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Posts Tagged ‘theory of constraints’

iTLSThe MRP realms embraced by the sometimes complementary sometimes competitive disciplines known as TOC (Theory of Constraints), Lean, and Six Sigma have been integrated into a “united” theory by an operations expert and author by the name of Reza Pirasteh.  This hybrid goes by the name of iTLS.  Pirasteh’s goal in uniting these three different schools of thought is to “help organizations deliver their best productive potential by optimizing process efficiency and profitability, as well as aligning products and services.”

While Pirasteh’s work and its implications are well beyond the scope of this humble blog, a few key aims of his methodology are worth sharing here today.  It also should be noted that much of iTLS is best applied to the large and/or global firm.  However, as we see so often in the world of MRP and ERP, the lessons of the large on a macro scale can often be applied to the small (i.e., SMB market) on the micro scale.  Besides, in a globally competitive environment, all manufacturers and distributors need to be aware of the tools available to them for continuous process improvement.

Thus, a rudimentary intro to iTLS today.

Within iTLS, each continuous improvement tool or technique plays a particular role in optimizing operations and profitability.  In a recent article in APICS Magazine entitled “A Continuous Process Improvement Case Study” (Mar/Apr 2014 issue), the authors detail which of these three separate disciplines is best applied when – and why.  The short version is excerpted from their article below.

(For the full article, check out the APICS Magazine website here.) 

  • The Theory of Constraints (developed in the main by Eli Goldratt) aims to focus on the global results, subordinating local resources to best exploit the constraints that limit production processes.
  • Lean tools and techniques are best suited for elimination of non-value-added activities, particularly within constraints.  When these constraints are sequentially eliminated, this favorably affects company profitability.
  • Six Sigma helps users understand the sources of variation and variability that cause a process to perform outside of its specifications.  Six sigma tools recognize the natural process variability and are able to account for it in order to create a robust process that does not violate customer specifications despite natural, random process variations.

Successful practitioners of iTLS include a pump manufacturer in Brazil, a mid-size family business nearly 50 years old with three plants.  Following the concepts of iTLS they took seven steps, over seven months.  In doing so they eliminated, coincidentally, seven deadly wastes, while reducing variation and increasing on-time delivery and trimming overall lead time from 7 days to just over 2, all while cutting their part rejection rate to 3.4 ppm.

The 7 steps:

  1. Identify the constraint
  2. Exploit the constraint
  3. Remove sources of waste
  4. Control process variability
  5. Control supporting activities
  6. Remove the constraint and stabilize
  7. Reevaluate system performance

In today’s competitive environment, one-size (or methodology) does not fit all.  But a united hybrid of best-of-breed philosophies can be a driver of productivity – and profits.

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In a recent article in their newsletter Operations Management Now,our friends at APICS (The Association for Operations Management) touch on a discussion of two concepts with a long and rich pedigree, and how they are coming together in at least one industrial sector.

Just-In-Time (JIT) is familiar to most folks in the supply chain sector.  Simply put, it represents the idea of reducing waste and shrinking lot sizes to the smallest possible sizes in order to increase manufacturing agility.  It is modeled on the famous Toyota Production System, and is an essential component of lean manufacturing.

Theory of Constraints (TOC) was developed by Eli Goldratt as a way of managing complex systems according to the rate of flow of materials or information.  The bottleneck, or slowest part of the system, represents the constraint and defines the maximum potential throughput of any system (at least until it is removed or improved, at which point one seeks the next highest bottleneck, or constraint).

Recently, the APICS article notes, an Indian newspaper called Business Standard examined the roles of JIT and TOC there.  And while the Indian automotive sector “swears by JIT in an effort to replicate Toyota’s success in Japan,” it has not always been successfully implemented.  In many cases, instead of tighter inventories they found huge mismatches – some parts have a month or two of inventory, while other parts were out of stock.  The answer, suggests Satyashri Mohanty, director of the Vector Consulting Group, is TOC.

Quoting directly from Abe Eshkenazi’s APICS newsletter article of Nov. 16, 2012…

The article goes on to highlight some of the extensive changes that TOC is bringing at factories across the Indian automotive sector. One consequence is that the previously accepted realities of forecasting and operating at full capacity are losing ground to replenishment ordering. When a downstream partner or process runs out of a specific component, quick changeovers to different platforms must be performed at the supplier to meet demand. “Things we had produced would now lie around and we would be scrambling to make something else,” says Vijay Gokhale, chief operating officer at Fleetguard, an automotive filter manufacturer. It is painful, and suppliers become caught in the same vicious cycle, he says.

