Session 10 Theory of Constraints

A brief Click to edit Master subtitle style

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Origins

Developed by Eliyahu M. Goldratt A management philosophy developed in the 1980s Boosts process performance by studying each element of the process Identifies and focuses on reducing bottlenecks Often applied in conjunction with Kaizen, TQM, JIT / Lean principles
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The concept

Line managers have always analyzed individual components of a process Maximizing components may not improve the process Goldratt views the entire process and looks for the weakest link

Named as Capacity Constrained Resource (CCR)

All projects contain one, but not many CCRs

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Goldratts 5 steps

Identify the systems constraints Decide how to exploit the constraints Subordinate everything else to the exploitation of constraints Elevate the systems constraint If any constraints have been violated, repeat the process

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Definitions

Constraint: Anything that limits or hampers a systems performance relative to its goal Inventory: All the money used to purchase things the system intends to sell Operating expense: The money a system spends to turn inventory into throughput Throughput accounting: An accounting system used to measure TOC operations

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Drum-Buffer-Rope
Logistical tool that balances flow of a system Drum: A schedule for capacity of the constraint Buffer: Built in lead time for parts to reach the constraint early (in process inventory) Rope: A schedule, or information connection, for releasing raw materials
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Implementing the DBR

Identify Capacity Constrained Resource (CCR) -Paretos Rule may help Schedule CCRs to capacity (drum) Protect from statistical fluctuations with time buffers (buffer) Monitor CCRs to ensure the timely release of materials upstream (rope) Monitor the Buffer
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An Illustration
10 units / hr Process 1 12 units / hr Process 2 7 units / hr Process 3

Process 5

Process 4

10 units / hr

11 units / hr

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Click to edit Master subtitle style

Six Sigma Business Process Management

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Process Vs Functional View

Process elements Inputs, Process, Output

INPUTS Man Materials Methods Mother nature Management

PROCESS

Outputs Products Services

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Owners & Shareholders

Stakeholders have the best knowledge about process They have the best ideas for process improvement They are aware of unintended consequences Stakeholders consent is necessary for implementation
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Who are the process stakeholders?

Process Managers & operators Process customers, internal & external Suppliers internal & external Process design personnel Maintenance personnel

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Project Management & Benefits

Why does project management produce sub-optimal results? What are countermeasures?

All members of a project team should have the enterprise wide viewpoint Project teams should have members representing the stakeholders Project teams should seek consultation from other parts of the enterprise as they form action proposals
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Project Measures

Need meaningful performance measures Example: Productivity / throughput Focus on incremental improvements All sub-activities need to be geared towards the larger objectives Example of kaizen events

The Czech Mate case

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Project Documentation
Goals & objectives

Project plans & schedules

Project budget

Roles, responsibilities for team members List of Key Result Areas (Deliverables) 3/11/13

Needs focus on the metrics E.g. for a plan or schedule :Gantt Chart Cost considerations are critical Documentation at every stage

Pre-event Post - event

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Voice of the Customer

Get the requirements / expectations of the Customer (VOC) Customer segmenting

Internal & external Age groups (esp. for consumer goods) Geographical location Industry types A retail or individual customer A firm (supplier company, customer company)

Types

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Customer Data Collection Methods

Written surveys (or) online surveys [survey monkey, googlegroups] Focus Groups Interviews

Face-to-face By phone

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Analyze Customer Data

Different types of graphical tools can be used

Bar charts Pie diagram Line charts, etc

12 10 8 6 4 2 0

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Business Results

Process Performance Metrics An example

A process produces 40,000 pencils. 3 types of defects can occur. The number of occurrences are

Blurred printing: 36 Wrong dimensions: 118 Rolled ends: 11 Total number of defects: 165

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Business Results

Defects Per Unit

Defects per unit (DPU) = # defects / # units = 165 / 40000 = 0.004125 Blurred printing: 40,000 Dimensions: 3 places where it is checked, hence, number of opportunities = 3 x 40000 = 120,000 Rolled ends: 2 ends per pencil, hence total number of opportunities = 40,000 x 2 = 80,000

Defects per Million Opportunities

DPMO = # defects x 1,000,000 / total number of opportunities = 165,000,000 / 240,000 = 687.5

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Business Results

Throughput yield = e-DPU In the current example,

Throughput yield = e-0.004125 = 0.996 Assume a process that goes through stage A, B & C with individual yields of 0.9, 0.8 & 0.9 respectively. Then RTY = 0.9 x 0.8 x 0.9 = 0.648

Rolled throughput Yield

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Business Results

Parts Per Million (PPM) When referring to defects,

PPM = DPU x 1,000,000 PPM is often used to denote impurity. Suppose 0.35 grams of sand is found in 25 kilograms of rice, then

An Example

PPM = 0.35 x 1,000,000 / 25,000 = 14 PPM

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THANK YOU

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