Theory of Constraints Training
WHAT IS IT AND WHAT IS IT FOR?
A) THEORY OF CONSTRAINTS – Based on the fact that all businesses or processes operate with weaknesses or “constraints” which hinder the progress or success of the operation. If we learn to identify and strengthen the constraint, we strengthen the entire operation.
B) HOW DO WE PUT THE THEORY INTO PRACTICE?
2. EXPLOIT THE CONSTRAINT (define cause(s) and cure(s))- Put all effort toward maximizing the area that is causing the problem. By improving the “weak link,” the chain also improves.
3. SUBORDINATE TO THE CONSTRAINT (involve\train others) – Plant-wide activity is targeted at the improvement of the constraint area.
4. ELEVATE THE SYSTEM’S CONSTRAINT (document improvement) – Improve the constraint capacity to a higher performance level.
5. CREATE INERTIA FOR CHANGE (celebrate success) – Once a constraint has been improved, go and identify your new challenge for continuous improvement.
1. It’s not our fault!
2. Our problems are different; it won’t work.
3. Yes, but… (bad things that will happen).
4. We won’t be allowed to… (policy issues).
5. We won’t get the support.
These resistance layers must be peeled away by the following:
1. Locate objective evidence of the problem.
2. Implement programs and activities that solve today’s constraints.
3. Use scoreboards that continually document our success.
4. Question the policies that prohibit or stagnate improvement.
5. Actively participate in the improvement process.
D. WHAT SHOULD WE EXPECT – RESULTS!
Three steps to creating improvement:
1. Managerial know-how : Know what to change
2. Logistical know-how: Know what to change to
3. Psychological know-how : Know how to cause change
E. OUR PROFIT CONSTRAINTS
THE PARADIGM SHIFT
A) Paradigm is defined as “a pattern or a model”. For us, our paradigms are our perception of correctness. In our struggle for identifying and elevating constraints, we will have to shift or adjust our concept of the proper methods. This paradigm shift atmosphere creates the psychology to cause change.
B) WHICH IS MORE IMPORTANT?
1. Manager’s Controlling Cost – The realm where every department struggles to improve their departmental efficiencies.
2. Manger’s Protecting Through-put – The realm where “whole plant issues” are the focus to improve flow. In other words, do we want to control cost or deliver on time? There is no good answer. This basic conflict causes most our dilemma. But, to subordinate all decisions to fixing our weakest links in the plant, the entire plant through-put improves, while lowering our greatest cost. Therefore, the conflict no longer exists.
C) COST CONCEPT VS. THROUGH-PUT CONCEPTS OF OUR PROFIT CONSTRAINTS:
1. FINISHING DIRECT PRODUCTION LABOR:
Cost Concept – We’re working too much overtime, so we need more people working.
Through-put Concept – a)Improve the bottlenecks that cause inventory and overtime. b)Work on the right parts. c)Reduce handling and elevate operational rates.
2.DIE CAST DIRECT PRODUCTION LABOR:
Cost Concept – Automate for maximum efficiency. Keep the operator running, no matter what.
Through-put Concept – a)Don’t run inventory. b)Reduce set-up time and improve operator up-time. c)Improve operational cycle times by fixing problems.
3.DIE CAST INDIRECT LABOR:
Cost Concept – The more people we have helping, the better we will be in Die Cast.
Through-put Concept – a)Reduce indirect by reducing set-up time. b)Redirect duties to absorb duties.
Cost Concept – a)Keep help available just in case. b)When manufacturing works, everyone works.
Through-put Concept – a)Only work overtime when manufacturing is actually down. b)Redirect duties to absorb labor.
Cost Concept – a)Cover with overtime if someone’s missing. b)Need someone 3 shifts to do set-ups, move parts.
Through-put Concept – a)Transfer duties to not cover for missing people. b)Schedule and shorten set-up times to staffed shifts.
Remember, the goal of every business is to make money. Living in the cost world with local or departmental optimization actually raises the cost.
Living in the through-put world, all decisions should target either: a)increasing sales, b)reducing cost or inventory or, c)improving through-put constraints.
