Theory of Constrains Manufacturing Systems

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Developed by Thomas Sotiriadis


Theory of constraints (TOC) is an engineering management technique used to evaluate a manageable procedure, identifying the largest constraint (bottleneck) and strategizing to reduce task time and maximise profit. It assists in determining what to change, when to change it, and how to cause the change[1]. The theory was established by Dr. Eliyahu Goldratt through his 1984 bestselling novel The Goal. Since this time, TOC has continued to develop and evolve and is a primary management tool in the engineering industry. When applying TOC, evaluative tools are used to determine the constraint and further reduce and/or eliminate its effect on the procedure. These tools include:

  • The Five Focusing Steps
  • The Thinking Process
  • Throughput Accounting
  • Drum-Buffer-Rope

While it is a dominant engineering management and manufacturing tool, TOC is also widely used in throughput accounting, software engineering and other project, program, and portfolio management fields. Although the theory is limited by varying factors, time factors and human identification, TOC is the ideal engineering solution to increasing profit and reducing idle time in a manufacturing systems through its ability to elimination 'the weak link.'

Contents

History

'The Goal' Eliyahu Goldratt

Theory of Constraints is a method to determine a procedure in a sequence of tasks which has the greatest negative effect on the production line. The theory operates with the assumption that every process has at least one influencing constraint, of which must be improved for the process to become more economic. Time spent trying to maximise processes which are not considered the bottleneck will not provide any benefits to the system. Attempting to reduce the influencing factor the bottleneck has on the entire system, will further the 'goal.' The procedure of reducing the negative effect the bottleneck has on the system, is considered as repeating process, as one bottleneck is minimized the attention turns to the new largest hindering procedure.

The theory was first derived by Dr Eliyahu Goldratt through his 1984 bestselling novel, 'The Goal.' Dr Goldratt was a well-regarded educator in the construction industry, being sought-after by many large companies. In the early 2000's, Goldratt established Goldratt's Marketing Group to further enhance the TOC knowledge to those interested. The Marketing Group was established to further enhance the knowledge of businesses in product production, suppliers and distributors, project managers and retail workers, further develop the quality of decision-making, improving communication and stimulating new solutions.[2] Goldratt's Marketing Group still operates today offering workshops and events, as well as articles and programs to enhance individuals and organisations TOC knowledge and ability to apply the theory to different situations.


Bottleneck

In streamline manufacturing, the bottleneck is the procedure which inflicts the greatest limitation on production time and profit in the system. It is generally the station with the greatest amount of work in progress(WIP) at the work station after a controlled period of time[3]. Bottlenecks often results in slow production times, surplus of raw material and low employee morale.

Nearly every manufacturing system initially has a bottleneck and consequently, the system can only be as fast as its weakest link. It is critical to be able to determine the procedure in the production line which is the limiting task. Generally the station which has accumulated the largest amount of WIP can be considered the Bottleneck, however other engineering management techniques can be applied to determine the bottle neck.

Any work station which is not operating at 100% capacity is having a negative effect on the entire manufacturing system. This negative effect can have negative costly impacts, environmental impacts or even client and staff impacts if not identified and improved[4]. Often too much time is investing into reducing running costs of a production line as this is identified as having a negative impact on operation costs and production, however reducing costs consequently reduces cash flow through the system, not dealing with the bigger impact, the bottleneck.

Application

There are several practiced techniques applied to streamline manufacturing to reduce and or eliminate the constraining factor in the system. The methods applied to the systems all are designed to isolate the constraint, break it down into its components and find a suitable solution to reducing the negative impact the station has on the entire system. The thinking processes as well as the identification of the bottleneck is conducted in different manners. The four most common practiced techniques include; Five Focusing Steps, Thinking Process, Throughput Accounting and the Drum-Buffer-Effect.

Five Focusing Steps

Five Focusing Steps Cycle

The five focusing steps of TOC is an ideal approach to identifying the bottleneck and the correct procedure to reduce the impact keeping in mind the 'goal.' The five focusing steps are[5]:

  1. Identify the Constraint
  2. Exploit the Constraint
  3. Subordinate the Constraint
  4. Elevate the Constraint
  5. Repeat the Process
Identify the Constraint

The first step is to determine which process in the system is constraining the systems total throughput. This is the most important step as it will either further limit or increase the rate of manufacturing in the system. Indicators of the bottleneck in the system will have accumulated a large amount of WIP and will have a higher average cycle time. This process may also have the highest cost to manufacture in the system and that may be the bottleneck. Different individuals and organisations desire different outcomes from systems, whether it be time related or cost related. It is important that during this step, the 'goal' is kept in mind , which will ultimately help determine what is the most important limitation to reduce; whether it be production time or costs. However the individual or organisation determines the bottleneck, it is important to decipher which station is having the largest negative impact on the system as a whole.

