Theory Of Constraints (TOC)

The Theory of Constraints is a tool that came about in 1984 from the Israeli physicist and business management author Eliyahu M. Goldratt. The theory and philosophy was born from the appropriately named Goldratt book, The Goal, which proclaimed that all systems and processes are driven by a goal or a few goals which are limited in their capacity only by one or a very slight few constraints. It goes on to claim that the only way to fully achieve this goal or goals is to identify the most limiting constraint and either reduce it so it is no longer the limiting constraint or eliminate it altogether.

While the focus of the theory and the ensuing improvement is the constraint, there are important assumptions that are considered vital to the success, or to some the downfall, of the theory. Goldratt asserts that all organizations and processes can be measured by three characteristics: Throughput, Operating Expense, and Inventory. Of course, by measuring these three characteristics, we can then track and therefore control them. The variations that are inherent in these is what leads to the constraint.

A good example is to look at an organization and its three characteristics. Throughput can be viewed as sales, or even the revenue generated through these sales, Operating Expense is exactly that, and Inventory is reflected in the investment in goods or services that the organization participates in to sell their own goods and services.

By measuring all of these characteristics, and tracking and controlling them, we can identify the constraints upon which this theory is built. These constraints are the heart of the theory, and state that there is always at least one, and at most very few, constraints that are holding the organization back from either fulfilling the goal or limiting the rate at which the goal is achieved. These constraints may be internal or external. Some examples of internal constraints are equipment, people, and policy.

The key to success, Goldratt claims, is to follow “five focusing steps”, which assist in identifying the constraint and destroying it such that we are no longer constrained by that specific constraint and instead another constraint takes its place. It is imperative to understand that a constraint always exists, but the limiting constraint may change as they are identified and improved or cleared.

If you assume that the goal is clearly articulated, then the five focusing steps are:
1. Identifying the constraint. This is the resource or policy that is preventing the organization from achieving the specified goal. This is found by monitoring the three characteristics as defined previously.
2. Exploiting the constraint. Ensuring the constraint’s full resources, attention, and intention are dedicated toward the goal. Then, identifying ways in which more resources, attention, and intention can be focused solely on the limiting constraint.
3. Subordinating all other resources and processes. This entails taking full inventory of the processes and resources available to the organization and dedicating them toward supporting the exploitation determined in step 2. This usually includes aligning the entire organization around the decision behind step 2.
4. Elevate the constraint, if necessary. If necessary, dedicate more resources or processes toward eliminating the constraint outlined, or perhaps place more resources on the constraint so the constraint’s capacity is increased.
5. Re-evaluate the constraint, and repeat with step 1. Over the course of accomplishing steps 1-4, the constraint may have shifted or changed. Re-evaluate the constraint and start again from step 1. One very important characteristic to note is the propensity to continue with step 4 indefinitely, not recognizing that there is a new constraint.

If managed correctly, this is a constant cycle which is repeated indefinitely, and is identified by Goldratt as the Process of Ongoing Improvement (POOGI).

Theory Of Constraints (TOC)Like anything else, there is always variation when we measure our three characteristics. Because of this, Goldratt preaches the use of buffers, particularly during the exploiting and subordinating stages, to eliminate or reduce the variation effect on the constraint. According to the TOC model, the organization should always be able to output up to the capabilities of the constraint. With the buffers, that constraint is constantly the constraint, ensuring no other piece of the organization becomes the constraint.

The Theory of Constraints can be used by any complex system or organization in which the desired outcome is a goal that is either achieved faster or more cost effectively. By systematically reducing the constraints that keep us from attaining this goal, we dedicate more resources toward the constraint and less toward other operations that are not constraining the process. You should use this tool over others when your organization cannot define what the single most constraining process is that is affecting your organization’s process capability.

A good example is one of a widget manufacturing line that has been manufacturing widgets for the last 20 years. The company has used lean and six sigma for the last 10 years to bring its costs down significantly, and is now the leading manufacturer of widgets across the country.

