Constraint Management

Idle Time Formula

Idle Time=nc-Σt n= number of stations c= cycle time Σt= total standard time required to assemble each unit

activity-on-node (AON) network

an approach used to create a network diagram, in which nodes represent activities and arcs represent the precedence relationships between them

Constraint

any factor that limits the performance of a system and restricts its output (e.g. lack of capital equipment; planning/scheduling)

An item that has been built to stock has yet to be sold. Which TOC operational measure is used to describe it in its current​ state?

inventory

Balance delay

is the amount by which efficiency falls short of 100 percent (BD(%)=100-Efficiency)

A workstation in a process is a bottleneck if...

it has the highest total time per unit processed.

TOC methods increases the firm's profit more effectively by focusing on...

making materials flow rapidly through the entire system

Traditional Method

produce the products with the highest contribution margins or unit sales

The traditional method of making product mix decisions considers...

producing the products with the highest contribution margin first

3 ways to expand bottleneck capacity

1. investments on new machines 2. increase operating hours (e.g. hire more employees, or implement multiple shifts) 3. redesign the process

Line Balancing

the assignment of work to stations in a line process so as to achieve the desired output rate with the smallest number of workstations (creates workstations with workloads as evenly balanced as possible thus making bottleneck capacity not much higher than others)

What is the chief concept behind the TOC

the bottlenecks should be scheduled to maximize their throughput of services or products while adhering to promised completion dates (assuming demand is greater than or equal to capacity. If not, then need external change where marketing increases demand)

cycle time

the maximum time allowed at each workstation to complete its set of tasks on a unit

What is typically the bottleneck when setup times are large?

the operation with the highest total time per unit processed

Work Elements

the smallest units of work that can be performed independently (want to make it equal per workstation in line balancing)

Throughput time is defined as...

the total elapsed time from the start to the finish of a job being processed at one or more workcenters.

Throughput time

total elapsed time from the start to the finish of a job or a customer being processed at one or more work centers

(T/F) A bottleneck is an operation that has the lowest effective capacity of any operation in the process

true

Work should be released into the​ system...

when the bottlenecks need work.

immediate predecessors

work elements that must be done before the next element can begin

2 examples of buffers

1. Constraint Time Buffer (e.g. materials arriving earlier than needed; placed in front of bottleneck) 2. Shipping Buffer (e.g. FG inventory placed after bottleneck)

5 steps of TOC

1. Identify the System Bottleneck(s) 2. Exploit the Bottleneck— Create schedules that maximize the throughput of the bottleneck 3. Subordinate to the System Constraint—Non-bottleneck resources should be scheduled to support the schedule of the bottleneck and not produce more than the bottleneck can handle 4. Elevate the Bottleneck— consider increasing the capacity of the bottleneck (if it's still a constraint after steps 1-3) 5. Repeat— do not let inertia set in (i.e. the system constraint may shift)

4 operational measures that relates to financial measures

1. Inventory— decreases in I leads to an increase in net profit, ROI, and cash flows 2. Throughput— increase in T leads to an increase in net profit, ROI, and cash flows 3. Operating Expense—decrease in OE leads to increase in net profit, ROI. and cash flows 4. Utilization— increase in U AT THE BOTTLENECK leads to an increase in net profit, ROI, and cash flows

3 types of constraints

1. Physical (e.g. machine) 2. Market (e.g. demand less than capacity) 3. Managerial (e.g. policy)

7 key principles of TOC

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)

What does DBR do? (2 things)

1. ensures that raw material is not introduced into the system at a rate faster than what the bottleneck can handle (rope) 2. ensures that the bottleneck is never starved for work (before buffer) and protects customer shipping schedules (after buffer)

theoretical minimum

A benchmark or goal for the smallest number of stations possible, where the total time required to assemble each unit (the sum of all work-element standard times) is divided by the cycle time

drum-buffer-rope (DBR)

A planning and control system that regulates the flow of work-in-process materials at the bottleneck or the capacity constrained resource (CCR) in a productive system (bottleneck schedule is the "drum" because it sets the beat/production rate; buffer plans early flows to the bottleneck and disrupts disruption; rope is the "tying of material release to the drumbeat" thus controls rate of throughput)

Bottleneck exists in which type of manufacturing process?

All of them (line, batch, job)

Efficiency (%) formula

Efficiency(%) = (Σt/nc)100

Who developed the theory of contraints?

Eli Goldratt

There are three consecutive steps in a customer service process. The first two steps are each capable of serving 25 customers per hour while the third step can process only 20 customers per hour. At which steps is there a waiting time?

If the first two steps run at full capacity, then the third has a waiting line since it has less capacity

Throughput

Rate at which a system generates money through sales

theoretical minimum formula

TM=(Σt/c) Σt= total time requires to assemble each unit (sum of work-element standard times) c= cycle time

pacing

The movement of product from one station to the next as soon as the cycle time has elapsed

2 ways to identify a bottleneck in a workstation

When a workstation: 1. has the highest total time per unit processes 2. or has the highest average utilization and total workload

When does a business system/process NOT have at least one bottleneck?

When their output is limited SOLELY by market demand

Bottleneck

a capacity constraint resource (CCR) whose available capacity limits the organization's ability to meet the product volume, product mix, or demand fluctuation required by the marketplace (i.e. special type of a constraint that relates to the capacity shortage of a process; usually have lowest capacity ) (e.g. sales department not getting enough sales; loan department not processing fast enough)

Precedence Diagram

a diagram that allows one to visualize immediate predecessors better; work elements are denoted by circles, with the time required to perform the work shown below each circle

mixed-model line

a production line that produces several items belonging to the same family

Theory of Constraints (TOC)

a systematic management approach that focuses on actively managing those constraints that impede a firm's progress toward its goal of maximizing profits and effectively using its resources (developed by Eli Goldratt)

Line balancing applies only to line processes that do...

assembly work or work that can be bundled in many ways to create the jobs for each workstation in the line

cycle time formula

c=(1/r) c= cycle time in hours per unit r= desires out rate in unites per hour

The fourth step in Theory of constraints application, "elevate the bottleneck" means that the analyst should...

consider increasing capacity of the bottleneck

Bottleneck Method

focus on the contribution margin generated at the bottleneck; = Contribution Margin/Time at Bottleneck

The theory of constraints principles outlines are NOT applicable to what type of processes?

none, it's applicable to every type of process