improvements.

Drum-Buffer-Rope Systems

The bottleneck schedule is the drum.  It sets the beat or the production rate for the entire plant and is linked to the market demand.

The buffer is a time buffer that plans early arrival of material  to the bottleneck and thus protects it from disruption due to shortage of work.  A finished-goods inventory buffer is  placed in front of the shipping point to decouple planning of the bottleneck from customer requirement urgencies. The bottle neck production must be optimized to get maximum production from the bottle neck.  
The rope represents the tying of material release to the drumbeat, which is the rate at which the bottleneck controls the throughput of the entire plant. It is thus a communication device to ensure that raw material is not introduced into the system at a rate faster than what the bottleneck can handle. Rope is a device like kanban in Toyota Production System (lean).

Buffer management constantly monitors the execution of incoming bottleneck work.

Illustration

Assume a simple process with three operations. A. B and C. Capacity of A is 750 units per week, Capacity of B is 600 units and Capacity of C is 650 units. B is bottleneck unit to supply production to the market the demand being 650 units per week. Capacity of B has to be used without any waste. Therefore a buffer is placed before B and a finished goods buffer is created to serve the market without disturbing the schedule of B. B is drum, buffer is buffer stock of material before B and the rope is connection between A and the buffer. The material flow is pulled forward by the drumbeat prior to the bottleneck meaning A will produce what is scheduled on B with some advance time delivery plan.. What is produced in B is pushed forward onto C and it will process it immediately and push it to finished goods buffer. 

Thus, DBR specifically strives to improve throughput by better utilizing the bottleneck resource. So e the process batch in the DBR is any size that minimizes setups and improves utilization at the bottleneck and , at nonconstrained resources the process batches are equal to what is needed for production as per buffer requirement. 
Transfer batches between operations can be as small as one unit each, to allow a downstream workstation to start work on a batch before it is completely finished at the prior process. Using small transfer batches facilitates a reduction in overall lead time (This is a TPS feature).

Effectively implementing a DBR system requires a good understanding of the TOC principles.

Applying the Theory of Constraints to Product Mix Decisions

The firm’s actual throughput and overall profitability depend more upon the contribution margin generated from the products produced at the bottleneck, therefore the bottleneck method of taking product mix decision will generate more profit. In the book examples are given.



Managing Constraints in Line Processes 190
Line Balancing
Rebalancing the Assembly Line
Managerial Practice 5.1 Assembly Line Balancing at Chrysler
Managerial Considerations 195

In this section traditional line balancing is only described. No special theory of constraints point of view is given.

Learning Goals in Review 196

Experiential Learning 5.1 Min-Yo Garment Company
Video Case Constraint Management at Southwest Airlines

Process Improvement – Process Industrial Engineering – Relevant Chapters in Operations Management

Process Strategy and Analysis – Important Points – Operations Management – Krajewski – 12th Edition

Quality and Performance – Important Points – Summary – Krajewski – 12th Edition

Lean Systems – Important Points – Summary – Krajewski – 12th Edition

Constraint Management – Important Points – Summary – Krajewski – 12th Edition

Index to Summaries of all Chapters of Krajewski’s Book

Operations Management – Krajewski – 12th Edition – Chapter Summaries – Important Points