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Posts Tagged ‘The Goal’

Those whose careers span a lengthy involvement in the manufacturing sector, and those younger but with a keen interest in productivity improvement in manufacturing,  will no doubt recall the name of Eli Goldratt, who passed away on June 11th

Eli (actually Eliyahu M. Goldratt) gained fame as the author of the seminal business novel (a novel concept in itself at the time) “The Goal.”  The book went on to sell an astounding thirty million copies in about 50 languages.  Goldratt was an Israeli physicist whose own critical path took him into the world of management consulting – some would say, guru. 

His work on optimizing productivity in business, and particularly in an area he dubbed the “Theory of Constraints” serves as the foundation today to dramatic process improvements across the business spectrum.  TOC principles have been applied with great success over the past 25 years at businesses large and small across the world.

By looking at resources and their flow, and identifying key constraints, Goldratt and his many cohorts and later firm members built an industry around, essentially, solving problems via a rigorous intellectual approach — critical thinking skills.  By identifying constraints, raising and addressing them to find the next constraint, and so on, Goldratt and the members of his Avraham Y. Goldratt Institute (which he named for his father upon its founding in 1986) were able to apply a mathematical, scientific and heavily logic-based methodology to problem solving in engineering, production and other business processes.

Goldratt had a strong local connection (local to us here in northernIndiana).  For sixteen years, Dr. Donn Novotny was partners with Eli, later leaving the Institute to form his own organization, The Goal Institue.  Donn lives in Elkhart, Indiana, our neighbor city to South Bend.

Notably, to readers of “The Goal” Donn was the inspiration for the lead character and plant manager Alex Rogo – in effect, Donn was Alex Rogo.  Donn is a good friend and we’ve sponsored him on multiple occasions at our own firm’s events.  He continues the tradition of both institutes to this very day, by continuing to lecture on and teach the principles of TOC (among others) to any company or group willing to listen.

I’ve personally worked with Donn when he helped our firm and learned much from his cerebral approach to problem solving.  By liberal use of his hand-drawn graphics, careful logic, and the use of the “cloud” concept regarding constraints (a “cloud” metaphor that long preceded the one we hear so many IT writers opine about today…), Donn is able to intelligently and beautifully apply critical thinking skills to problem solving that any company could take advantage of today – once taught through the skillful presentation of someone like Donn.

Goldratt’s loss as a modern business thinker is regrettable.  Thankfully, his acolytes and fellow consultants, like Donn, continue the tradition – one aimed at improving the lives and lots of businesses and the people that run them and work in them.

 

We originally wrote about Eli and Donn’s work early in 2007 in a series of seven posts that begins here.

(For more information about Dr Donn Novotny and his work, you can also go here and here.) 

 

 

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Our friends at Software Advice.com have put together a clever little MRP “timeline” to which they’d like to draw the manufacturing world’s attention.  We thought we’d oblige them by plugging them here, as we thought readers would find this little mini-history lesson of interest.

You can find their timeline here (you may first have to scroll down past a long line of sales & propaganda info; Software Advice helps people select ERP system, much as we do, but the world is large enough…).  Once you reach their “timeline” you can click on it at various marker points to see a mini-brief on the evolution of material requirements planning from the 1950s clear up to the present.  The captioned events are perhaps a bit subjective, but the earlier history in particular is noteworthy in its historical context, and often interesting.

For instance, from it you’ll learn (from the year 1950 entry) how inventory management and the bill of materials were born.  Quoting…

“Maytag develops a system for storing a limited assembly model schedule on a 650 tape-drum. With this system, Maytag is able to project their time-series several months in advance. However, the bill of materials (BOM) has to be maintained and inventoried on tape as well. These are the first steps toward maintaining electronic copies of inventory and bill of materials.”

We were pleased to see mention of the founding of APICS (1957), and its influence over MRP historically.  As a past recipient of their “Company of the Year” award from our local chapter of APICS, we often use and recommend them to others for training and CPIM certification.

The 1960 entry presents Joseph Orlicky’s implementation of the first material requirements planning system at J I Case Co. in Racine Wisconsin, and the subsequent computerization by IBM of this important event in MRP.

The 1978 entry notes the move of MRP to the minicomputer and the introduction of MAPICS on the IBM S/34.

The 1980 entry discusses the emergence of MRP II, and the new planning components introduced in the MRP arena.

But we were most delighted to see credit given (if somewhat anonymously) to our good friend Dr. Donn Novotny, in the timeline’s 1984 entry, introducing the famous book “The Goal” and its influence on continuous improvement.  Many of our clients know of our own firm’s  long association with Donn who, perhaps unknown even to the folks at Software Advice, was actually the role model for Alex Rogo, the lead character and plant manager charged with turning around an unprofitable plant in Eli Goldratt’s seminal business novel.  Donn’s influence – and that of Goldratt’s book describing his successes – remains a powerful factor in companies he works with to this day.  Operating out of his Elkhart, Indiana home, Dr. Novotny continues to consult to companies worldwide today.

