Study Notes on Constraint Management

Operations Management: Processes and Supply Chains - Chapter 7: Constraint Management

Learning Goals

  • 7.1 Explain the theory of constraints.

  • 7.2 Identify and manage bottlenecks in service processes.

  • 7.3 Identify and manage bottlenecks in manufacturing processes.

  • 7.4 Apply the theory of constraints to product mix decisions.

  • 7.5 Describe how to manage constraints in line processes and balance assembly lines.

Definitions

  • Constraint: Any factor that limits the performance of a system and restricts its output.

  • Bottleneck: A capacity constraint resource (CCR) whose available capacity limits the organization’s ability to meet the product volume, product mix, or demand fluctuation required by the marketplace.

The Theory of Constraints (TOC)

Overview

  • The Theory of Constraints (TOC) is a systematic management approach that focuses on actively managing constraints that impede a firm’s progress toward maximizing profits and effectively using its resources.

Operational Measures Related to Financial Measures

  • Inventory (I): All the money invested in a system in purchasing things it intends to sell.

    • A decrease in I leads to an increase in net profit, ROI, and cash flow.

  • Throughput (T): The rate at which a system generates money through sales.

    • An increase in T leads to an increase in net profit, ROI, and cash flows.

  • Operating Expense (OE): All the money spent to turn inventory into throughput.

    • A decrease in OE leads to an increase in net profit, ROI, and cash flows.

  • Utilization (U): The degree to which equipment, space, or workforce is currently used; measured as a ratio of average output rate to maximum capacity, expressed as a percentage.

    • An increase in U at the bottleneck leads to an increase in net profit, ROI, and cash flows.

Key Principles of the TOC

Focus on Flow vs. Capacity

  • The focus should be on balancing flow, not capacity.

  • Maximizing the output and efficiency of every resource may not maximize the throughput of the entire system.

Implications of Bottlenecks

  • An hour lost at a bottleneck is an hour lost for the entire system.

  • An hour saved at a non-bottleneck resource is insignificant, as it does not improve overall system productivity.

Inventory Management

  • Inventory is needed only in front of bottlenecks to prevent them from idling and in front of assembly and shipping points to protect customer schedules.

  • Work should be released into the system only as frequently as dictated by the bottlenecks, as bottleneck flows should equal market demand.

Resource Utilization

  • Activating a non-bottleneck resource does not equate to utilizing a bottleneck resource and does not necessarily increase throughput or performance.

  • Every capital investment must be evaluated based on its global impact on throughput, inventory, and operating expense.

Steps in the Theory of Constraints

  1. Identify the System Bottleneck(s)

  2. Exploit the Bottleneck(s)

  3. Subordinate All Other Decisions to Step 2

  4. Elevate the Bottleneck(s)

  5. Do Not Let Inertia Set In

Managing Bottlenecks in Service Processes

  • Throughput Time: The total elapsed time from the start to finish of a job or customer being processed at one or more work centers.

Example 1: Keith’s Car Wash Process

  • Keith’s Car Wash offers Standard and Deluxe washes, with both processed through Steps A1 and A2, with variations in subsequent steps:

    • Standard Wash: Steps A3 and A4

    • Deluxe Wash: Steps A5, A6, and A7

    • Both finish at the drying station (A8).

Questions and Analysis for Keith’s Car Wash

  • (a) Bottleneck identification for Standard and Deluxe washes.

  • (b) Capacity calculations for Standard and Deluxe washes (e.g., Standard at 4 customers/hour, Deluxe at 3 customers/hour).

  • (c) Average capacity considering customer distribution (60% Standard, 40% Deluxe).

  • (d) Potential waiting lines for Standard and Deluxe washes depending on customer flow and bottleneck positions.

Managing Bottlenecks in Manufacturing Processes

Identifying Bottlenecks

  • Setup times and associated costs directly affect the size of the lots traveling through job or batch processes.

Example 2: Diablo Electronics Manufacturing

  • Products A, B, C, and D processed across five workstations V, W, X, Y, and Z.

  • The goal is to determine which workstation has the highest utilization (bottleneck).

  • Aggregate Workload Calculation: For each workstation, compute the total workload based on product demand and processing times, noting the total should not exceed 2,400 minutes (available production time).

  • Identifying Workstation X as the bottleneck due to the highest aggregate workload compared to all others.

Capacity Analysis

  • Identical Sandwich Lines Analysis: Two lines with two workers and three operations.

  • Toaster identified as a bottleneck at 40 seconds per sandwich.

  • Overall capacity for completed sandwiches calculated as rac{3600 ext{ seconds}}{37.5 ext{ seconds/sandwich}} = 96 ext{ sandwiches per hour}.

Drum-Buffer-Rope Systems

  • A planning and control system regulating the flow of work-in-process materials at the CCR (bottleneck) in production.

  • Drum: Represents the production rate; sets the beat of the entire plant linked to market demand.

  • Buffer: A time buffer planning early flows into the bottleneck to protect it against disruptions.

  • Rope: Ties material release to the rhythm set by the drum, focusing on controlling throughput across the entire operation.