IT’S GOOD TO BE A “HERBIE”
NOTE: Please be sure you’ve watched “The Goal.”
A) WHAT’S IT MEAN TO BE A “HERBIE”?
1. In the film “The Goal,” Herbie was the overweight kid (the constraint,) who was carrying too much weight (the problem causing the constraint,) and slowing down the entire hike (the process…, any process).
2. Alex Rogo had the same problem at work as he had during the hike – a major problem causing a constraint, which slowed down the entire process. (Everyone losing.)
3. By identifying the core problem, subordinating all decisions toward it’s solution, elevating it’s performance, thus improving the entire process, everyone won! (In which example.)
4. Some questions to consider:
a. Did Herbie know that he was the constraint at the start of the hike? Why?
b. Was there trial and error learning what the hiking constraint was? Why?
c. How was the hiking constraint solved?
d. How was the plant constraint solved?
e. How was Alex’s marriage constraint solved?
f. How are Alex’s 3 problems related?
g. How are our problems related?
B) WHY IS IT GOOD TO BE A “HERBIE”?
1. By identifying our herbies, we find our greatest opportunities to win.
2. The success of the process is always significantly tied to Herbie.
3. Elevating Herbie always elevates those any way tied to Herbie.
4. Herbie feels better when he wins.
C) WHY DO WE THINK IT’S BAD TO BE A “HERBIE”?
1. We are way too defensive.
2. Identifying constraints implies action (we gotta do something).
3. We, too, suffer from the resistance layers.
4. We are too deeply entrenched in the cost world (local optima).
D) SOME HISTORICAL T.O.C. FACTS:
1. By subordinating efforts to our 19XX profit constraints, profit has improved in 3 months.
2. Finishing direct labor has improved 40% in 3 months.
3. Every area that took specific action has seen measurable improvement.
USING CONSTRAINTS TO MANAGE
A) FOCUS ON THROUGH-PUT
1. In “The Goal,” every member of the hiking team doing his best (local optima) brought no better results.
2. It was only when the process constraint (Herbie) was identified and elevated did the process improve. (Global optima) and everyone won.
3. Good local or individual performance, then, cannot be as key a factor as focusing on constraint management.
B) WHAT IS THE FOCUSING PROCESS POWERFUL ENOUGH TO GUARANTEE RESULTS?
1. IDENTIFY THE SYSTEM CONSTRAINT: no ifs, ands, or buts; find the weakness link in your (or any) process. Nothing else will do.
2. EXPLOIT THE SYSTEM CONSTRAINT: squeeze the maximum from the weakness link in the chain. Strengthening a current resource is always more cost effective than adding resource.
3. SUBORDINATE EVERYTHING TO THE ABOVE DECISION: This is where the paradigm shift occurs between “local optima” and “global optima”. The local world says “maximize every resource,” the global world says “maximize the constraint” and subordinate everything else.
4. ELEVATE THE SYSTEM CONSTRAINT:
a. Off load to non-constraint areas.
b. Change the policies or control procedures.
c. Add more capacity or equipment.
d. Subcontract in the constraint area.
Remember: Elevate the constraint; improve the bottom line.
5. CREATE INERTIA TO CHANGE:
Finding and breaking constraints can be easily defined as “continuous improvement.” Removing one Herbie creates another (yet much smaller). Pareto analysis says work on your next biggest. That’s why swapping herbies is inevitable.
These continuous improvement philosophies must be practiced by all T.D.C. Employees to bring about change.
THE ART OF MANAGING THE CONSTRAINT
TRAINING SESSION 5
In lessons 1 through 4, we’ve learned that all processes have a series of steps or links that create the process. We’ve also learned that every process (no exception) has weak links (Herbies in “The Goal,” constraints in our processes) that become the key controlling factor in the success of the process. The power of these constraints to hinder progress is so very often ignored, or possibly even defended, due to not understanding their impact.
A)WHY IS IT DIFFICULT TO MANAGE PRODUCTION? WHAT WOULD THE CURES COST?
