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Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW1
TOC for Mining
Operations
General Appreciation
The Theory of Constraints approach to
Operational Excellence
These Slides have been prepared and presented by Arrievan Niekerk and form part of a series of presentations
that were developed over several years. They represent a personal view of the subjects and are not to be
interpreted as official documents of any kind.
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW
TOC in Context
Suppliers PurchasingOwn
ProcessesDistribution
ChannelMarket
2
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW3
The Impact of Our Ideologies
IDEOLOGY
WORDS ACTIONS
RESULTS
We very seldom take a step back and challenge our core beliefs as the reason why some things just do not work
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW4
“The significant problems we face
today cannot be solved with the
same level of thinking we were at
when we created them.”
– Albert Einstein
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW5
Basic Frame of Reference
Understanding the world of FLOW,
Variation and Interdependence
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW
Managing a Complex Environment
• Complexity stems from the number of agents (21), number of linkages (35), time dependence, time delays, technical details, social considerations, cause and effect relationships, etc
12 1617
13
15
12
11 1819
2011
915 16 14 1310 12 OUTIN 11
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW
Examples of sequential flow processes
Raw
Material ValveSawMachine
Station
Drilling
Station
Welding
StationAssembly Packaging
Hydraulic Valve Manufacturing
Sand
SourceProductLoader
Trucks
(x2)Screen
Wash
& DryLoad Transport
Sand Mining
Patients
arrive
Patients
Leave
Admin
Reception
BP &
Lung
Capacity
Chest
X-Ray
Hearing
Test
Eyes &
Urine
Certify
(Nurse)
Occupational Health Screening
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW8
A Few Trivial Questions
• You are instructed to cut costs by 10% in order
to meet the challenge of a lower Sales Price
– How would you go about it?
– What process would you follow?
• Is there another, more meaningful way?
A B C ED F
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW9
A Few Trivial Questions
• You are faced with the above efficiency report:
– Where will you focus most of your attention?
– Where will you not put any attention now?
• What is the most probable action you will
take in order to get quick results?
A B C ED F
92% 75% 80%72%60%65%
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW10
What bothers you about this chain?
15 16 14 1310 12Mineral
Resource
A Very Basic Operation
A sequential flow line with processes of different average capacity
(e.g. Tons per Hour)
How will you go about improving it?
Expected output of this chain = ?
Product
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW11
What are the deep rooted beliefs that
cause us to develop chains like these?
A Perfectly Balanced Chain?
Output of the chain = ?
16 16 16 1616 16Mineral
Resource Product
Output of the chain = ?
10 10 10 1010 10Mineral
ResourceProduct
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW12
The World of
Local Efficiency
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW13
What causes us to develop chains like these?
THE WORLD OF Local Efficiency
10 10 10 1010 10
Output of the chain = ?
Mineral
ResourceProduct
When we prepare our budgets, what is the governing mental model?
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW14
For this system we believe that:
If every resource in the chain is optimised,
we will have an optimised chainB
We have to utilise all resources to their full capacityD
A The output of the chain will be 10 (or close to it)
C Balancing Capacity results in Optimised Flow
10 10 10 1010 10Mineral
ResourceProduct
The world of Local Efficiency:
A Perfectly Balanced Chain?
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW15
10
12
0
Resource
Input Output
Perf
orm
an
ce
Time
Max
Ave
Min
Fact No1 in a Chain:
ALL RESOURCES VARY OVER TIME
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW16
Fact No2 of a Chain:
RESOURCE DEPENDENCY IS HIGH
and works forwards and backwards
A B C ED FMineral
ResourceProduct
Upstream: STARVATION
Downstream: BLOCKAGE
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW17
Time
Perf
orm
an
ce
12
10
0
5
In Combination: Variation and Interdependency
kills the synchronisation of FLOW
10 10 10 1010 10
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW18
Context
“If a company tell me they have
moving bottlenecks, my response
is: You have no bottlenecks and
most of your resources have at
least 30% spare capacity”
– Dr Eli Goldratt
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW19
How Much Will It Produce in Reality?