Exploit the Constraint

Exploiting the constraint is to introduce a new method or production at the point of the bottleneck. This step is not designed to solve the entire problem the bottleneck inflicts on the system, but provide short term improvement in the system. Common rapid relief techniques include:

  • Inventory buffers
  • Quality check
  • Continuous operation
  • Schedule around bottleneck
  • Offload constraint work

It is important when implementing one or a number of these techniques, and or other solutions to short term improvement of the system, that this process is not going to negatively impact other procedures in the system.

Subordinate to the Constraint

This step focuses on techniques to mitigate impact from upstream or downstream processes which may further delay the operations of the bottleneck. Techniques include:

  • Drum-Buffer-Rope
  • Subordinate maintenance
  • Added sprint capacity
  • Operations pace

Implementing these procedures will reduce the strain put on the constraining procedure, allowing it to continue production freely without depending on other stations or having other stations depend upon it.

Elevate the Constraint

In this step, actions are taken to break the constraints by the implementation of larger changes to improve the bottleneck. These changes usually include a large investment of time and or money. Techniques used include:

Implementing one of a number of these techniques to the constraint is going to have a large positive impact in finding the most economical solution for the system and that individual procedure.

Repeat the Process

Once the initial four steps of the Five Focusing Steps have been executed, the bottleneck of focus should no longer be the hindering process of the system. The implementation of the Five Focusing Steps is not used for one off improvement but for continuous improvements to the process. If the bottleneck has been broken, the next step is to repeat the focusing steps for the new bottleneck. If the bottleneck has not been broken, a new approach needs to be taken, including verifying that the investigated constraint has correctly been identified as the bottleneck.

This procedure has the ability to, if used correctly and the right techniques are used along the way, reduce the manufacturing system down to its most efficient, cost effective form for the amount of time and money willing to be invested.

Thinking Process

The thinking process in TOC, are tools used to determine, and fix a problem in a system. In streamline manufacturing it is a fundamental approach to always be striving to improve processes, eliminate bottlenecks and reduce manufacturing time and costs. A common approach is to answer the following questions:[6]

  • What should I change?
  • What should It change to?
  • How to cause the change?

Asking these questions when faced with a problem in a production line, will offer a range of solutions simultaneously to improve the current situation. The thinking process allows a smooth transition through the layers of the process to be able to adapt a more suitable method to improve the manufacturing system. Although an effective approach to determining, reducing and eliminating the bottleneck, the framework for this approach is not as straight forward and easy to interpret as the Five Focusing Steps. This procedure allows more individual interpretation of the situation and allows the individual to apply techniques to mitigate and eliminate the bottleneck without necessarily considering the system as a whole. This method is a more informal approach to eliminating the bottleneck.

Throughput Accounting

Throughput accounting (TA) is a simple management accounting technique providing managers with information support to make profitable decisions for their system. It is an alternative method to traditional cost accounting, in which limiting factors in a system are identified and simple solutions are adapted to move towards reaching the businesses goal. The actions of throughput accounting maximize the net profit from a system in the shortest amount of time, with limited resources and limited expenditures.

Throughput accounting uses through methods in dealing with income and expenses in a system.[7]

Throughput (T) is the rate at which a system can produce a unit. For profit orientated systems, throughput is considered net sales (S) minus totally variable cost (TVC). Throughput is only accounted for the material which passes through the manufacturing system and is sold or used for profit. Items which may have been purchased and are in storage are not considered in this formula but are considered investments.

Investment (I) is the monetary value of the system. The value of inventory, buildings, machines and other assets are considered investments. This value is considered to be the total amount of value to the manufacturing system.

Operating expenses (OE) is the cost of the supply chain operating to produce the unit. For a system manufacturing a physical item, the operating expense is the investment cost minus the cost of raw materials but including the cost of maintenance, rent and taxes.

Individual and organisation managers operation manufacturing systems should answer the following questions when proposing change to the system:

  1. Increase throughput?
  2. Reduce inventory?
  3. Reduce operating expenses?

These questions should be followed by asking, 'how' to make the change. If the goal of the manufacturing system is to increase net profit(NP), the following equations can be important in the decision making process:

  1. NP = throughput - operating expenses = T-OE
  2. [Return on investment]](ROI) = NP/I
  3. TA Productivity = T/OE
  4. Investment turns (IT) = T/I

Drum-Buffer-Rope

Drum Buffer Rope Concept

The Drum-Buffer-Rope concept is applied to a manufacturing system to synchronize various work stations so they are no faster than the bottleneck (reference article). Like a band marches to the beat of the drum, so does the production line to the beat of the slowest station. Once the bottleneck is ready to move on, the adjacent stations, controlled by the speed of the bottleneck, may move onto the next unit. The rope theory was introduced with the intention to explain that once the rope stretches to its maximum, being the speed of the bottleneck to produce units, those stations attached cannot work any further.