Yet, some companies have realized great benefits from a TOC implementation. At Filtrum Tools and Components, manufacturing lead times are down five days, while red-zone inventory situations have gone from 5 percent to 1 percent. As Mohanty explains, manufacturing to replenishment levels has made the company far more agile.

The real point here is that “finding the right tool for the job” in supply chain planning is never as easy or simple as it may appear.   Different situations often demand different tools and strategies.  If it weren’t so, all manufacturing would be running off the same supply chain tools.  They don’t, because manufacturing is always in flux, demand fluctuates, tools evolve, planning is only as good as your execution, and something is always changing.

That’s why managers need strong training in a variety of supply chain planning and manufacturing disciplines.  Which in turn is why for nearly 20 years we’ve been recommending training by APICS to anyone who will listen.  It doesn’t earn us a penny, but a smarter customer for our manufacturing software solutions inevitably leads to a better and more mutually profitable partnership between us.

You can learn more about APICS and its training offerings at their website here.

 

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In 2008, well known business consultant, author (of the best-selling book “The Goal” among many others) and ‘founding father’ of the Theory of Constraints, Eliyahu Goldratt, penned a rather lengthy (20 page) article entitled “Standing on the Shoulders of Giants.”  My friend Dr. Donn Novotny recently passed along a copy of the article, which I thought might prove instructive to those in manufacturing with an interest in Lean, TOC and logistics and process improvement.

If you’re interested in a full copy, send me a note or comment in this blog. 

Any improvement in production flow usually comes down in one form or another to flow control – that is, the idea that by increasing or decreasing supply of material (or space, or time) to a work center and managing the resulting buffers, one can optimize the rate of production while minimizing the cost of inventory required to meet that flow.  The results can include faster throughput, better due-date delivery, and lowered expenses.  On this basis, Goldratt’s article supplies some background on the evolution, theory and more importantly, the effective practice of these “lean” techniques.  I’ll take the liberty of synopsizing here…

Roughly, the prevailing school of thought that is generally lumped into the category of “lean” is built on three primary foundations:

1. Henry Ford, and Ford Motor Co., which in the early part of the 20th century solved production dilemmas found in high volume production facilities with little variety or variability.  Essentially, Ford espoused limiting space between work centers (when that space is full, stop production!), and improve the work center after this position, because that is the current bottleneck.  The controlling concept was space reduction and this was often known simply as in-line production.

2. Next came Taiichi Ohno, and Toyota Motors, during the mid to latter 20th century.  Where Ford limited space between work centers, Ohno proposed limiting inventory between centers as well as in the material supply chain.  This led to the term ‘just-in-time’.  When maximum allowed inventory accumulated anywhere in the line, stop production!  These principles worked best for Toyota’s high volume, but “medium” variety environment – one that was often a “stable” environment as well.  (With Toyota, some limited variability in model production was allowed.)  Like Ford, Ohno sought to improve the work center directly after the point where inventory (or in Ford’s case, space) was accumulating, as this pointed to the current bottleneck.  In this environment, Kanban came to exist, and the terms “lean” and TPS (Toyota Production System) came into play.

3. And then, in the 1980s and later, MRP (Material Requirements Planning) and the theories of Eli Goldratt (among others) took the matter to the world of low-volume / high-variety (or unstable) production.  Where Ford limited space and Ohno limited inventory between work centers, Goldratt proposed to limit time between them.  The current bottlenecks would then be those with the most material waiting in front of them – basically, a step up on the shoulders of Ohno, and before him, Ford.  MRP and TOC were the results of this evolution in the process of production. 

Each major theory built on the one before it, at last finishing with Goldratt’s Drum-Buffer-Rope concepts, as described in his seminal work, The Goal. 

Goldratt’s full article explores in more depth than here the implications of the third generation, and the challenges between theory and practice in production centers where variety runs high.  We’ll look at how that worked for one well known manufacturer,Hitachi, in our next post.  Stay tuned…

 

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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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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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