Tocip – application for manufacturing

Theory of Constraints – Introductory Presentation (TOCIP)

Presented byRajeev Athavale

TOC – Application for Manufacturing

This presentation is based on the eBook:Theory of Constraints – Application for

Manufacturingurl: https://leanpub.com/tocmanufacturing

https://leanpub.com/tocmanufacturing

https://leanpub.com/tocmanufacturing

Manufacturing –Problems, Causes and TOC Solution

What Do We Strive For?

• We strive to deliver to our customers– What they want– When they want– Where they want and– The quantity they want

So that we satisfy our customers and our business flourishes!

What Really Happens?

• Our Due Date Performance is poor• We have Long Lead-times• We have too high Inventories• Our Payback period is usually long• There are too many customer complaints• Internally, we have bad human relationships

The Vicious CycleWe want to finish our orders in time, so• We release all the material as early as possible to the

shop floor• We try and improve utilization and efficiency

everywhere • We try and have large batches and save on setup time– For this purpose, we pull some future orders ahead– We also produce something more for the sake of large batch

size and keep it in our warehouses with the belief that it will protect our future sales

• We try to reduce waste everywhere• We try to reduce setup time everywhere or at least

where we consider it to be high

The Vicious Cycle

• However, to our surprise, our lead time increases and our orders start going late

• Our inventory keeps increasing and more and more cash gets tied up in inventory

• Our quality becomes an issue and there are increased rejections, rework and scrap

So we decide to work harder…

The Vicious Cycle• So we work harder– We release more and more material to the shop floor– We try to keep everyone busy– We increase our batch sizes– We try to improve everything, everywhere and everyone– We frequently undertake cost reduction programs– We fire people, sale off some excess capacity– We outsource the parts and processes that are cheaper

outside, as compared to our costs– We keep our costly machines running all the time and

bring down the cost per part • We strive for high utilization and try to increase

efficiency everywhere

The Vicious Cycle

• However, we find that:– Our lead time has increased further– More and more orders are going late– Inventory is going through the roof– We are wasting lots of time and money due to rework

and scrap– Our cash flow is becoming a threat– There are more customer complaints– Our profitability is at rock bottom and so on

• We decide to work even harder… and the vicious cycle – the negative loop continues

What is the Cause?• High variability in our processes?• People not skilled enough?• Our vendors are highly unpredictable?• Customers change their mind frequently?• Machines break down?• Quality issues?Nope!• If it is true, then you need to put in comprehensive

improvement efforts everywhere– However, if you do so, you cannot expect significant result in short

period of time• Since your time, money and other resources will be spread across many

initiatives

• Therefore, you cannot expect significant result in short period of time

Then What?

• Our mode of operations• The measurements that we use to judge

people’s performance

Both put together cause a vicious cycle…

Before We Talk About the Solution…

Do not discuss the solution unless:• People have understood the problems• The causes and• They are able to relate them to their situation

Before We Talk About the Solution…How do we judge a solution to be good?Dr. Goldratt said that a solution is good if:• It results in excellent benefits• It is a Win-Win-Win for all whose collaboration is

needed• The risk (multiplied by damage) is small relative to

the benefits• It is simpler than what we do now• The sequence enables people to come on board – any

cluster of actions brings immediate significant results• It does not self-destruct

SOLUTION

DRUM-BUFFER-ROPE (DBR)

DBR System

• The DBR system is designed to regulate the flow of WIP through a production line at or near the full capacity of the Constraint in the manufacturing chain

• To achieve this optimum flow, the entry of work orders into production is synchronized with the current production rate of the Constraint

• Let us see the meaning of each of the terms i.e. Drum, Buffer and Rope

DRUM• The Drum is the Constraint (ideally beating to the pace of the

market demand)• It is called a “Drum” because it establishes a pace or frequency

to which the whole organization synchronizes itself – It means, if the Constraint works faster i.e. the drum beats are fast or

the rhythm is fast, the whole organization runs faster and matches the speed of the Constraint

– Conversely, if the Constraint slows down i.e. if the drum beats are slow or the rhythm is slow, again the whole organization slows down to match the speed of the Constraint