This concept was first applied by Ford Motors Cor., Ltd[8] who used conveyor belts as transporters of material for their automobile construction. From the introduction of this concept, Mr. Taiichi Ohno of Toyota Motors Corporation introduced the concept Kanban[9]. Kanban is Japanese for 'visual signal.' Kanban was introduced after Toyota engineers observed a supermarkets technique of product ordering. Products were not ordered to demand, but when stock was low. Toyota used this to model their manufacturing systems whereby a workstation once it has completed its task, would demand the next task be bough to the station. Common Kanban techniques include the demand for something being interpreted through visual representation, colors. Colors are generally used to identify when a station is busy or when they are ready for a delivery of WIP.

There are four steps to ensuring a Kanban approach to streamline manufacturing is executed effectively[10]:

  1. Visualize work
  2. Limit work in progress
  3. Focus on flow
  4. continuous improvement

Although an effective method of limiting the influence of the bottleneck in a production system, the DBR concept does not go far towards eliminating the bottleneck and more towards maintaining the production rate of the system. As outlined in the Five Focusing Steps under the 'subordinate to the constraint' section, this process is used to improve the working conditions on other stations which are bottleneck effected, but not implement strategies to improve and reduce the bottleneck and achieve 'the goal.'

Constraints and Limitations

A key process in TOC is the identification of the limiting factor in a production system to ultimately improve the production of units. A major limitation in the theory is that of identifying the station which is in fact the limiting procedure][11] . There are three limiting factors, the identification of the bottleneck, variation in data and time which all can have negative influential impacts towards identifying and reducing and eliminating the bottleneck.

Identification

It is not uncommon that when applying TOC the wrong work station is being examined as the limiting station when, however this station may only be the bottleneck due to another constraining factor not being focused on. This limitation theory, may encourage the waste of resources and times on a station which may in fact not require optimizing.

Variation

Another limitation of the theory is the lack of consideration towards varying factors. Factors such as demand for a product are not directly examined when TOC is applied. If the market demand for a product is varying, the use of resources to improve the situation may be better used expanding production capacity.

Time

Time is an influential constraint when applying TOC. The theory does not consider the current time frame for the production system and the duration of the demand for the product. The theory limits itself to short-term effects on the system rather than forecasting for the future. Overcoming this constraint means examining the long-term effects of work done to improve the constraint. If findings in a short-term analysis seem to repeat they can be considered as long-term effects, therefore implementing changes may be appropriate.

