Presented by : Isha Agnihotri
Aurodyeing, Baddi
About Author : Eliyahu Moshe Goldratt (1947-2011)
He was an Iranian physicist, educator, author, scientist,
philosopher and business leader. He created and
developed the Theory of constraints for applications in
production, supply change and distribution and provided
an overall framework for helping organizations and
individuals to determine:
What to change – find and use the leverage point
What to change to – create simple, practical solutions
How to cause the change – build a secure and stable
improvement environment.
INDEX CONTENT
1 Brief Introduction
2 Key Concepts
3 What is the only GOAL?
4 Problem Areas
5 Case Study
6 The implementations done
7 Theory of Constraint concept.
8 Key learnings
BRIEF INTRODUCTION
Alex Rogo’s (plant manager) Bearington plant is
losing money.
He is given 3 months ultimatum to either make
plant make money or plant will be closed.
i
He implements a few concepts suggested by Jonah.
He, with his team consisting of Stacey, Lou, Bob
and Ralph improve the processes and culture at the
plant.
At the end the team achieve the organizational goal
and Alex gets promoted as Divisional Manager
KEY CONCEPTS
• All the money
• Rate at which system system has
invested in
generates money through
purchasing
sales
things it intends
to sell
Throughput Inventory
Operational
Bottleneck
Expense
• Any resource
• All the money system whose capacity
is equal to or
spends to convert
less than the
inventory to throughput
demand placed
upon it
What is the GOAL ???
“There is only one Goal, may be the company’s objective is different”
To make money!!
The action that moves us to make money is productive and the action
that takes away from making money is non-productive
How to ensure company is achieving the Goal ??
Using TOI measurement
Through put (T)
Operational Expense (O)
Inventory (I)
PROBLEM AREAS
THE INVENTORY IS HIGH
Every machine was used with 100% capacity which in turn increased Inventories due to
capacity mismatch between adjacent machines/resources
BOTTLENECK’S CAPACITY IS LOW
Bottlenecks decided throughput of the system as a whole.
DELAYS IN ORDER DELIVERY
BOTTLE NECK
WIP 0 4 6 0 0 THROUGHPUT
is 10
INVENTORY
Boy Scout Hike (What to change?)
WIP
o Each boy is an operation
o The product is “walk the trail” on time
o Each boy/operation is dependent on the one in front.
o A “sale” is when the last operation/boy walks the trail.
o Throughput is the rate at which the last person walks the trail.
o Operating expense is the energy output of each boy.
o Inventory (material inside the plant) is the distance b/w the first-last boy.
Fluctuations in operating speed is causing inventory to increase and causing
throughput to decrease. Attempting to reduce gaps is increasing operating expense.
Boy Scout Hike (What to change to?)
HERBIE (loaded)
Put Herbie in the lead of the troop
Result :
Inventory decreased
Operational Expense decreased
But sales lowers as through put is at low rate, which is not acceptable for goal.
Boy Scout Hike (How to cause change?)
HERBIE
Divided load Herbie is carrying in troop enables him to walk faster
Observations:
The top speed (maximum out put of machine) depends upon the constraint.
Low fluctuations in operating speed is makes inventory to decrease as fluctuations
are dependent upon the first operation (Herbie/constraint/bottleneck)
Result :
Inventory decreased
Operational Expense decreased (was in an optimum level through out the trail)
Through put increased
The Implementation
Identify the Bottleneck in UniCo process
HEAT TREAT (BOTTLE NECK 2)
NCX 10 (BOTTLE NECK 1)
Two Bottlenecks are found in the system. After improving the work
procedure at Heat Treat, later on it was observed that Heat Treat is NOT
actually a Bottleneck. Again TOC is done
The Implementation
Realigning Quality Control
Prioritization (Tagging)
Recall some of the Old Machines
Dedicated Personnel
Material Release System or Routing of material
Reduce the Batch Size
The Implementation
TOC (Theory of Constraints) concept
NCX 10 (bottleneck) is the major constraint in the system.
Identify the
Constraint
Stop utilizing non bottleneck machines to provide input
to bottleneck to their full capacity.
Repeat the Exploit the
process Constraint Activate non-bottlenecks to an optimum
level as per NCX 10 (bottleneck) capacity.
Allocated Zmegma parallel to NCX 10 to
decrease the inventory and increase
throughput on NCX 10
Subordinate
Elevate
and
performanc
Synchronize
e of the
to the
Constraint
Constraint
The throughput of any system is determined by the Bottleneck Constraint.
Hence to increase the throughput one must focus on identifying and improving this constraint.
The Implementation
Benefits after the implementations
• Customer Satisfaction
• Work in progress decreased
• Inventory decreased
• Lead time decreased
• Improved performance
• Operating Expense Decreased
• Sales increased with increased through put
• Plant began “Making Money”!
KEY LEARNINGS
Balance the flow with demand, not capacity.
The level of activity of the system is determined by constraints (Bottlenecks)
in the system
An hour lost at a bottleneck is an hour lost by the entire system.
An hour saved at a non-bottleneck is worthless.
Performance of an operation should be evaluated by its bottom.
All activities which moves system to its goal is only productive else are non-
productive tasks.
Efficiency of a system is determined as an whole not by individuals sections
efficiency.
Thank You
Queries are welcomed.
