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The Theory of Constraints

The Theory of Constraints. Now that we know the Goal, how do we use it to improve our system?. The Theory of Constraints. Step 1: Identify the system's constraint(s). Step 2: Decide how to exploit the system's constraint(s). Step 3: Subordinate everything else to the decisions of Step 2.

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The Theory of Constraints

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  1. The Theory of Constraints Now that we know the Goal, how do we use it to improve our system? Paul A. Jensen Operations Research Models and Methods Copyright 2004 - All rights reserved

  2. The Theory of Constraints • Step 1: Identify the system's constraint(s). • Step 2: Decide how to exploit the system's constraint(s). • Step 3: Subordinate everything else to the decisions of Step 2. • Step 4: Elevate the system's constraint(s). • Step 5: If a constraint is broken in Step 4, go back to Step 1.

  3. Step 1: Identify the system’s constraint(s). • What is the Goal? • What is Throughput? • What is Inventory? • What is Operating Expense?

  4. Step 2: Decide how to exploit the system’s constraint(s). • What is the constraint? • How do we get as much throughput as possible?

  5. Step 3: Subordinate everything else to the decisions of Step 2 • Throughput? • Inventory? • Operating Expense?

  6. Step 4: Elevate the system’s constraint(s). • Throughput? • Inventory? • Operating Expense?

  7. Step 5: If a constraint is broken in Step 4, go back to Step 1. • What might happen if the constraint is elevated?

  8. Summary: The Theory of Constraints • Step 1: Identify the system’s constraint(s). • Step 2: Decide how to exploit the system’s constraint(s). • Step 3: Subordinate everything else to the decisions of Step 2. • Step 4: Elevate the system’s constraint(s). • Step 5: If a constraint is broken in Step 4, go back to Step 1.

  9. Application in Manufacturing

  10. Step 1: Identify the system’s constraint(s). • What is the Goal? • What is Throughput? • What is Inventory? • What is Operating Expense?

  11. To Identify the Resource Constraint • Compute the load on each production resource assuming market demands. • Compare the resource loads with the resource capacities. • Those resources for which the loads exceed the capacities are constraints (bottlenecks). • If no production resource load exceeds its capacity, • the market demands are the constraints. • the constraints are external to the manufacturing system.

  12. Compute the loads and compare with capacities. • Production P=100, Production Q=50 • A: Load =2000, Capacity = 2400 Minutes • B: Load =3000, Capacity = 2400 Minutes • C: Load =1750, Capacity = 2400 Minutes • D: Load =1250, Capacity = 2400 Minutes • What is the constraint?

  13. Step 2: Decide how to exploit the system’s constraint(s).

  14. Exploiting the constraint • Assume a single constraint is identified. • Rank the products in order of the ratio: • Throughput dollars per minute of constraint use. • Select the product mix so that the products with greater ratios are produced in preference to the products with smaller ratios. • What goal is this method trying to achieve? • How does this method achieve the goal?

  15. What and how much to produce? • P: TP/Unit = 45, B Min/Unit=15 • Q: TP/Unit = 60, B Min/Unit=30

  16. Calculate Solution • Produce as much P as possible • Use the remainder of the constraint resource for Q • What is the profit for this product mix?

  17. Step 3: Subordinate everything else to the decisions of Step 2.

  18. Subordinating Production • Production P=100, Production Q=30 • A: Load =1800, Capacity = 2400 Minutes • B: Load =2400, Capacity = 2400 Minutes • C: Load =1650, Capacity = 2400 Minutes • D: Load =1150, Capacity = 2400 Minutes • What determines the load on the non-constraints?

  19. Step 4: Elevate the system’s constraint(s). • Where should process improvements be focused? • What is the benefit of elevating the constraint? • What is the benefit of elevating a non-constraint?

  20. Step 5: If a constraint is broken in Step 4, go back to Step 1. • What might happen if the constraint is elevated? • What happens if there are no more internal constraints?

  21. Say we add another machine of type B. • Production P=100, Production Q=50 • A: Load =2000, Capacity = 2400 Minutes • B: Load =3000, Capacity = 4800 Minutes • C: Load =1750, Capacity = 2400 Minutes • D: Load =1250, Capacity = 2400 Minutes • How much should we produce? • What is the new constraint? • How do we elevate the new constraint?

  22. Summary: The Theory of Constraints • Step 1: Identify the system’s constraint(s). • Step 2: Decide how to exploit the system’s constraint(s). • Step 3: Subordinate everything else to the decisions of Step 2. • Step 4: Elevate the system’s constraint(s). • Step 5: If a constraint is broken in Step 4, go back to Step 1.

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