Availability
90%
?
(0.94)6 = 73% of design capacityAvailability
94%
Availability
80%
(0.90)6 = 58% of design capacity
(0.80)6 = 31% of design capacity
10 10 10 1010 10
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW20
10 10 10 1010 10Mineral
ResourceProduct
World of Local Efficiency
What will the resulting behaviours be?• Relentless cost control measures
• Adjustments of all input costs, downwards (easiest)
• Increased pressure on all levels to improve local efficiencies
• Focus on every link in the chain – cost and efficiency
• Undiscussable issues everywhere – “stop complaining and just do your job!” (We know better)
• ………………
Guaranteed Outcome: Performance well below standard, Costs per part go through the roof!
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW21
How do we normally handle improvement?
We throw money at the problem
Or we Cut Costs
Output of this chain = 5
10 10 10 1010 10Mineral
ResourceProduct
Output of this chain = 8
16 16 16 1616 16Mineral
Resource Product
We start with … 6/7
15 16 14 1310 12Mineral
ResourceImprove!
These chains suffer from the same flaw!
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW22
Another World,
The World of
OPTIMISED FLOW
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW23
Every Chain has a Weakest Link and it
determines the FLOW of the total chain
10
• How well should it be run?
• What is the implication of standing time?
• What is required from Maintenance?
• What about operator availability and skill?
• What about quality control?
• What about product value?
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW24
Next: Buffer the FLOW of the critical resource
from fluctuation in the rest of the chain
10
• We have to Protect the Constraint from the rest
of the chain by buffering
• We must effectively buffer the FLOW chain from
every possible negative effect
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW25
10
10
Protective
Capacity
(Flexibility)
Protective
Capacity
(Flexibility)
Next: Ensure that the rest of the chain can support
the needs of the constraint
? ? ? 10 ? ?
We need 20% protective capacity in front and behind the constraint in order to maintain the FLOW
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW26
5
Impact of Buffers on FLOW
? ? ? ?10 ?
Time
Perf
orm
an
ce
12
10
0
With buffers
Without buffers
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW27
D
Buffers & Protective Capacity
• Establish and maintain a buffer of work in front of the constraint
• Establish and maintain a space buffer behind the constraint
• Without protective capacity, buffers cannot be managed
• Making sure that we will not stop
the FLOW
E FA B C
Protective Capacity
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW28
COMPARING
Local Efficiencyand
Optimised FLOWin terms of ability to
MAKE MONEY
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Heuristic Flow © 2008
Heuristic
FLOW29
10 10 10 10 10 10
A B C D E F D E FA B C
12 12 12 12 1210
D E FA B C
16 15 14 13 121010 10 10 10 10 10
A B C D E F
Comparing the Production Costs
(0.94)6 = 73% of design capacityAvailability
94%
Availability
80%(0.80)6 = 31% of design capacity
Costs 6 x 10 = 60 (5x12) + 10 = 70
Output 7,3 Units 9,4 Units
Cost/Unit 60/7,3 = 8,2 70/9,4 = 7,5
Costs 6 x 10 = 60 (16+15+14)+10+(13+12)= 80
Output 3,1 Units 8,0 Units
Cost/Unit 60/3,1 = 19,4 80/8,0 = 10
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW30
10 10 10 10 10 10
A B C D E F D E FA B C
13 13 13 12 1210
D E FA B C
16 15 14 13 121010 10 10 10 10 10
A B C D E F
Production Costs: Closer to REALITY
(0.90)6 = 58% of design capacityAvailability
90%
Availability
80%, but
Constraint 85%
(0.80)6 = 31% of design capacity
Costs 6 x 10 = 60 (3x13)+10+(2x12) = 73
Output 5,8 Units 9,0 Units
Cost/Unit 60/5,8 = 10,3 73/9,0 = 8,1