References

  1. ↑ Vorne Industries Inc.,. (2016). What is the Theory of Constrains?. Retrieved from: http://www.leanproduction.com/theory-of-constraints.html. |The article, ‘Theory of Constraints,’ published by, Vorne Industries Incorporated, provides an in depth analysis of the theory proposed by Dr. Goldratt. The article describes in detail the application of the theory as well as the solution tools used. It also explains the significance of the theory in conjunction with management engineering and indeed manufacturing systems. It was beneficial to gain a real understanding of the topic and its applications. This article also be valid as it is up to date and complies with other articles of similar standard.
  2. ↑ Goldratt's Marketing Group,. (2011). Biography of Dr. Eliyahu M. Goldratt. Retrieved from: https://www.toc-goldratt.com/tocweekly/biography-of-dr-eliyahu-m-goldratt.%7CThe Biography of Dr. Eliyahu M. Goldratt, published by the Goldratt Marketing Group, provided a detailed description into the foundations of the Theory of Constrains as well as Dr. Goldratt’s book, ‘The Goal.’ ‘The Goal’ was Dr. Goldratt’s attempt to explain his theory and how it is applied to various management standards to achieve optimal cash flow in systems. The book was first published in 1984 and since has been revised 4 times, the most previous in 2014. This article was influential in being able to determine the history of the theory, and the grounds upon it is used.
  3. ↑ Investopedia., (2017). Bottleneck. Retrieved from: http://www.investopedia.com/terms/b/bottleneck.asp.%7CThe web article, ‘Bottleneck,’ published by Investopidia, explains the insignificance of a bottleneck in a system and the effects it may have on the system overall. This article is useful in outlining and introducing the concept of a bottleneck, as well as brief examples of encounters with bottlenecks. The article is recently up to date as of 2017 and its content is able to be verified by similar articles and the information they value.
  4. ↑ Imaoka, Z., (2008). Bottleneck (Constraint). Retrieved from: http://www.lean-manufacturing-japan.com/scm-terminology/bottleneck-constraint.%7CThe article published by Asprova Corporation in 2008, titled, ‘Bottleneck (Constraints),’ is an introduction to the topic of bottlenecks and constrains in systems. This article explains the significance of eliminating bottlenecks in systems and the beneficiaries. This article provides an In depth explanation into the significance of increasing the cash flow through systems and the hazards faced along the way. This article was very useful in explaining the significance of the Theory of Constrains and the negative impacts bottlenecks have on systems.
  5. ↑ Theory of Constrains Institute., (2017). Five Focusing Steps. Retrieved from: https://www.tocinstitute.org/five-focusing-steps.html.%7CThe Five Focusing Steps, published by The Theory of Constrains Institute, is an elaborate article explaining one of Dr. Goldratt’s theories to reduce and eliminate constrains in systems. This article dives into explaining necessary precautions to take on each level to ensure the constraint is properly eliminated. This article is recently published as information provided, matches information provided by other reliable sources. The article is very useful in explaining and understanding the five focusing steps and their significance, as well as methods of approach on each step.
  6. ↑ Dr. Youngman. K., (2010). A Guide to Implementing the Theory of Constraints. Retrieved from: http://www.dbrmfg.co.nz/Thinking%20Process.htm.%7CPublished in 2003, this article written by Dr. K. J. Youngman, is an in-depth approach to different methods of eliminating the bottleneck in systems. This article goes on to explain the five focusing steps, as well as the thinking process and throughput accounting. Each section is explained and further explained with real world examples and solutions. This article was useful in learning the approaches taken to eliminate the bottleneck in systems. It is a valid source of information as it provides a detailed list of sources as well as information which has been matched with other creditable sources.
  7. ↑ Goldratt UK., (2007). Back to Basics. Retrieved from: http://www.goldratt.co.uk/articles/newsletter/back_to_basics_1.html.%7CThe article, ‘Back to Basics,’ published by Goldratt UK, is a real world approach to the Theory of Constraints. The article elaborates on the significance of the companies ‘goal,’ which it believes in most cases is that relating to money. This goal theory can only be further enhanced by the increase of production in systems to generate more cash flow through systems. This article applies knowledge learnt in other credited articles, and shows how it is applied to manufacturing systems and the importance to improve manufacturing. Unlike other articles, this one’s main focus is that of ‘making money,’ and it outlines specific ways in which this can be achieved.
  8. ↑ Asprova Corporation., (2008). DBR (Drum Buffer Rope) Theory. Retrieved from: http://www.lean-manufacturing-japan.com/scm-terminology/dbr-drum-buffer-rope-theory.html/DBR.%7CAsprova Corporation’s 2008 article titled, ‘DBR (Drum-Buffer-Rope) theory, is a well-written article explaining the importance of the DBR theory concept. It also goes on to explain the use of the theory in managing bottlenecks. The article uses the concept of hikers only being able to hike as fast as the slowest person, which is a metaphor for the manufacturing system only being as valuable as the bottleneck. This articles information, although somewhat outdated, due to the last edition being in 2008, still provides valid information as well as examples to the theory. It also was useful in determining the DBR and its use in the theory of constrains and the five focusing steps.
  9. ↑ LeanKit Incorporated., (2017). What is Kanban?. Retrieved from: https://leankit.com/learn/kanban/what-is-kanban//.%7CThis web article edited and published in 2017 is an introduction to the Kanban concept in manufacturing. The article titled ‘A (Very) Short History of Kanban, sums up the article perfectly, as the idea of Kanban in manufacturing is a more recent engineering tool and although practiced today widely, does not have the same amount of recorded success as other engineering manufacturing methods. As this article is just an introduction, minimal facts are outlined and more the concept of the idea is portrayed to the reader. With this in mind, the article was useful in explaining the tool and its relevance to eliminating the bottleneck in manufacturing systems.
  10. ↑ Kanban Tool., (2017). Kanban Explained in Four Easy Steps. Retrieved from: http://kanbantool.com/kanban-presentation.%7CThis presentation uploaded by Kanban Tool and Shore Labs in 2009, uses an illustrated version to portray the Kanban concept to viewers. The pictures are clear and easy to determine what is happening, as well as the significance portrayed in each graphic. As well as images, the presentation also used information to explain Kanban in engineering manufacturing systems. This article was useful to gain visual representation to further endorse the Kanban theory.
  11. ↑ Markgraf. B., (2017). Limitations of the Theory of Constrains. Retrieved from: (http://yourbusiness.azcentral.com/limitations-theory-constraints-16352.html.%7CThis article published by B. Markgraf provides an alternative view of the Theory of Constrains. In his article, Markgraf outlines the weaknesses and limitations the Theory of Constrains possesses. His article explains in depth that there is in fact a number of variables which effect an engineering manufacturing system and that ultimately determine when an engineering bottleneck is a problem, or when it is in fact the thriving station and the bottleneck has relocated. Markgraf explains that it is not always possible to determine when a system will posses a limitation and therefore the Theory of Constrains is not as valid as other engineering techniques to improve production in a system. This article is very useful as It provides the reader with the alternate view of the theory, furthering their depth of knowledge.
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