Lecture of © Washington State University-2013 1 Introduction to TOC Topics DBR, Critical Chain,...

Lecture of

© Washington State University-20131

Introduction to TOC Topics

DBR, Critical Chain, Replenishment Overview

EM 530 Applications in Constraints Management

[email protected]://etm.wsu.edu/

James R. Holt, Ph.D., PEProfessor

Engineering Management

151

© Washington State University-2013 2

Angel eLearning Pages


Class Schedule


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Introduction to the Theory of Constraints

• Every system is a subset of a larger system.

• Within any complex system there is one constraint (or very few).

• Three main factors impact every system: InterdependenceStatistical Variation Behavior of individuals

• (Humans trying to deal with the first two factors)


Emphasis for this Course

• Physical Processes Process Flows

• Manufacturing, Paperwork, Service Processes Project Management Scheduling

• Single Project, Multi Project Distribution Systems

• Retail Model, Replenishment Supply Chains

• Cooperative and Non-Cooperative Members


Class Materials

• Texts: The Goal, Eli Goldratt Critical Chain, Eli Goldratt Project Management in the Fast Lane, Rob

Newbold Isn’t It Obvious? Eli Goldratt

• Software: Production Simulation,

Project Management Simulation, Lots of individual Games,

Excel based DBR model Scitor PS8.5


Individual Learning Experiences

• Simulations: Mostly on you own

• Games: Dice Game Job Shop Game Bead Experiment Project Management Games Supply Chain Game

• Research Searching known areas Searching publications


Process View of Systems

Input Process Output Input Process OutputInput Process Output

Larger Process

Input Process Output


System Complexity

• Division of Labor breaks down the linkages of complex systems into manageable chunks.

• Which is harder to manage? System A or B?

System A System B


Interdependence

100

The excess capacity at some links is of little value since there is usually some other factor that prevents links from functioning at maximum capacity


Operational Efficiency

• Work flows from left to right through processes with capacity shown.

Process A B C D E

RM FG

CapabilityParts 7 9 5 8 6per Day

Excellent Efficiency--Near 100%Chronic Complainer

Too Much Overtime

MarketRequest

11


Behaviors

• Workers will find a way!

Process A B C D E

RM FG


MarketRequest

11

Both found ways to look busy and appear to have a capacity of 5 parts/day.

5 5


Behaviors

• Workers will find a way!

Process A B C D E

RM FG


MarketRequest

11

Process A slowed to reduce building WIP

5 5

Process B doesn’t have a choice


Then Variability Sets In

• Processing times are just AVERAGE Estimates

Process A B C D E

FG

Reality 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2

RM


What does an Average of 50% mean?

Process A B C D E

FG

Reality 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2Prob: 0.5 0.5 0.5 0.5 0.5

• Half the time there are 5 or more per day at each process--Half the time less

RM

Two at a time: 0.25 0.25

Over all: 3.125% Chance of 5 per day


The TOC Approach to Solving Physical Problems

• The Five Focusing Steps Step 1. Find the Constraint Step 2. Decide How to Exploit the Constraint Step 3. Subordinate all others to the

Constraint Step 4. Elevate the Constraint Step 5. Warning!!! If the Constraint moves,

start over at Step 1.


1. Identify the Constraint

Process A B C D E

FG

• The Constraint is the “Drum” for total production (Identify can also mean ‘Select’)

RM

Reduced CapabilityParts 5 5 5 5 5per Day


2. Exploit the Constraint

Process A B C D E

FGRM

Reduced CapabilityParts 5 5 5 5 5per Day

Make sure there is work available for the constraint just-in-case (Buffer)


3. Subordinate All Else

Process A B C D E

FGRM

Real CapabilityParts 7 9 5 8 6per Day

Each process should operate at maximum capacity (Road Runner Work Ethic)


Prevent Over Production

Process A B C D E

FGRM


Control release of material to the process at the rate the constraint demands (Rope). The Art of Subordination.