• This helps to minimize the chances of starving or overloading the Constraint

• So the whole organization dances on the drum beats of the Constraint

DRUM• Planning can be complex if you try to schedule every

resource / machine / process / department• It would be correct to base your production plan or

schedule on the Constraint’s ability to finish tasks• You are actually scheduling the Constraint rather than

any other resource / machine / process / department• As such, their schedule depends upon the schedule of

the Constraint• What dictates what we should work on? – What the market wants and– What we are able to deliver

DRUM

• The list of work for the Constraint is called the Drum• All the resources should be managed so that the

Constraint can be utilized as much as possible• The Drum is the means for exploiting the system’s

Constraint• It dictates the pace of the shop floor and matches it to

the Constraint’s capabilities• The actual Drum is the master production schedule• However, it is recommended that one may not really

make an exact schedule; but leave the same to the operators who know what should be sequenced after what

DRUM

The Drum is the key for synchronization of the work of all other resources

BUFFER• The Buffer is a time, rather than things or

material– It is not the stack of WIP waiting in front of the

Constraint– It is the units of WIP planned to arrive for processing

some period of time before the Constraint is scheduled to begin working on them

• In order to protect Operations against the damages created by interruptions that may happen from time to time, the Constraint must have the right work available even if upstream resources run into unexpected problems

BUFFER

• We make sure that the right work is available for the Constraint by releasing the respective material to operations enough Buffer time before it is due to be worked on by the Constraint

• The Buffer is a set time-interval; the time-interval material is released before the Constraint needs it

• Buffer is the time assigned for the material to move to the completion or to the Constraint

Three Types of Buffer

• Constraint Buffer• Assembly Buffer• Shipping Buffer

Types of Buffer

Constraint Buffer

• It protects the Constraints from starving for work from the processes up to the Constraint

• It is a liberal estimation of the lead time from raw material release to the site of the Constraint

• It is the time buffer offset used to schedule the release of materials that feed the Constraint

• We refer Constraint as “Protected site” (since it is protected by a buffer)

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Assembly Buffer• It protects the processes from Constraint up to the

assembly• This is a liberal estimation of the lead time from the

release of raw materials to a process step where parts that don’t use the Constraint are assembled with parts that do

• It protects the flow of parts from the Constraint against interruption due to the parts coming late from non-constraints

• We refer assembly as “Protected site” (since it is protected by a buffer)

Shipping Buffer

• This Buffer protects the processes for shipping• It is a liberal estimation of the lead time from

the assembly to shipping• The Shipping Buffer protects the Shipping Due

Date• We refer shipping as “Protected site” (since it

is protected by a buffer)

ROPE• The purpose of the rope is to protect the Constraint

from being flooded or starved with WIP• The rope is a communication device that connects

the Constraint to the material release point and ensures that raw material is released into the production process at the rate of the Constraint

• The rope is a signal by the Constraint to the gating operation that allows additional inventory to move into the system

• We need to protect the Constraint from starving for work to make sure the correct material is always ready and waiting for processing in good time before the Constraint is expected to process them

ROPE• We can achieve this by ensuring that we release

material a rope-length in time prior to the scheduled consumption of the Constraint

• Tying the Rope is the act of choking the release of material in accordance with the Drum and the Buffer

• Rope is the schedule for material release• Example:– Suppose we have determined the Buffer of 8 hours– It means the work is released 8 hours before it is due at

the Constraint– This means the upstream work centers have 8 hours to

finish their work on the material released and deliver it to the Constraint for further processing

ROPE• Now the Roadrunner work ethic is appropriate for

upstream resources as well as for downstream resources

• Upstream resources will not create unneeded inventory since we choke the work released according to the pace dictated by the Constraint

• Downstream resources will work as fast as possible when they have work

• From time to time, both upstream as well as downstream resources will sit idle, since they have more capacity than the Constraint

DBR Summary

• The DRUM – the system component with the least capacity – defines the maximum Throughput that can be achieved by the system

• DBR logic necessitates that strategic buffers are placed in the system as protection against variability at the Constraint operation as well as at other control points

• Buffers i.e. level of WIP, additional capacity and time allowances are strategically positioned to ensure very high – if not full – utilization of the Constraint, thereby ensuring maximum output relative to system’s capacity

DBR Summary

• The DRUM, in conjunction with the Rope, controls the pace of the system by controlling the release of the material into the system

• The rope is a signal by the Constraint to the gating operation that allows additional inventory to move into the system

• Thus, by controlling the release of materials, all processes are forced to work at the rate of the Constraint