Costs 6 x 10 = 60 (16+15+14)+10+(13+12)= 80
Output 3,1 Units 8,5 Units
Cost/Unit 60/3,1 = 19,4 80/8,5 = 9,4
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW31
D E FA B C
13 13 13 12 121010 10 10 10 10 10
A B C D E F
Comparing the Profit: 90% Availability
Income 5,8 x 15 = 87
Costs 60
Profit 87 - 60 = 27
(3x13)+10+(2x12)= 73
9 Units
73/9 = 8
Reducing the Cost/unit produced by 22%
Costs 6 x 10 = 60
Output 5,8 Units
Cost/Unit 60/5,8 = 10,3
9 x 15 = 135
73
135 - 73 = 62
Extra profit created through “additional costs”: 35Costs of lost opportunity is not even measured and it is the biggest cost to the
company- buffering pays for itself many times over
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW32
D E FA B C
16 15 14 13 121010 10 10 10 10 10
A B C D E F
Comparing the Profit: 90%BC vs 80%Flow
Income 5,8 x 15 = 87
Costs 60
Profit 87 - 60 = 27
16+15+14+10+13+12= 80
8,5 Units
80/8,5 = 9,4
Reducing the Cost/unit produced by 9%
Costs 6 x 10 = 60
Output 5,8 Units
Cost/Unit 60/5,8 = 10,3
8,5 x 15 = 127
80
127 – 80 = 47
Extra profit created through “additional costs”: 20Costs of lost opportunity is not even measured and it is the biggest cost to the
company- buffering pays for itself many times over
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW33
Context
“If you want to make money, ...
most of your resources MUST be
IDLE form time to time”
– Dr Eli Goldratt
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW34
Comparing the Chains: Operation
Balanced Capacity Balanced FLOW
Murphy Exposed
Unstable Flow
Control Everything
Manage by Budget
Uncontrolled Idle Time
Higher Cost/Product
World of Scarcity
Murphy Protected
Stable Flow
Control Leverage Points
Manage by Constraint
Managed Idle Time
Lower Cost/Product
World of Abundance
10 10 10 10 10 10
A B C D E F D E FA B C
16 15 14 13 1210
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW35
Comparing the Chains: Mental Models
Balanced Capacity Balanced FLOW
Can we describe the
types of thinking
behind this type of
chain?
Can we try to describe
the mental models
behind this type of
chain?
10 10 10 10 10 10
A B C D E F D E FA B C
16 15 14 13 1210
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW36
IN SUMMARY
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW37
IN SUMMARY
In the world of Local Efficiency:– The overall performance will inevitably be well
below expectation,
– Deliveries will almost always be late
– Product availability will be low
– You are guaranteed to have frustrated customers
– The costs will inevitably be higher than expected
– Company performance is bound to go down
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW38
IN SUMMARY
In the world of Optimised Flow:– The overall performance will be better than
expected,
– Deliveries will almost always be on time
– Product availability will be exceptionally high
– You are guaranteed to have satisfied customers
– The costs will inevitably be lower than expected
– Company performance is bound to go up
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW39
KEY FOCAL POINT / “Constraint”
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Heuristic Flow © 2008
Heuristic
FLOW40
BUFFERING
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Heuristic Flow © 2008
Heuristic
FLOW41
SUBORDINATION
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Heuristic Flow © 2008
Heuristic
FLOW42
PROTECTIVE CAPACITY
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW43
“The closer you are to a
balanced capacity chain, the
closer you are to bankruptcy”
– Dr Eli Goldratt
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW44
The flow through the bottleneck
determines the output of the chain as a
whole!
Key question to ask:
HOW CAN WE HELP THE BOTTLENECK
TO PERFORM BETTER?