A manager has been brought in to analyze the process used to manufacture the widgets and recommend areas for additional improvement. The manager, has decided to use TOC as a tool. He then took about 16 weeks to measure the throughput of every workstation and has found that a single workstation is the constraining factor. They are constantly working on a backlog, and while lean processes have cut their production time by half, they are still the weakest link in the chain.

Management decided to put a second workstation dedicated to that constraining factor, therefore doubling the capacity of the constraint, and thus increasing the capacity of the line. While the cost was increased twofold, so was the production output, allowing the organization to increase their sales offerings and double their revenue.

The Theory of Constraints is a process for ongoing, continuous improvement of a process or organization. By taking this tool onboard and implementing it, you will find the most constraining factor that is holding back your company from its best performance.

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Takt Time – the Rhythm of lean manufacturing

Do you know how long it will take you to read this article? If you glanced at your watch before you opened this article, look at it again when you are done. Then, read ten more articles and take the average reading time. Is that fast? Or is it slow? Should you be reading faster in order to meet your reading goals? Or should you slow down to maximize comprehension and quality of the reading? Takt time can answer this question.

Takt time is derived from the German work, Taktzeit, and can be literally translated to mean “cycle time”. Using the previous example, if your boss came to you and told you to read an article next week, you would know exactly how much time you would have to block out of your day to read articles. If you weren’t feeling well, or thought you were particularly distracted, you could compare your time to the time you just derived.

Traditionally, Takt time is the maximum time per unit that a production line is allowed to produce a quality product in order to meet demand. After it is benchmarked, it sets the pace and the standard for further production from the same line or workstation. It can show managers and quality teams where to focus their attention and resources in attempting to improve the overall process. It can also alert managers to bottlenecks and choke points that need attention to process resources.

The Takt time is computed by dividing the time demand (units required per day) by the net time available to work (minutes of work per day). This will give you a unit of minutes of work per unit required, and provides for a good description of what Takt Time really is.

The end goal of determining the Takt time is to produce products at a pace that mirrors what the customer’s demand is. By meeting the demand from the customer, the inventory is kept to a minimum and thus costs are also minimized. Of course, no machine or person is perfect, and there are inefficiencies in every process, so a good manager and quality specialist will take these variations into account when determining the required rate to run the line at. Sometimes it simply takes trial and error to find the ideal rate to run the line at. Additionally, most companies will have the ability to adjust the required time by adjusting daily working time, increasing workers, and other things that will indirectly affect the line time.

It is very important to realize the difference between cycle time and Takt time. Takt time is only determined by the demand and the amount of time available to work. It actually is not affected by the actual performance of the line or workstation whatsoever. Cycle time, however, is the amount of time it actually takes to complete the production of the unit. They are separate, and most people, particularly those who are relatively unfamiliar to lean processes. While they are not the same thing, Takt time and Cycle time should always be compared to each other for a relative gage of your process’s ability to meet the necessary demand.

When a car company comes out with a new model car, they perform market analysis, surveys, and forecasts that decide what the demand for the new model will most likely be. This, along with the supply chain management team, can determine what the production goals will be for a certain factory, and consequently, the line. For example, let’s say that they will need 30 new models per day.

In order to get the production team off the ground, produce quality products, and provide training to the team, management has decided to limit amount of production time available to the line to 5 hours per day. Therefore, the Takt time is 30 units per day / 5 hours per day, or 6 units per hour required to produce to meet customer demand, and can be further broken down to 1 unit every 10 minutes. This will lead to every car that comes off the line being shipped and no inventory being held at the factory… the ideal way to run the business.

the TAKT Time FormulaFigure (1)

This can be further broken down to workstations. For example, the door installation workstation for the new, 4-door model car would also need to put out one car per ten minutes. However, since there are 4 doors, the workstation will have to install one door every 2.5 minutes. While this may seem obvious, what may not seem obvious is that this is beyond the capacity of a single workstation, and will lead to a bottleneck , and subsequently a focused lean project which will bring the cycle time to the Takt time, leading to an efficient process.