• This prevents accumulation of WIP across the system

DBR Summary

DBR helps in increasing Throughput while simultaneously reducing Inventories by:• De-coupling interdependency (by means of a

buffer),• Getting the variability to work in our favor and• Protecting the Throughput capacity of the

system

BUFFER MANAGEMENT

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Buffer

• A buffer is a time zone, placed in front of a major event that we have planned to take place - the dispatch of a product

• It is the tolerance within which we can be certain that the planned event will take place

• It acts like a cushion to protect the system from disruptions that we expect to take place but have no way of knowing when or how long they will cause a delay - the thing we call statistical fluctuations

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Buffer

• Buffers are an essential part of our applications because they provide the means to detect when things are going wrong and allow us to take corrective actions before it is too late

• They also provide the on-going information to show us where and by how much something needs to improve

• Buffer management is a control mechanism technique designed for a purpose

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Objectives of Buffer Management

• To check whether the due-dates or availability are threatened

• To validate whether the buffers used are about right, adequately protecting the system performance

• To absorb minor deviations to the plan• To reveal and warn us about the major threats

to the plan

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Buffer Management

Buffer Management technique is used: • To identify possible problems in the production so

that we know where to focus improvement efforts• To assess the impact of changes made to the system• To monitor the trade-off between the protection of

the Constraint and the resulting lead-time

Buffer is a liberal i.e. a fairly long estimate of the lead time between two internal points

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Buffer Zones

In order to manage the buffers to give us suitable signal for action, we divide it into three equal Zones:• Zone 3 – Green Zone• Zone 2 – Yellow Zone• Zone 1 – Red Zone

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Zone 3

• Zone 3 – It is the top end of the buffer– Since it is a liberal estimate, it is much longer than

the net processing time; But it is short enough that many orders consume most of it

– It is also referred as “Green” zone

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Zone 2

• Zone 2 – It is the middle of the buffer– Variability and uncertainty occasionally consume part

or this entire segment– During this time, orders can be expected at the

buffered control point or protected site i.e. Constraint, or Assembly or Shipping, as the case may be

– However, generally, they are not– It is also referred as “Yellow” zone

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Zone 1

• Zone 1– It is the bottom of the buffer– Any penetration of this zone constitutes a danger

flag– This means that the orders are due very shortly at

the buffered control point or protected site (i.e. the Constraint or assembly or shipping point) but are not there i.e. we have very limited time to bring them in

– It is also referred as “Red” zone

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Holes in Buffer Zones• Hole is a task missing from the planned buffer• The situation where an order is not at the protected site

(i.e. the Constraint or Assembly point or Shipping point) it is referred as a “hole” in the buffer

• There can be holes in any of the three zones• These holes can be used as indicators to decide whether

to intervene or not• It is very natural that most buffers will be penetrated and

consumed• But that does not mean that you need to jump into action• It is important to know when to intervene and it is

equally important to know when not to intervene

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Signals from Buffer Management System

• An early indication of the hole in Zone 3 (Green zone)

• This will not only tell you that the order is likely to be late, but will also leave sufficient time for you to expedite

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• If there are more than one order in Zone 1 (Red zone) at a time is an indication that the system is destabilizing

• If there is only one order in Zone 1 (Red zone) at a time, but it happens many times during a short period, the system is still likely to be destabilizing

• Examine the load on the whole system and decide what actions to take to re-stabilize the production system

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• Many orders penetrating in Zone 1 (Red zone) also indicates that a new Constraint may be emerging– Investigate in to the case and take suitable action

• Holes in Zone 1 (Red zone) also indicate improvement opportunities

• The holes may be happening, for example, because of a low yield from a resource with relatively large excess capacity

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• At any given point of time, orders will be in one of the three buffers depending upon the stage of the orders

• You need to check the relevant buffer zone and decide whether it warrants action or not

• Zone 1 is closest to the demand point and therefore, is the most important Zone and all the material in this Zone should be present

• Holes in this Zone indicate the very real possibility of starving the Constraint or causing deviation from the schedule or missing due dates

• Therefore, immediate identification and expediting for the missing materials is necessary

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Signals from Buffer Management System• Zone 2 represents intermediate protection for the

Constraint• As such, not all of the planned material is expected to be

present• Though expediting for missing material may not be

necessary, it may be worthwhile to investigate the cause for its absence and the cause for disruption

• Keep releasing orders as per the schedule dictated by the Constraint

• Before committing delivery dates for the new orders, check when the order is likely to get processed by the Constraint, check the current Lead Time and then commit the dates after calculating the Buffers

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Drum-Buffer-Rope

• It is possible that you may find managing three buffers as a cumbersome, complex mechanism and you may struggle with it

• Is there a simple way?

