Sophia Miles - Operation management
abnj619
OPMT310Chapter23TheoryofConstraints.pptxGoldratt’s Goal of the Firm
The goal of a firm is to make money.
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Goldratt’s Theory of Constraints (TOC)
Identify the system constraints.
Decide how to exploit the system constraints.
Subordinate everything else to that decision.
Elevate the system constraints.
If, in the previous steps, the constraints have been broken, go back to step 1, but do not let inertia become the system constraint.
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Performance Measurement – Financial
Net profit
An absolute measurement in dollars
Return on investment
A relative measure based on investment
Cash flow
A survival measurement
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Performance Measurement – Operational
Throughput
The rate at which money is generated by the system through sales
Inventory
All the money that the system has invested in purchasing things it intends to sell
Operating expenses
All the money that the system spends to turn inventory into throughput
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Productivity
Productivity typically measured in terms of output per labor hour.
Does not guarantee profitability.
Has throughput increased?
Has inventory decreased?
Have operational expenses decreased?
Productivity is all the actions that bring a company closer to its goals.
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Bottlenecks and Capacity-Constrained Resources
Capacity: the available time for production
Bottleneck: what happens if capacity is less than demand placed on resource
Nonbottleneck: what happens when capacity is greater than demand placed on resource
Capacity-constrained resource (CCR): a resource where the capacity is close to demand on the resource
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Time Components
Setup time: the time that a part spends waiting for a resource to be set up to work on this same part
Process time: the time that the part is being processed
Queue time: the time that a part waits for a resource while the resource is busy with something else
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Time Components of Production Cycle (continued)
Wait time – the time that a part waits not for a resource but for another part so that they can be assembled together
Idle time – the unused time that represents the cycle time less the sum of the setup time, processing time, queue time, and wait time
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Finding the Bottleneck
Run a capacity resource profile
Obtained by looking at the loads placed on each resource by the products that are scheduled through them
Use your knowledge of the particular plant
Look at the system in operation
Talk with supervisors and workers
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Saving Time
Bottlenecks govern both throughput and inventory in the system.
An hour lost at a bottleneck is an hour lost for the entire system.
An hour saved at a nonbottleneck is a mirage.
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Batch Sizes
What is the batch size?
One?
Infinity?
Larger batch sizes require fewer setups and therefore leave more time for processing.
Desirable for bottleneck resources.
For nonbottleneck resources, smaller batch sizes are desirable.
Reduces WIP inventory.
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How to Treat Inventory
Traditional view is the only negative impact of inventory is carrying cost.
However, can also lengthen lead times and create problems with engineering changes.
Less WIP reduces the number of engineering changes.
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JIT Drawbacks
JIT is limited to repetitive manufacturing.
JIT requires a stable production level.
JIT does not allow very much flexibility in the products produced.
JIT still requires work-in-process when used with Kanban so that there is “something to pull.”
Vendors need to be located nearby because the system depends on smaller, more frequent deliveries.
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Benefits from Dollar Day Measurement
Marketing
Discourages holding large amounts of finished goods inventory
Purchasing
Discourages placing large purchase orders that, on the surface, appear to take advantage of quantity discounts
Manufacturing
Discourage large work-in-process and producing earlier than needed
Project management
Quantify a project’s limited resource investment as a function of time
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Relationship with Other Functional Areas
Accounting’s influence
Global measurements show net profits, ROI, and cash flow.
Local cost accounting measurements show efficiency or utilization rates.
Marketing and production
Marketing and production should work in harmony.
In practice, they act independently.
Data for evaluating marketing and manufacturing are different.
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Goldratt’s Rules of Production Scheduling
Do not balance capacity, balance the flow.
The level utilization of a non-bottleneck resource is not determined by its own potential but by some other constraint in the system.
Utilization and activation of a resource are not the same.
An hour lost at a bottleneck is an hour lost for the entire system.
An hour saved at a non-bottleneck is a mirage.
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Goldratt’s Rules of Production Scheduling (continued)
Bottlenecks govern both throughput and inventory in the system.
Transfer batch may not, and many times should not, be equal to the process batch.
A process batch should be variable both along its route and in time.
Priorities can be set only by examining the system’s constraints, and lead time is a derivative of the schedule.
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Drum, Buffer, Rope
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