Takt time can be used in many applications that aren’t necessarily the traditional line manufacturing application. It can be used in order processing, call center operation, project management tasks, or anything in a business that can be measured by processing time.

A good tool to have in your toolbox, Takt time will give a company an insight into what the capacity of a method or process must be in order to meet the demand a customer places on it. By doing this, the company can set a benchmark that will guide the company toward the ideal situation of perfect supply chain management.

SMED – Makes Lean Flexible

When looking for places to lean out the manufacturing process, many managers skip over the concept of Single Minute Exchange of Die, or SMED. Quick changeover, as it is called in many circles, should always be a concern, particularly when it comes to assembly lines and manufacturing. The actions needed to take, while simple, have a long lasting impact on the business and the quality, speed, and capability of the line to react to demand changes.

To completely understand SMED, you have to understand assembly lines in exacting detail, and it helps to know what the objectives of lean processes in general are. Primarily, assembly lines produce a very specific product by utilizing specific work cells or work stations that produce pieces of that product with a high degree of efficiency, quality, and speed. Unfortunately, while this may be able to produce the product quickly, one of the major drawbacks is that the line is only able to produce a single class of product.

For example, an assembly line that produces stator windings cannot be turned around to produce control circuitry. Therefore, in order to produce a wide variety of products and models, or even a single, very complex product with many assembly stages, a company must run many assembly lines, which takes up a large amount of space, and space costs money. Even if the company wants to produce many variations of the same product, such as a product with different features or model specifications, many times, a single assembly line cannot handle these requirements.

The general concept behind lean processes is to reduce or eliminate waste and cut costs by simplification or process changes. Now that you know about the skeletal model of assembly line manufacturing and lean processing, you should be able to see the value of enabling a single assembly line to produce many different products or variations of products.

By doing this, the company reduces the amount of space necessary for them to occupy, they are able to react to demand shifts in product lines, and overhead is severely cut down so many products become profitable for the company to produce. This is where SMED comes into play.

If a company were following the SMED philosophy exactly, they would be able to produce a company and manufacturing layout that could change the dies and robotic programming in the assembly line so that the assembly line can shift from producing one model to another in a very short amount of time. By doing this, the company will not need as many assembly lines, or as many branches on a single line, therefore reducing the square footage necessary to manufacture a wide line of products. They also will not need a completely different set of employees to keep the assembly line moving, and will not need to upkeep, buy, or power any additional equipment associated with the second or third line.

Finally, since the company can quickly adjust the line to manufacture which ever product they would like, they can quickly change the assembly line to manufacture the product that is seeing a higher demand and cut back on the product that is seeing a lower demand. By achieving this incredibly agile position, a company can easily manage its inventory and maintain a large amount of liquidity in their company.

The first time a company embarks on a quest to enable SMED, they will not be able to change over the manufacturing lines as quickly as they would like. The end goal is to be able to shift the assembly line from one product to another in less than 100 minutes, therefore reducing the amount of downtime associated with the shift. The company will not realize this significant progress until a few months of lean studies and process evaluation.

Thank about the various models of GPS units that are on the market. Some of the market leaders have dozens, if not hundreds, of models to manufacture, in order to meet the demands and wants of the customer. There isn’t a single assembly line in the world that can manufacture such a large variation in products, but they can manufacture two, or a few, very similar products.

The GPS manufacturer has 12 assembly lines and decides to pursue SMED with the end goal of reducing to 4 lines. They estimate that this will cut costs by 60%, reduce downtime by 20%, and make them able to increase revenue by 30% by expanding their markets by offering additional models to their overseas customers. As shown in Figure (1), they commissioned a study and found that they can consolidate their 12 lines into 4, as they had wanted. They then were able to commission the other lines to produce the additional models without incurring any significant additional overhead.

Single Minute Exchange Of Die Or SMED simplified

Figure (1)

While this is something that anybody can suggest, it is a very high level concept that has to be evaluated not only at the manager level, but at the upper management level as well. The effects are far reaching, and without careful planning, a company can possibly negatively affect their output capacity, leaving a shortage of inventory in the supply chain.