Simplified Drum-Buffer-Rope

SDBR

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• Generally, market is the real and ultimate Constraint

• Of course, from time to time, there could be some fluctuations in the demand and when the demand is at its peak, you may find that some resources are capacity constrained, though temporarily

• Identify such Capacity Constrained Resources (CCR)

• Typically the CCR is the internal constraint that you identified while implementing DBR

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• But, by and large, you may find that the market is the real constraint and you generally have more capacity, most of the time, than what the market is demanding

• If this is the case, you can move to SDBR• SDBR has only one buffer – Shipping Buffer• The Shipping Buffer is the only Buffer and it

encompasses the entire production time plus the required pad for uncertainty and variation

• There is no “Zone 2 (Yellow zone)” in SDBR – Just a “Green” zone and “Red” zone and they are not in exact proportion

• The Green zone is larger

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• You need to release the material Shipping Buffer time ahead of the delivery due date

• For example, if the due date of an order is say 25th March

• The Shipping Buffer time (i.e. the liberal estimate of time that you would need to complete the order) is 14 days

• Subtract 14 working days from 25th March to arrive at the material release date and

• Release the material on that date – not before, not after

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• As you go ahead, on regular basis, monitor the load on the Capacity Constrained Resource (CCR), as mentioned above

• Make sure that it does not exceed 90% of its capacity• From time to time, when you find that the load on

CCR has exceeded 90%, take steps to reduce the load• Apply overtime or additional shifts to eliminate the

blockages• In extreme cases, ask the sales people to back off

demand generation until the issue is resolved

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• Use small production batches as far as possible; but do not go overboard, otherwise due to their long setup times, a new CCR may emerge

• Refine the Quoted Lead Time based on the current load on the CCR so that the CCR doesn’t get overloaded

• Verify the CCR regularly• Any significant change in demand has a high

probability of shifting the location of the CCR

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• You need to frequently review the size of the Shipping Buffer

• Products with very different production routings may need different sizes of Shipping Buffers

• The Shipping Buffer depends on the excess capacity i.e. – More excess capacity, smaller the Shipping Buffer– Less excess capacity, larger Shipping Buffers

• Since excess capacity varies over time, it is necessary to check the adequacy of the Shipping Buffer regularly

Backup Slides

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Basic Rules of Manufacturing

• Improve flow• Prevent over-production• Abolish local efficiencies• Have a way to systematically identify

blockages and remove them (Process of On-going Improvement)

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Choosing the Buffer Size• There are two ways to determine the size of the Buffer– One is to do complex calculations– But the data may not be accurate

• The best and easiest way to determine the size of the Buffer is to take the existing lead-time and cut it into half

• Later, this size can be refined• One should start with a reasonable initial buffer size

and get on with it• Use the Buffer Management to increase or decrease

the size of the buffer so as to reflect changes in the operating environment

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Choosing the Buffer Size

• Determining the length of the time buffer is not easy; it is a non-trivial judgment call

• If we want to be very cautious and therefore choose a very long buffer, we can safely accommodate almost any disturbance

• But at what price?

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Choosing the Buffer Size• A very long buffer will increase our lead time

considerably – We will release materials much earlier than we can use

them– The average levels of work-in-process and finished goods

inventories will also increase– As a result, our need for cash will increase, our future

competitive position will deteriorate, and carrying costs will be higher

• If we choose very short buffers, our average response time will be very quick, but we must be prepared for a lot of expediting and quite unreliable deliveries

Learn More…

• Read Theory of Constraints (TOC) Application for Manufacturing: Learn the solution in detail

• Theory of Constraints – Do It Yourself Kit for Small & Medium size Enterprises for Manufacturing: Learn how to implement DBR / SDBR

• Theory of Constraints (TOC) Basic Concepts and Decision Making: Learn more about TOC

• Visit https://leanpub.com/u/rajeevathavale• For Training and consulting contact:

[email protected]

https://leanpub.com/u/rajeevathavale

https://leanpub.com/u/rajeevathavale

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Tocip – application for manufacturing