7 Constraint Management

PowerPoint Slides For Operations Management, 9e by

Krajewski/Ritzman/Malhotra
by Jeff Heyl
2010 Pearson Education
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall. 71
Managing Constraints

Constraints are factors that limit

performance
Capacity is the maximum rate of output
Three types of constraints
A bottleneck is any resource whose
capacity limits the organizations ability to
meet volume, mix, or fluctuating demand
requirements

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall. 72

Theory of Constraints

TOC is a systematic management approach

that focuses on actively managing those
constraints that impede a firms progress
toward its goal of maximizing profits and
effectively using its resources
It outlines a deliberate process for
identifying and overcoming constraints
TOC methods increase the firms profits by
focusing on materials flow through the
entire system

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall. 73

Goldratts Goal of the Firm

The goal of a firm is to make money

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Theory of Constraints
TABLE 7.1 | HOW THE FIRMS OPERATIONAL MEASURES RELATE TO ITS
| FINANCIAL MEASURES
Operational TOC View
Measures
Inventory (I) All the money invested in a system in
purchasing things that it intends to sell
Throughput (T) Rate at which a system generates
money through sales
Operating All the money a system spends to turn
Expense (OE) inventory into throughput
Utilization (U) The degree to which equipment, space,
or workforce is currently being used,
and is measured as the ratio of average
output rate to maximum capacity,
expressed as a percentage
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Relationship to Financial
Measures
A decrease in I leads to an
increase in net profit, ROI,
and cash flow.
An increase in T leads to an
increase in net profit, ROI,
and cash flows.
A decrease in OE leads to an
increase in net profit, ROI,
and cash flows.
An increase in U at the
bottleneck leads to an
increase in net profit, ROI,
and cash flows.
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Theory of Constraints
TABLE 7.2 | 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 nonbottleneck resource is a mirage because
it does not make the whole system more productive.
4. Inventory is needed only in front of the bottlenecks in order to prevent them from
sitting idle, and in front of assembly and shipping points in order 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 nonbottleneck 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 nonbottleneck resources cannot
increase throughput, nor promote better performance on financial measures
outlined in Table 7.1.

7. Every capital investment must be viewed from the perspective of its global impact
on overall throughput (T), inventory (I), and operating expense (OE).
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall. 76
Unbalanced Capacity

Synchronous manufacturing views constant

workstation capacity as a bad decision

77
The Statistics of Dependent Events
(Variable) (Constant) When
Process Time (A) Process Time (B) one
process
takes
10 longer
6 8 10 12 14
than the
(Constant) (Variable) average,
Process Time (B) Process Time (A) the time
can not
be made
10 up
6 8 10 12 14

Rather than balancing capacities, the flow of

product through the system should be balanced

78
Capacity Related Terminology
What is a Constraint?
Any factor that limits system performance and restricts its
output.

Capacity is the available time for production

Bottleneck is what happens if capacity is less than
demand placed on resource
Nonbottleneck is what happens when capacity is
greater than demand placed on resource
Capacity-constrained resource (CCR) is a resource
where the capacity is close to demand placed on the
resource

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 Saving Time
What
What are
are the
the consequences
consequences of
of saving
saving time
time at
at each
each
process?
process?

Bottleneck Nonbottleneck

Rule:
Rule: Bottlenecks
Bottlenecks govern
govern bothboth throughput
throughput
and
and inventory
inventory in in the
the system.
system.
Rule:
Rule: An An hour
hour lost
lost at
at aa bottleneck
bottleneck is is an
an hour
hour
lost
lost for
for the
the entire
entire system.
system.
Rule:
Rule: An An hour
hour saved
saved at at aa nonbottleneck
nonbottleneck is is aa
mirage.
mirage.
7 10
Theory of Constraints

TOC involves the implementation of these

five steps
1. Identify the System Bottleneck(s)
2. Exploit the Bottleneck(s)-create schedules that
max. the throughput of the bottleneck
3. Subordinate All Other Decisions to Step 2-non-
bottleneck resources should be scheduled to
support the schedule of the bottleneck.
4. Elevate the Bottleneck(s)-increase the capacity
of the bottleneck
5. Do Not Let Inertia Set In-steps 1-4 must be
repeated.
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Theory of Constraints

Bottlenecks can both be internal or external to the

firm and are typically a process or step with the
lowest capacity
Throughput time is the total elapsed time from the
start to the finish of a job or a customer being
processed at one or more workcenters
A bottleneck can be identified in several different
ways
1. If it has the highest total time per unit processed
2. If it has the highest average utilization and total
workload
3. If a reduction of processing time would reduce the
average throughput time for the entire process

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Drum-Buffer-Rope Systems

The bottleneck schedule is the drum

because it sets the beat or the production
rate for the entire plant and is linked to
market demand
The buffer is the time buffer that plans
early flows into the bottleneck and thus
protects it from disruption
The rope represents the tying of material
release to the drum beat, which is the rate
at which the bottleneck controls the
throughput of the entire plant

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Drum-Buffer-Rope Systems

Constraint (Bottleneck)
Nonconstraint
Buffer

Material PROCESS A Time Buffer PROCESS B

Release Capacity Inventory Capacity
Schedule 800 units/wk 500 units/wk

Rope Buffer Drum

Shipping
Nonconstraint
Buffer

PROCESS C Finished Goods Market

Capacity Inventory Shipping
Demand
700 units/wk Schedule
650 units/wk

Figure 7.3 Drum-Buffer-Rope Systems

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Batch Sizes

What is the batch size?

One?
Infinity?

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Comparing Synchronous Manufacturing to JIT
JIT is limited to repetitive manufacturing

JIT requires a stable production level

JIT does not allow very much flexibility in the

products produced

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Comparing Synchronous Manufacturing to JIT
(Continued)
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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