Check out the timeline yourself.  Maybe you’ll even have an historical anecdote to contribute to the editors.  I’m sure they’d welcome the input.

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In the first of this seven part series of thoughts on manufacturing constraints and scheduling, I started with a reference to Eli Goldratt’s The Goal.  Along the way, we placed links to various online sources for more information.  Obviously, the trove of information is deep.  You really should check them out.

In our own consulting practice, usually we find clients simply want some guidance.  And usually, we provide it ourselves.  Sometimes, we refer them to others with a reputation for solving problems. 

For Lean Manufacturing matters, we like to go to our guys Larry Lukasik and Jim Therrien.  They don’t have a website – they’re too busy doing good work helping companies go lean – but we happily connect them with clients with a need in this area. 

Other times, we’ve called in our good friend Dr. Donn Novotny (referred to earlier as the role model for Alex Rogo in The Goal).  Donn’s President of The Goal Institute, and is a master at solving complex problems with logical thinking processes.  He’s a master teacher of TOC and has worked with companies large and small, all over the world.

Frequently, we apply our Business Process Analysis, a modestly priced fixed-fee engagement whereby we help clients identify and resolve their own bottlenecks, constraints and process gaps.  Once identified, we’ve had great success in solving problems with better processes and, of course, software and technology. 

That technology slant seems to be the field-leveler these days.  The clients we have that are really committed to their tech investments gain real strategic competitive advantage – and most importantly, growth, compared to those with fear of the terrain, or whose commitment to real improvement often just doesn’t compare.

The global landscape is changing, faster than most recognize.  The Internet and its associated Widgets of Productivity are changing the landscape for all of us.  You embrace it, exploit it for your own purposes, or get run over by it.

In this series on Drum-Buffer-Rope thinking, I hope we’ve provided a little food for thought.  This stuff has been around for awhile.  And we’ve barely scratched the surface.  Most of it is about logical thinking processes — but necessary ones, at least in today’s manufacturing environment. 

At the least, I hope we’ve induced you to think about your own constraints, and what you can do about them. 

In solving these kinds of problems on a daily basis, our team gets to see a lot of the best (and sometimes, the worst) practices in action.  The common thread among the best of them is smart people leading smart teams operating under the assumption that, really, what other choice do we have?  Adapt and survive.  Else, not.

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To properly manage an acceptable production flow, relative to the demands of your customer (and in pursuit of on-time, on-budget), a set of rules derived from our previous post’s key points can be established, based on Theory of Constraints logic.  These points are intended to drive the logic of your MRP.  You can find them here, and they are summarized below:

1. Establish the due date requirements for the orders or demand. This provides the first and “ideal” drum to work to.

 2. Identify the CCRs (Capacity Constraint Resources) in the system.

 3. Develop a Drum or a schedule for the CCRs which makes best use of them and is in-line with the needs of the market. The drum is effectively the master production schedule which establishes the “drum beat” and control for the entire system.

 4. Protect the throughput of the factory from statistical fluctuations through the use of time buffers at critical locations. Time buffers are strategically located to protect the throughput of the entire system and to protect the due dates promised to customers.

 5. Use logistical ropes tied to the CCR drum schedules for each resource. The ropes synchronize all non CCRs to generate the timely release of the right materials into the system at the right time. Ropes ensure that operations upstream of CCRs are time phased to CCR requirements and operations downstream do not subsequently impede product flow.

In your overall scheduling, you should insert buffers along the way to protect the constraints from disruptions, expected or otherwise.  Your schedule (The Rope) releases material into your system on a timely basis, tied to the size of these buffers, in order to increase the likelihood of smooth, continuous flow.

A schedule, which above all is intended to be do-able and realistic, is only as good as the team’s ability to manage it, to make it happen.  Focusing on constraints and the correct imposition of buffers (in the right place and size) will help improve the success of your schedule, especially when Murphy raises his head, as invariably happens.  And to come full circle, by managing the critical resource constraints with good scheduling and appropriate systemic buffers, new smaller constraints may begin to appear.  At that point, you go back to step one, identifying and attacking the new constraints – in the ultimate process of continuous improvement.

Next up, some final thoughts…

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We looked earlier at identifying constraints, noting that it is fairly intuitive to observe that the constraint by definition is the weak link in the system.  How do we improve the throughput at the constraint without unduly increasing the expense or cost of doing so?

The answer lies in finite scheduling – The Rope, of Drum-Buffer-Rope thinking – in order to balance the flow (throughput) of our system.  The idea is to control the flow of production through the plant in order to meet sales (market) demand, with the least amount of manufacturing lead time, expense and inventory costs.

Modern MRP software can handle this for you.  In our experience over the years, we’ve seen many manufacturers with a high level of urgency regarding Scheduling.  Often, it’s the first thing they look at when evaluating an MRP system, but the last thing they implement – and for good reason.  Truly tight scheduling simply asks so much of the operators and managers.  We often guide clients to a rough-cut or gross requirements scheduling solution: it’s more important to get the order right, than schedule the shop down to the gnat’s behind – especially since attempts to do so are rarely successful.