1. Customers changing their minds
2. Absenteeism and supply shortages
3. Lack of training of employees
4. Unreliable processes; machines down
5. Poor quality standards/ measurements
6. Prohibitive policies on the workforce
B)SO BY ELIMINATING ALL THESE PROBLEMS FROM OUR DAILY PRODUCTION ENVIRONMENT, MANAGING PRODUCTION SHOULD BE A PIECE OF CAKE…, BUT IS IT?
1. Customer orders never change
2. Employees never miss work
3. All employees are properly trained
4. Machines stay up; processes continue
5. Good quality standards, good measurements
6. Write any policies you deem needed
7. Other remedies are in place
C)UNFORTUNATELY, WE FIND THAT EVEN IN A “PARADISE PLANT” WHERE ALL OUR PRODUCTION DEMONS HAVE BEEN ELIMINATED, WE STILL EXPERIENCE ORIGINAL PLANS WITH LIMITED LIFE (WHAT DO WE RUN?, FOR HOW LONG?), CUSTOMER ORDERS STILL DON’T SHIP ON TIME, AND OUR PRIORITIES CHANGE CONTINUOUSLY. WHY IS THIS?
The efficiency syndrome: (local optima)
* If a worker doesn’t have something to do, we’ll find something to keep him busy.
* Managers protect their “high efficiency numbers” by working on the wrong thing.
* Workers must create “something for themselves to do,” so they slow down.
* Enlarge the “batch size” to save the set-up cost per unit, which in turn, automatically increases the lead time, and inventory levels.
D)THESE PROBLEMS WHICH ARISE FROM MANAGING OUR “LOCAL EFFICIENCIES” ARE ELIMINATED BY MANAGING OUR CONSTRAINTS. ALL THE PROBLEMS WE ORIGINALLY LISTED ONLY ADD FUEL TO THE FIRE.
WE HAVE MET THE ENEMY. IT IS US.
IDENTIFY THE PROBLEM, IDENTIFY THE CURE
A)SO WHAT EXACTLY IS THE PROBLEM THAT KEEPS CAUSING SO MANY COURSE CORRECTIONS, EXPEDITES, MISSED DELIVERIES AND CONFLICT?
* Managers try to protect costs by concentrating on maximizing local efficiencies (limit hours and resources).
* Managers try to protect through-put by working on what’s needed to deliver on time (increasing hours and resources).
B) SINCE WE CAN’T LIVE IN THE COST WORLD BY CONTROLLING ALL COSTS, MAXIMIZING EFFICIENCIES AND REDUCING COST PER UNIT, WHILE AT THE SAME TIME LIVE IN THE THROUGH-PUT WORLD BY MAXIMIZING SALES AND ALLOCATING ALL RESOURCES TO THE ON-TIME DELIVERY OF THE PRODUCT (ONE SAYS LIMIT RESOURCES AND THE OTHER SAYS INCREASE RESOURCES), WE MAY HAVE FOUND THE ROOT CAUSE OF OUR MAYHEM: THE CONFLICT BETWEEN COST WORLD THINKING AND THROUGH-PUT WORLD THINKING.
C) SO WHAT EXACTLY IS THE CURE TO THE CONFLICT WE’VE IDENTIFIED THAT CAUSES SO MANY MANAGERS TO STRUGGLE WITH MANUFACTURING?
Managers must eliminate their cost world only thinking:
* Do not run larger batch sizes per set-up because it only increases inventory, process lead time and increases costs.
* Identify and improve the “weakest links,” instead of “all links.”
* Remember that our focus is to :
1. Increase sales
2. Assure on-time delivery
3. Reduce the cost related to constraints
4. Reduce inventory
(These are all “Through-put World” issues.)
* Teach your people the T.O.C. concepts so that they understand the process of “improving the weakest link.”
D) SOME AREAS TO START ON NOW. (WE WANT RESULTS.)
1. Seven areas of waste: (Where can you look)
a. Overproduction – Any unneeded inventory
b. Wasting time – Set-ups, parts sitting idle
c. Conveyance – Moving parts
d. Processing Time – The actual operation rate
e. Motion – Activities not related to processing (walking, talking)
f. Corrections- rework, sorting, re-typing, etc.
g. Waste of person – People realize when they / their valuable time are/ is waste. (Low be the man whose life is a waste.)