SMED is a very effective way of significantly changing the way a company does business. It should be fully explored, particularly if a company is in the manufacturing business.

Work Cells – A building block of lean manufacturing

If Lean Manufacturing were a building, then the bricks that lay the foundation of lean manufacturing, particularly with assembly lines, would be work cells. The fruit of the work cell implementation is a more efficient, stronger assembly line with higher quality products, happier employees, and a safer work environment.

Work cells belong to a type of manufacturing referred to as cellular manufacturing. The concept behind this type of setup is exactly how it sounds: on a certain floor or line, there exists a string of equipment and workstations that promotes an efficient flow of inventory and materials from raw material to final, assembled product. The important aspect to note about cellular manufacturing is the idea that it minimizes transportation and waiting time, which makes the process ideal for quality leaders to implement.

Using the concept of cellular manufacturing as a base, then the work cell is a group of equipment, workstations, and/or personnel that are physically located in a single area and allows for the group of workers and equipment to produce an entire product or group of products completely from start to finish. It can be thought of as a small version of the entire assembly line, complete with its own specific processes, teams, equipment, operating guidelines, and quality standards.

The alternative to cellular manufacturing is the “batch and queue” system, in which the product is produced in stages, then allowed to sit for a period of time in a queue while it is waiting to get to the next workstation, as can be seen in Figure (1). If the production line is large enough, this leads to large amounts of inventory waiting in various queues, incurring costs to the company and taking resources away from the production line. Additionally, the line must become much more complex because additional machines and personnel are needed to transport the product between batches. With cellular manufacturing, the work cell absorbs the queue and ensures that inventory is kept to a minimum by constantly producing a quality product inside of the cell, which is demonstrated in the bottom half of Figure (1).

Work Cells and Batch and Queue Operation Compared

The company that should be most interested in using this tool is the one that finds themselves bogged down by excess inventory and slow processes. Another, less obvious telltale sign that cellular manufacturing is necessary is workers that are unhappy with their job, because production is directly proportional to job satisfaction. The company will also find themselves very slow to react to demand changes and cost reduction techniques. The excess inventory directly drives these factors.

Not every company is a good candidate for shifting to work cells and cellular manufacturing. Some companies simply do not have a manufacturing process that is long and complicated enough to justify work cells. Other companies produce products that are not able to be split into different assembly steps, leading to a convergent line at the very end of the line, and not allowing any room for work cells. While these are a couple of situations in which work cells will not necessarily be the best choice for a company, a large majority of companies would benefit greatly from the positive impact this model has on their inventory and production costs and times.

A good example of the work cell model is with a generator manufacturer. In its most simple form, a generator consists of a rotor, a stator, the casing, and the control systems. Each part consists of many subassemblies that are reflected in Figure (1) by the different processes, Processes A-C.

Up until now, the manufacturer was using the batch and queue model of manufacturing in which each station puts out its product, and then sits in the “up and coming queue” of the next process. These queues are represented by the yellow boxes in Figure (1). As you can see, with the batch and queue process, there is a lot of inventory sitting around for no reason other than waiting for the next process to take care of it and process it.

The second part of the diagram, the work cell, is the model that the manufacturing plant moved to when they decided to finally lean out their processes. The work cells are constantly processing product, and don’t have a “queue”. There may be a few times where a bottleneck happens and there is an excess inventory because of a slow workstation, but in general, there should be no inventory stacking up in a work cell system.

This is all because the work cell is constantly running their process, and the previous and next work cells are taking their inventory, also completing their processes on a continual basis. If running correctly, the work cell method should resemble a conveyer belt or assembly line, with a few stops for the processes, but otherwise running fluidly and continuously.

Work cells should be designed at the highest levels. While the workers must be trained in the conduct of business inside of the work cells, the actual system should be designed with a 30,000 foot view. Managers should also be trained to operate their cells efficiently to keep the bottlenecks to a minimum.

If utilized properly, a work cell system can reduce and possibly eliminate the need for inventory. It will also foster higher quality due to constant improvement and a continuous worker from one end of the cell to the other.

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