Protect Yourself to be Predictable

Process A B C D E

FGRM


Protect from Variability in Receiving Protect from Variability in

Constraint


Step 4. Elevate the Constraint

Process A B C D E

FGRM


When more capacity is needed than the constraint can produce, often it is necessary to increase the capacity of the constraint.

10


Step 5. Avoid Inertia

Process A B C D E

FGRM


When the constraint moves, change your controls.


A better option,

Process A B C D E

FGRM


To avoid the difficulty of constantly moving the constraint and changing culture, it is often better to elevate the whole chain rather than just the constraint. (McDonalds)


Simple Test

7 6

8 3 9

RM 1

RM 2 FG

Demand50

What is the constraint? Where are the buffers? The Rope?


Simple Diversion

20

40

5

RM

15 A

15 B

15 C

FG Demand

10

18



Tough Complex

20

10

12

RM1

RM2

RM3

RM4

RM5

6 A $$

15 B$

FG Demand

1012

14

8

9 9

10



Simple Complex

5RM

FG Demand

5

5

5

5

5

5

3

5

5

5

5

5

5

5



Projects as Processes

• Projects Are: Unique Dependent on Precedence Activities Not Well Known Highly Variable Share Resources Concurrent with Other Projects Valued by Scope, Schedule and Cost


Project Problems

• Projects Are: Usually Late Have Too Many Changes Often Over Budget Lots of Rework Many Priority Battles Resources Not Available When Needed Jeopardize Scope for Cost or Schedule


Projects are Balancing Acts

Quality andScope

Timing andSchedule

BudgetedCosts


Then things Combine

Precedence Structure

Statistical Variation

HumanBehavior

Quality andScope

Timing andSchedule

BudgetedCosts


And Reality Sets In

Quality andScope

Timing andSchedule

BudgetedCosts

Precedence

Structure

Statistical Variation Human

Behavior

Bumpy Road of Reality


The Project Dilemma

• There is Always a Trade-Off

Meet Original Commitments

Meet Commitment

in Danger

Compensate for Early Mis-

Estimates

Not Jeopardize

Other Original Commitments

Not Compensate for Early Mis-

estimates


Resolving Project Problem Options

Meet Original Commitments

Meet Commitment in

Danger

Compensate for Early Mis-Estimates

Not Jeopardize Other Original Commitments

Not Compensate for Early Mis-

estimates

Add more time&money and decrease scope

Use our Safety Buffer Correctly


Consider the Aspects of Projects

Good Statistics

Central Limit Theorem(add enough things together and the total looks normal)


Typical Activity Duration

Mean

Standard Deviation

Normal Duration Time

Mean50% Probable

85% Probable

Project Task Duration Time


So, what is the Behavior?

•Engineering Pessimism:Estimate a safe value (85%)

Assigned Date

Time-->

•Parkinson's Law: “WorkExpands to full the time available” (Just keep tweaking! More is better!)

•Engineering Optimism:I’m good, I can beat 50%.

Level of Effort

•Student Syndrome: “Why start now? It isn’t due until Friday?” (There is more urgent work/party!) •Empirical evidence shows

most tasks complete on or after the due date


Engineering Perpetual Motion (overtime)

Assigned Date

Time-->

Level of Effort

NormalWork Load 1X

Actual Work Load 2X


The result is Bad Multi- Tasking

A1

A2A3

B1

B2B3

Ten Days Each Task

Project Manager A

Project Manager B


Politically Correct Schedule

A1 A2 A3

B1 B2 B3

10 20 30 40

30 Days Flow

50


More Like Actual Schedule

A1 A2 A3

B1 B2 B3

10 20 30 40

40 Days Flow

50


Elements of the Project Management Solution

• Prioritize

• Don’t Schedule Conflicts

• Avoid Bad Multi-Tasking

• Don’t Release Too Early/Too Late

• Buffer Critical Chain Buffers: Project / Feeding / Resources

• Schedule 50% Estimate Completion

• Communicate “Time Remaining”