2. Work Area Organization Steps: (5 – S’s)
a. Sort – Straighten up the area.
b. Set In Order – Put everything in its place.
c. Shine – Clean up and keep it clean.
d. Standardize – Write standard work instructions.
e. Sustain – Follow standard work instructions.
3. 5 Whys: Ask why 5 times for root cause of problems in the process. (Identify)
4. Live by TAKT time – Working to the metronome beat. (Process Rate) Better known as THE HOLY GRAIL.
5. Standard Work Check List
a. Write work instructions.
b. Follow work instructions (Chicago Bulls).
c. Review the process periodically.
d. Remove the smallest variance found.
6. Exploit/ Elevate
a. Quick imperfect changes better than long, perfect ones.
b. No action/ No success
c. Human improvements the best: The human is a paid for resource, ready and anxious to change. Equipment costs more money and is usually unchangeable.
CHANGE THE MIND-SET; CHANGE THE METHOD
A) So, our people are trained, they’ve seen “The Goal,” they recognize that it’s good to be a Herbie, and they are elevating our constraints by 40%. Right?
(Check one) Right______ Wrong______
B) Why? (If right, list the focusing steps you’ve used to identify, exploit, subordinate and elevate their constraints; if wrong, list the excuses and resistance layers you’re still trying to overcome.)
C) If you’ve answered the first question as right, you’ve created the inertia and empowerment to fuel “continuous improvement” in your employees; if wrong, you’ve not changed the mind-set that hinders progress.
D) What is “rationalizing”: To develop self satisfying, but incorrect reasons for one’s behavior. (A distinctly human trait or mind-set.)
E) Some good examples of “rationalizing” as a hinderance to progress.
* Changing the standard instead of the behavior. (We’re not making quality parts, because the spec’s too tight.) (Attendance)
* Not starting an improvement project, because you and your people are too busy. (You’re busy dealing with the constraints you’re not solving.)
* Justifying bad behavior, for one good reason (instead of fixing the reason).
F) “Rationalizing” is just another way to describe the resistance layers to progress. These old methods, old attitudes, old mind-sets, old philosophies must be culturally questioned and removed for new methods to flourish.
G) Logical trees as a cure for “rationalizing.” **Practice writing down your problems or objectives, then eliminating the insupportable branches:
H) By expressing our most illogical fears, as well as our most logical reasoning, the curse of the old mind-sets are broken, and new and improved methods can emerge.
I) So, for how long will your people stay in the old mind-set with the same old methods and the 40% waste?
RESOURCE MANAGEMENT USING D.B.R.
A) What is DRUM, BUFFER, ROPE? (D.B.R)
DRUM, BUFFER, ROPE is a common sense view of managing constraint resources. Since we know all processes have a constraint, our new jobs under T.O.C. are identifying and exploiting that constraint (to use the constraint to your advantage).
B) In any process, the rate at which the constraint operates (it’s capacity) is said to be the drum beat, tempo, or speed of the process. Thus, the constraint capacity shall be called the drum.
C) Since exploiting the constraint is our new job, then assuring that the constraint is operating continuously is our #1 objective (that’s what subordination means). Furnishing enough work, to assure the constraint stays running, is called the buffer (the work waiting to go through the constraint).
D) The rope is the amount of work you must keep in the buffer to assure that
* the constraint resource always has enough work to do and
* the constraint resource never has work beyond its true capacity. One shuts the constraint (and the process) down, the other merely builds inventory in front of the constraint.
E) Thus, it can be said that the entire process can be scheduled by tying the drum (process constraint) to its buffer (que of work feeding the constraint) with a rope (the amount of work in the buffer).
F) The purpose of D.B.R should now be emerging as obvious to all managers:
1) Identifying the drum (constraint) is critical to T.O.C. (Exploiting the drum speeds up the process and determines process capacity.)
2) Buffers tell you two things:
* when it is time to exploit the constraint (too much material in the buffer) and
* when it is time to feed the constraint (not enough material in the buffer.)