It is all about FLOW, not CAPACITY
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW45
We must …
In order to …
16 16 16 16 16 16
A B C D E F
10 10 10 10 10 10
A B C D E F
In order to …
New Holistic Mechanism
DIRECTION: Mental frameworks that are aligned with the LAW that Governs Flow
Make More
Money(Now and in the
Future)
In order to …
Maximise
FLOW
We must …
Control
COSTSWe must …
D E FA B C
16 15 14 13 1210
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW46
10 E FA B C
Protective Capacity
If every resource in the chain is optimised,
we will have an optimised chainB
We have to utilise all resources to their full capacityD
A The output of the chain will be 10 (or close to it)
C Balanced Capacity results in Optimised Flow
10 10 10 1010 10Mineral
ResourceProduct
Our ‘logic’ is indeed flawed!
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW47
The Theory of Constraints?
The Power of Leverage
“Doing the right thing”
A DIFFERENT WORLD!
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW48
Continuously improve
overall performance
Step 1:Identify
the
weakest
link
Step 2:Decide how
to exploit
the weakest
link
Step 3:Subordinate
everything
to the
previous
decisions
Step 4:Elevate the
weakest
link
Step 5:If you have
broken a weakest
link then go back
to step 1Remember: Old habits die
hard
A chain is only as strong as its weakest link
We followed the 5 focusing steps based on
the laws of FLOW
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW49
Enhanced Management
• Key Focal point(s)
• Constraint Rate & Schedule
• Buffer Management
D E FA B C
Time
Buffer+
90100
807060
50
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW50
Synchronized Flow The DRUM-BUFFER-ROPE way
D E FA B C
Raw Material Flow
“Rope” that ties the first process
to the Constraint operation
Time
BufferSpace
Buffer
Constraint or “DRUM”
that determines the
flow rate of the system
Finished
Goods
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW51
Management for Complex Production
100 –
90 –
80 –
70 –
60 –
50 –
40 –
30 –
Ca
pa
city (
Ite
ms p
er
ho
ur)
Process / Line Number
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 10 |
Internal Constraint
(Lowest Capacity)
Minimum Acceptable
Utilisation Level for Break Even
= Active Constraint
= Next Constraint
= Near Constraint
= Non Constraint
= Sprint Capacity
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW52
TOC Breakthrough Thinking
1. Optimised flow and optimised capacity cannot be
achieved simultaneously (except on the constraint itself)
2. In order to optimise flow you MUST have buffers and
protective capacity (resilience)
3. For services, the customer becomes the “raw material”
and any bottleneck causes a queue (and customer
dissatisfaction)
4. Superior Flow and/or Customer Service necessitates
protective capacity at all times
5. Optimised Flow paves the way for significant reduction
on costs per part produced
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW53
SAFETY
Generic “Model” for Optimal FLOW in Open
Cast Mining Operations
Overburden
RemovalTreatCrushing
Load &
Haul
Drill &
BlastOre
BodyProduct
ROM
Buffer
Floor
Stock
Exposed
Ore
Plant
Stock
Pile
Flowing
OUT
Flowing
IN
PEOPLE Material MaintenanceEquipment Services
Total Subordination to the CORE PROCESS
Quality Quality
Slimes
Simulate - Measure - Improve
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW
SAFETY
Generic “Model” for Optimal FLOW in
Underground Mining Operations
DevelopOpening Up
HoistTramStopeEquip PlantOre
BodyProduct
Ore
Pass
BoxesPay
Equipped
Panels
Pay
Face
Length
Plant
Stock
Pile
Flowing
OUT
Flowing
IN
PEOPLE Material UtilitiesEquipment Services
Total Subordination to the CORE PROCESS
Quality Quality