All that being said however, The Theory of Constraints (TOC) school of thought, first introduced in Goldratt’s The Goal focuses on five steps to implementing an effective scheduled throughput, which I quote verbatim below.  For a fine (if lengthy) overview go here.

1. Identify the system’s constraint(s).
2. Decide how to exploit the system’s constraint(s).
3. Subordinate everything else to the above decisions.
4. Elevate the system’s constraint(s).
5. If, in the previous steps, a constraint has been broken, return to step one, but do not allow inertia to cause a system’s constraint.

The Rope provides for proper release to the manufacturing flow process, or as put by others, it aids in subordinating all else to the system’s constraint(s).  It’s your schedule.

Broadly speaking, you start by identifying all constraints within the system.  Make these the focus of your attention.  From these, derive your planning, scheduling and control of resources.  Once you’ve identified your capacity constraint resources (your CCRs, or your bottlenecks), schedule orders through them according to the capacity of the resource and market demand (your due date requirements). 

This schedule (or Rope), in effect is a looping-back to the Drumbeat of your demand. 

Next article, a little more info on Scheduling…

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Picking up from our prior post on Throughput…

To get an ideal flow time for a complex assembly, use the version of Little’s Law that stipulates (stay with me here): Flow Time = Inventory / Throughput

To estimate a flow time for an assembly process then, we measure the Inventory (in dollars) across the line or process, measure Throughput in terms of COGS (Cost of Goods Sold) and find their ratio.  This will provide a usable measure of Flow Time.

Same goes for WIP.  Little’s Law implies: Flow Time = WIP / Throughput.  If you reduce WIP, you may reduce your cycle time, but that’s a slippery slope.  If you reduce WIP without making other changes to the variables in the system, you’ll reduce your throughput, eventually affecting lead times and ability to deliver.  You can’t just reduce WIP to get lean.  You need what’s called a variability reduction to maintain or improve throughput with less WIP.

The ideal production scenario, then, is one that can be scheduled with a clear eye on the rhythm of product (the Drum) while cognizant of the cost effects of the Throughput component – setting up the ideal length of time, based on the right amount of inventory — for parts to reach the constrained area (the Buffer)

Next up, the Rope…

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The simple way, in theory, to resolve a constraint is to throw inventory ahead of it, right?  After all, with enough material coming into the bottleneck, you never have to worry about it being in a wait state, with its consequent waste.  That inventory is directly related to lead time, and thus, the ability to deliver to customers on time (i.e., “make the schedule”).  Of course, we know intuitively that there is a cost associated with this too, potentially greater than the cost associated with waiting at the bottleneck.

Which brings us to Little’s Law.  It’s named for John Little, who in the 1960’s, working out of a university in Cleveland, Ohio (my home town) defined something called queueing theory.  It states that the Length of a queue is equal to the Average Arrival Rate times the Average Waiting Time.  It’s pretty simple when you think about it.  It relates three performance measures in a production system, and states them as a basic manufacturing principle.  Little expressed this as:

L= λ W

(Thus, Length of the queue equals lambda (a mathematical expression here used for, basically, Throughput) times Wait)

You can Google this stuff ad nauseum, but suffice it to say it’s useful in identifying a lot of different process flows and bottlenecks, including your own.  It’s used in business to calculate wait times, planned inventory times, desired warehouse inventory turns, ways to reduce WIP (Work in Process), process flows, etc.

In production it can be simply applied: A machine that can process a part a minute (i.e., 60 per hour) and that has 500 pieces in front of it has about 8 hours of WIP.  (All examples assume a ‘static’ environment, i.e., all other things being equal and unvaried.)  By itself, this figure holds less value than it does in context: if throughput is indeed 60 pieces per hour, then 500 pieces can be pushed through in a day.  But if the process in question can utilize just 6 pieces per hour, then you have an 80 hour (i.e., two week) WIP backlog, and that’s probably not good.  Too much inventory makes for good on-time delivery perhaps, but costs a fortune in excess inventory.

But from this calculation, a trained observer can roughly determine whether the flow into a work center is too much (thus wasting too much inventory), or is a good fit.  The 500 parts seem ‘reasonable’ with a 60 piece per hour flow rate, but much less so with a 6 piece rate.  Plant managers can begin using that knowledge to determine rough cut estimates of just how much inventory needs to flow into a bottleneck to keep it from becoming a major constraint of the system.

Simple.  Intuitive.  But a useful tool for getting at core calculations about your own throughput, bottleneck identification, and what to do about them.  This is the Buffer component of Drum-Buffer-Rope.  Find your biggest constraint, and calculate the rough level of inventory (or Buffer) – no more or less – that is required ahead of it to keep that constraint from going into serious waste mode.

In our next article, we’ll look at flow time in assembly, and the effects of WIP.

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