BA 314 Operations Management: Chapter 5: Constraint Management

Managing Bottlenecks in Manufacturing Processes Bottlenecks can exist in all types of manufacturing processes, including the job process, batch process, line process, and continuous process.

Identify Bottlenecks Relieve Bottlenecks Drum-Buffer-Rope Systems

balance delay

amount by which efficiency fall short of 100%

constraint Three kinds of constraints can generally be identified: • physical (usually machine, labor, or workstation capacity or material shortages, but could be space or quality) • market (demand is less than capacity) • managerial (policy, metrics, or mindsets that create constraints that impede work flow).

any factor that limits the performance of a system and restricts its output. In linear programming, a limitation that restricts the permissible choices for the decision variables.

c= 1/r r= desired output rate in units per hour

cycle time equation

if inventory decreases ---> an _____ in net profit, ROI, & cash flow

increase

if operating expenses decrease --> an ______ in net profit, ROI, and cash flow

increase

if throughput increases ----> an ______ in net profit, ROI, & cash flow

increase

if utilization increases at the bottleneck --> an ______ in net profit, ROI, and cash flows

increase

mixed model line

line that produces several items belonging to the same family

1. automated materials handling 2. less inventory storage area 3. less flexible

3 aspects of pacing

1. pacing 2. behavioral factors 3. # of models produced 4. different cycle times

4 managerial considerations

work elements

smallest units of work that can be performed independently

contribution margin

the amount each product contributes to profits and overhead; no FC are considered when making the product mix decision

TM= (∑t)/c

theoretical minimum equation

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

activity-on-Node (AON) network

which nodes represent activities and arcs represent the precedence relationships b/w them

Practical application of the TOC involves the implementation of the following steps.

1. Identify the System Bottleneck(s). 2. Exploit the Bottleneck(s). 3. Subordinate All Other Decisions to Step 2 4. Elevate the Bottleneck(s) 5. Do Not Let Inertia Set In.

drum-buffer-rope system (DBR) ...based on the TOC that is often used in manufacturing firms to plan and schedule production. DBR can be an effective system to use when the product the firm produces is relatively simple and the production process has more line flows. Planning is greatly simplified in this case and primarily revolves around scheduling the constrained resource and triggering other points to meet that bottleneck's schedule.

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

6th TOC principle

Activating a non-bottleneck resource (using is for improved efficiency that does not increase throughput) is not the same as utilizing a bottleneck resource (that does lead to increased throughput).

3rd TOC principle

An hour lost at a bottleneck or a constrained resource is an hour lost for the whole system and vice versa

7th TOC principle

Every capital investment must be viewed from the perspective of its global impact on overall throughput (T), Invetory (I), and operating expense (OE)

1st TOC principle

Focus should be on balancing flow, not on balancing capacity

Identifying Bottlenecks Manufacturing processes often pose some complexities when identifying bottlenecks. Identifying the bottlenecks becomes considerably harder when setup times are lengthy and the degree of divergence in the process is great... When the setup time is large, the operation with the highest total time per unit processed would typically tend to be the bottleneck.

If multiple services or products are involved, extra setup time at a workstation is usually needed to change over from one service or product to the next, which in turn increases the overload at the workstation being changed over. Setup times and their associated costs affect the size of the lots traveling through the job or batch processes. Management tries to reduce setup times because they represent unproductive time for workers or machines and thereby allow for smaller, more economic, batches.

4th TOC principle

Inventory is needed only is front of the bottlenecks to prevent them from sitting idle and in front of assembly and shipping points to protect customer schedules.

Managing Bottlenecks in Service Processes: Front office: A front-office process with high customer contact and divergence does not enjoy the simple line flows...

Its operations may serve many different customer types, and the demands on any one operation could vary considerably from one day to the next. Computing the average utilization of each operation can still identify bottlenecks. However, the variability in workload also creates floating bottlenecks. One week the mix of work may make operation 1 a bottleneck, and the next week it may make operation 3 the bottleneck. This type of variability increases the complexity of day-to-day scheduling. In this situation, management prefers lower utilization rates, which allow greater slack to absorb unexpected surges in demand.

Relieving Bottlenecks The key to preserving bottleneck capacity is to carefully monitor short-term schedules and keep bottleneck resource as busy as is practical. The long-term capacity of bottleneck operations can be expanded in various ways. Investments can be made in new equipment and in brick-and-mortar facility expansions.

Managers should minimize idle time at the bottlenecks caused by delays elsewhere in the system and make sure that the bottleneck has all the resources it needs to stay busy. When a changeover or setup is made at a bottleneck, the number of units or customers processed before the next changeover should be large compared to the number processed at less critical operations. Maximizing the number of units processed per setup means fewer setups per year and, thus, less total time lost to setups. The number of setups also depends on the required product variety; more variety necessitates more frequent changeovers.

2nd TOC principle

Maximizing the output and efficiency of every resource may not maximize the throughput of the entire system

Keys Principles of the TOC The chief concept behind the TOC is that the bottlenecks should be scheduled to maximize their throughput of services or products while adhering to promised completion dates. The underlying assumption is that demand is greater or equal to the capacity of the process that produces the service or product, otherwise instead of internal changes, marketing must work toward promoting increasing demand.

Seven key principles of the TOC that revolve around the efficient use and scheduling of bottlenecks and improving flow and throughput are:

Theory of Constraints (TOC) It outlines a deliberate process for identifying and overcoming constraints. The process focuses not just on the efficiency of individual processes but also on the bottlenecks that constrain the system as a whole.

a systematic management approach that focuses on actively managing those constraints that impede a firm's progress toward its goal.

Managing Bottlenecks in Service Processes Bottlenecks can be both internal and external to the firm, and typically represent a process, a step, or a workstation with the lowest capacity.

Where a bottleneck lies in a given service or manufacturing process can be identified in two ways. A workstation in a process is a bottleneck if (1) it has the highest total time per unit processed, or (2) it has the highest average utilization and total workload.

5th TOC priniciple

Work, which can be materials, info to be processed, documents, or customers, should be released into the system only as frequently as the bottlenecks need it.

bottleneck A business system or a process would have at least one constraint or a bottleneck; otherwise, its output would be limited only by market demand.

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

1. has highest total time per unit processed 2. has highest average utilization and total workload

a workstation in a process is a bottleneck if:

line balancing

assignment of work to stations in a line process so as to achieve the desire output rate with the smallest # of workstations

100- efficiency

balancy delay equation

buffer management

constantly monitors the execution of incoming bottleneck work

((∑t)/nc) (100)

efficiency equation

nc- ∑t

idle time equation

pacing

movement of product from 1 station to the next as soon as the cycle time has elapsed

immediate predecessors

must be done before the next element can begin