Simulate - Measure - Improve
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW
Typical TOC Flow Model for a Shaft
Loco & hopper
Buffers
Proven
Reserves
Months
A1
A2
Gold
Stoping
width Sweepings
Buffers
Rate t/d per level
Rate m²/d
Rate m/d= create buffer + match
stoping rate 1:10
Pay Face Buffer
Ore Reserve Buffer
Rate kg/d
Rate t/d
Safety
A4
A5
A3
A6S/W
Primary
Development
Raise
Development
StopingEquipped
panels Buffer
HG/LG
Panel Temp < 29
Timber
Man Carriages
Timber Cars on Surface
Head
Grade
Ledging
Equipping
UtilitiesLabour TimberServices Equipment SparesMaterial
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW56
Example – Managing a Tramming Bottleneck
Stoping Panels
Preventive
Maintenance
Tons
Trammed
StopeBoxes
Tramming Bottleneck
Haulage Conditions
BufferLoco
Drivers
TrammingCrews
Rail Maint Crews
Development
Cycle
Daily Routine1,5 hr Buffer
6,0 hours
4,5 hRate t/d
Timber
Timber Cars on Surface
Hoppers
Reef
Waste
Timber
People
Material
Buffer of available
skills
Blast
Clean
Drill
ShaftSchedule
ShaftStores
Regular Services
U/GStores
Spares
Man Carriages
Material &
Explosives
Timber CyclePeople
Locos
Engineering
Maint
Skills
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW
Buffer Management in a Stope, Day Shift
Available Face Time
Face
Time
Buffer
Total Shift Time
Total Face Shift Time
T
R
A
V
E
L
T
I
M
E
T
R
A
V
E
L
T
I
M
E
WP
DP DRILLING ChrgMS Critical Path
NP
Face Prep time
Number of holes
Depth of holes
Number of RDOs
Drilling time for face &
stick side
Amount of timber required
Transport time
Number of Stope workers
Time to build packs
Size of buffer
Tons per blast
Face cleaning time
Strike gully cleaning
Centre Gully cleaning
Number of winch drivers
Time to make safe
Time to move services
Time to charge up
Amount of explosives
Night shift preparation
TransportBuild Packs FB
Feeding
Buffer
Winch Winch
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Heuristic Flow © 2008
Heuristic
FLOW58
Stoping Panels
Example – Managing a Stoping Bottleneck
Total Water
Compressed
air
Ventilation
Waste TrammingTons
Trammed
StopeBoxes
Adequate Gullies
Reef Tramming
Shaft
Fully Functional
Crew
PanelCrew
PanelCrew
Buffer of available
skills
MO Crews
ShaftStores
Critical Material, Spares
& Equipment
U/GStores
Timber
Other
Man Carriages
Material & Explosives
Timber & Support
Support
PeopleEquipped
Panels
Panels
Development
Pay Face
Length
Ledging &
Equipping
Daily Routine1,5 hr Buffer
6,0 hours
4,5 h
Support & Safe time
Drilling time
Scraping time
Support transport time
Preparation time
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Heuristic Flow © 2008
Heuristic
FLOW
Lost Blast Analysis: Reflect the total chain• Questions to ask:
– Where in the cycle did we lose the blast?
– What part of the system failed?
– What can we do to ensure it does not happen again?
Winch
Build Packs FB
Feeding
Buffer
Total Shift Time
Face Shift Time
T
R
A
V
E
L
T
I
M
E
T
R
A
V
E
L
T
I
M
E
Face
Time
Buffer
Critical Chain Time
WP
DP DRILLING ChrgMS
Critical Path
NP
Transport
Winch
PEOPLE
Machinery
Utilities
Equipment
Services
DownstreamOwnMaterials Upstream
Goldratt Group (Southern Africa) © 2004
Heuristic Flow © 2008
Heuristic
FLOW
Full TOC Implementation
Develop
Opening UpHoistTramStopeEquip PlantOre
BodyProduct
Ore Pass
BoxesEquippedPanels
FaceLength
PlantStock Pile
Inventory
Consu-
mables
Operating
Expense
Sales /
Income
Throughput
Manufacturer
Bm
Consumer
1
Warehouse
1
Bw
Bw
Bw Bc
Bc
Bc
Bc
Warehouse
2
Warehouse
3
Consumer
2
Consumer
3
Consumer
4
Information Information
G
Y
R
Maintenance
& Service
Sp
ee
d
Co
st
Qu
ali
ty
Queue must be kept as short as possible
PEOPLE Material UtilitiesEquipment Services
Subordination to the Core Flow
Consumables
&Spares