• Negotiate Capability Not Dates

• No Milestones


TOC Flow Time

A1 A2 A3

B1 B2 B3

10 20 30 40

20 Days Flow

50


Don’t Schedule Conflict

Before

After TOC Leveling


Buffer the Project and NOT Individual Activities

Before with 85% Estimates

TOC Aggregated Buffer of Activities

Task Task Task Task Buffer

Task Buffer

Actual 50% Estimates with Individual Buffers


Protect the Critical Chain

Project Buffer

Feeding Buffer


Buffer Resources on the Critical Chain

Project Buffer

Feeding Buffer

Lt. Green be readyBuffer

Blue be ready

Green be ready

Cyan Resource be ready


Distribution System

• Retail Systems include time delay between demand cycles

• Production occurs to forecast

• Delivery Systems focus on efficiency--Transfer in large batches (long time between shipments)

• Errors in forecast are magnified ten fold

• Too much of the wrong inventory, too little of the right


Forecast Accuracy

Now ---> Future

Accuracy of Forecast

100%

Point where the world changes

Effective Response Zone

Death Response Zone


Pushing Inventory to the Retail Store

Manufacturing

Warehouse

DistributionStores

BEFORE


Locate Inventory Where it Provides Best Protection

After-Fast Production-Fast DeliveryAggregated Variability

Manufacturing

Warehouse

DistributionStores


Supply Chain Processes

• Supply Chain is made up of many independent links (Businesses or Business Units)

• Individual links do not provide a completed product

• There is significant interface problems Timing, Quality, Price, Value

• Links are in competition with each other / Leverage each other


Typical Supply Chain

Raw Materials

Refine /Prepare

Produce Transport

Distribute Retail Customer


Long and Short Duration Supply Chains

DairyCows

Creamery Deliver Retail Customer

Farmer Cannery Wholesale Retail Customer


Complex Combinations

Brakes

Tires

Bumpers

Upholstery

Engine

Transmission

Manuf.Car

Car Lot

Car Lot

Car Lot


Dedicated Chains

Mine SmelterRolling

MillProduct Steel

Sales

IndependentBusiness Unit



Single Firm - Totally Owned Industry - Sole Source

Transfer Prices Fixed by Policy


Competitive Chains

Oil Well

RefineryChemical

PlantClothMill

DressFactory

Customer

ClothMill

ClothMill

Oil Well

RefineryChemical

PlantDress

FactoryCustomer

Oil Well

RefineryChemical

PlantDress

FactoryCustomer

Transfer Prices at Market Prices


DBR Approach to Supply Chains

Raw Materials

ConstraintMachine Warehouse

Constraint Buffer Protects Replenishment

Shipping Buffer Protects Short Lead Demand

Low inventory system is very responsive to customer needs.

Low inventory system is product change.


In Non-Cooperative Worlds

Raw Material

ProduceConstraint

Transport Distribute Retail Customer

Constraint ClientSupply

Watch Diligently

Watch Diligently

Just-in-Time Production Using DBR


Reference Supply Chains

Snow River Dam Generator Powerlines

Electricity Customer

WaterWell

WaterTreatment

DistributionWater Tower

LocalLines

WaterCustomer


In A Cooperative World

Raw Material

ProduceConstraint

Transport Distribute Retail Customer

In the best world, individual business units cooperate and receive payment only when final customer pays.Inventory is greatly reduced. Quick delivery and response to change is possible.

Individual Links Must Share the Profits and Risks


Homework

• Read THE GOAL as fast as possible.

• Play the Dice Game as outlined in the Self- Study Session1a of this class. Report on your findings by email to [email protected]

• You will receive an email grading in response.

• The overall class Homework Status is linked at the top of the schedule and under the Angel <Lessons> Tab.

Keep Thinking! Dr Holt

Lecture of © Washington State University-2013 1 Introduction to TOC Topics DBR, Critical Chain,...

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Transcript of Lecture of © Washington State University-2013 1 Introduction to TOC Topics DBR, Critical Chain,...