3) The rope is the pre-determined amount of material in the buffer, which ties activity to the drum (too much material in buffer… stop feeding buffer, exploit constraint; not enough material in the buffer, feed buffer).
G) Constraint management works because the constraint is the primary focus. Faster resources before and after the constraint are more versatile to start-up and shut down, merely because they’re faster. Thus, using D.B.R to manage resources assures you’re running the right thing at the right time.
T.O.C. CASE HISTORIES
T.O.C. Case History #1
Shipping/Receiving – David Floyd
Identify – The Shipping Department had computer equipment getting filthy. The phone was virtually impossible to carry on conversations due to noise levels. Paperwork was getting dirty and blowing around. It seemed a fairly unprofessional area.
Exploit – Had to get top management to understand the problem. Meetings were called involving President and Vice Presidential team members to define problem. Options were discussed as to how to enclose an area without creating another constraint.
Subordinate – Construction costs to build an office were reviewed between purchasing and maintenance. A size was agreed upon and office layout determined. A “minimal cost” location was agreed upon.
Elevate – In June XX Presidential approval was given to build an office at a minimal cost, which resolved all the previously identified constraints. Completion is scheduled for end of July.
T.O.C. Case History #2
Die Cast – James Lincoln
Identify – #5 Die Casting machine was running RS parts poorly, creating excessive scrap.
Exploit – Options for resolving the issue were discussed at the S.T.A.R.T. team. Options included:
a) buy new machine for #5 – $240,000.00
b) buy used machine for #5 – 120,000.00
c) buy new shot end w/servo – 70,000.00
d) swap #14 and #5 machines – 5,000.00
(d) was chosen for the reason that exploit means make the most of current resources.
Subordinate – Maintenance negotiated a cheaper price with movers. Production scheduling created a one week window where machines could be shut down, eliminating the need for overtime. Machines were both moved in 7 hours due to planning.
Elevate – The machines were swapped for a cost of $2,800.00 and the shot end on #14 is making a better RS part.
T.O.C. Case History #3
Maintenance – Jimmy Choate
Identify – Had too much Maintenance labor in XX. Exceeded budget by $33,000.00
Exploit – (Maximize current resource) Had a man leaving the department. Decided not to replace the man (17% of work force). Knew the department had to absorb the position, not work over to cover.
Subordinate – (Everyone works to a common goal) Met with remaining department members to discuss the objectives to improve labor. Explained the decision and asked for input. Swapped some hours around and wrote new rules for staffing and coverage.
Elevate – Department is $11,500.00 under budget through May of XX and department is project current.
Create Inertia for Change – Have departmental employees mark labor budget so that success feels like theirs.
T.O.C. Case History #4
Scrap Causes – Jerry Brown
Identify – Small biscuits were identified as a primary cause of scrap at T.D.C., by documenting and analyzing scrap data. Thousands of shots were being scrapped.
Exploit – The data was further reviewed with primary operators and jobs causing short biscuits identified. A plan of “short biscuit reduction” was initiated.
Subordinate – A meeting was conducted for two consecutive months with the “short biscuit Herbies” and their foremen to identify causes and cures for the high scrap. Both machines and dies were modified to reduce short biscuits. Accountability was stressed with Herbies.
Elevate – By continuing to monitor and review results with the Die Cast Department, short biscuits fell from the significant cause of scrap, to the insignificant few. In house scrap has stayed below our goal of 5% as well.
T.O.C. Case History #5
A Constraint Resource – Nan Herring
Identify – As Production Scheduler, Nan had identified that the up-time or machine utilization on the HH 7″ body machine was insufficient to supply the customer’s needs. Every month we slipped another couple of thousand parts behind.
Exploit – We studied the actual machine utilization for May and discovered the machine was running 67% of an available 24 hours per day and needed improvement.
Subordinate – A meeting was held with the individual department supervisors and a list of action plans devised to maximize the resource through all aspects of the Die Cast operation. All were in agreement.
Elevate – The action plans were implemented on June 1 and utilized throughout June. The constraint resource was elevated to running 87% of an available 24 hours per day, or a 30% improvement. At the end of June customer orders were run and current through July 14.