Synchronous Manufacturing Theory of constraints

Basic Ideas
THE GOAL by Goldratt Goal of the organization Role of constraints What to produce and how much Statistical fluctuations, Random events and dependent events Principles of SM Drum buffer rope

Goal
The goal of every business organization is to make money, both now and in the future. Throughput: This is the quantity of money that the organization generates through sales in a given period of time. Inventory: This is the quantity of money invested in materials that the organization intends to sell. Operating expense: This is the quantity of money spent in converting inventory to throughput.

Role of constraints
A constraint is any element that prevents the system from attaining its goal. Marketing constraints: The limit to which the products can be sold Production (capacity) constraints: This limits the production quantities Material constraints: The limit to which material is available for production Logistical: Time taken to carry out activities Managerial: Policies of the organization Behavioral constraints: Operating decision making rules

Two types of resources

Bottlenecks: Any resource whose demand on it is more than its capacity Capacity constrained Resource (CCR): A resource which can become a bottleneck when not properly scheduled.

Exercise
A company makes a single product whose weekly demand is 100. Identify the constraint when The company works 8 hour shifts (5 days) and takes 20 minutes to make the product The company takes 30 minutes to make each product The supplier can give raw material at the rate of 15/day The supplier can give 25 units per day but the organization takes two days to place the order?

Solution
The production capacity is 3 x 5 x 8 = 120. The constraint is the demand and hence marketing is the constraint. The company should try and increase the demand. The production capacity is 2 x 5 x 8 = 80. The capacity is the constraint. The capacity has to be increased to meet the demand. The total raw material available is 15 x 5 = 75. The supplier is the constraint. The company should increase the material received from the supplier. They should introduce new suppliers who can supply the required quantities. The total raw material available in the week now is 3 x 25 = 75. The supplier is unable to deliver the required 100 because of the logistical constraints and policies of the organization.

What to produce and how much?

Consider three products A, B and C whose selling price (per unit) are Rs 80, 45, 60 respectively. The unit raw material costs are Rs 70, 30, 40 respectively. The time taken to produce is 4/hour, 5/hour and 3/hour respectively. Which product should the organization choose? If the decision is based on maximum SP, we choose A. If we choose based on gross profit, the values are 10, 15 and 20. We choose C. If we choose based on time to produce, the gross profit/hour is 40, 75 and 60. We choose B.

Example
Consider 3 products A, B and C and two machines. The profits are 40, 30 and 35. The unit processing times in the two machines M1 and M2 are 15, 16, 12 and 14, 11, 9 minutes respectively. A total time of 2400 minutes is available in a week. The weekly demands for the products are 70, 80 and 60 respectively. Find the production quantities using the TOC rule?

Linear Programming and TOC rule

The weekly demands for the products are 70, 80 and 60 respectively. Find the production quantities using the TOC rule? The time required on M1 is 70 x 15 + 80 x 16 + 60 x 12 = 3050 The time required on M2 is 70 x 14 + 80 x 11 + 60 x 9 = 2400. Machine M1 is the bottleneck. M2 has enough capacity The coefficients are 40/15, 30/16, 35/12 = 2.66, 1.875, 2.9166 We produce C first followed by A and then B. The time required to produce 60 of C is 720. A balance of 1680 is available. The time to produce 70 of A is 1050 and a balance of 630 is available. We can produce 630/16 = 39.375. The profit is 6081.25.

Example
Consider 3 products A, B and C and two machines. The profits are 40, 30 and 35. The unit processing times in the two machines M1 and M2 are 15, 16, 12 and 14, 14, 15 minutes respectively. A total time of 2400 minutes is available in a week. The weekly demands for the products are 70, 80 and 60 respectively. Find the production quantities using the TOC rule?

Solution
The capacities required for 70A, 80B and 60C on M1 and M2 are 3050 and 3000. Both are bottlenecks. We choose M1 (maximum bottleneck) and apply the TOC rule to get A = 70, B = 39.375 and C = 60. The capacity required in M2 for these quantities = 70 x 14 + 39.375 x 14 + 60 x 12 = 2431.25 which exceeds the available capacity of 2400.

Solution
Maximize 40A + 30B + 35C Subject to 15A + 16B + 12C 2400 14A + 14B + 15C 2400 A 70, B 80, C 60 A, B, C 0. The optimum solution by simplex algorithm is A = 70, B = 37.14 and C = 60 with Z = 6014.2.

If we had chosen M2 as the first bottleneck and applied TC rule we would have got the solution A = 70, B = 37.14 and C = 60 for which M1 has enough capacity. This solution is optimal.

Statistical Fluctuations
Define Statistical fluctuations, random events and dependent events Consider a two stage process where the first operation is manual while the second is automatic. Both can produce at the rate of 25/hour but the manual process shows statistical fluctuations. Compute the time required to make 100 parts?

Principles of SM
SM1 - Do not focus on balancing the capacities. Balance the flow SM2: Marginal value of time at a bottleneck resource is equal to the throughput of the product. SM3: Marginal value of time at a nonbottleneck is negligible. SM4: Level of utilization of a non bottleneck resource is controlled by other constraints in the system. SM5: Resources should be utilized and not simply activated. Activation refers to employment of a resource to process material while utilization is activation that increases throughput. SM6: Transfer batch need not and should not be equal to process batch. SM7: Process batch should be variable along its route and over time.

Exercise
Consider a manufacturing system with three machines M1, M2 and M3. The time available is 16 hours. Two products P and Q are made and go through the three machines. M1 can produce at 6/hour, M2 at 3/hour and M3 at 4/hour of P. M1 can produce at 9/hour, M2 at 6/hour and M3 at 7/hour of Q. The changeover is 30 minutes each machine from P to Q and back. The demand is for 20 of P and for 50 of Q. Apply the principles of SM through this example?

Solution
Among the machines M2 is the bottleneck for P (and Q). M2 can make 20 of P and 45 of Q in 8 hours. The actual bottleneck is the demand. All three machines should produce only 20 of P though each machine can produce more than 20 of P in 8 hours. This explains that we should balance the flow and not the capacity. If we produced based on capacity, M1 can make 48, m2 can make 24 and M3 can make 32. We will sell only 20 and the additional quantities made will be waste. This would have led to activation and not utilization. The utilization of the bottleneck machine for 8 hours will be approximately 90% (we have added a set up of 30 minutes to the time to produce 20 of P). M2 has a utilization of 52% and M3 has a utilization of 70%. We observe that the utilization of M1 and M3 depend on the constraint in the system which is the market. If the market had demanded 30, then M2 can make only 24 and will become the constraint and the utilizations of M1 and M3 would have increased since they would have made 24 of P.

Solution
Considering product Q, the demand is 50 but 2 can make only 48. We have a left over time of 0.83 hour on M2 in which we can have a changeover to Q which would take 30 minutes. The remaining time is just about sufficient to make 50 of Q. Now Q will have 100% utilization and becomes the bottleneck. Its marginal value becomes the throughput. If the demand for P or Q increases, every minute gained in M2 is precious. Machines M1 and M3 have extra time and hence there is no marginal value associated with these two machines.

Considering that M2 is the bottleneck when we consider both P and Q together, we should transport every piece from M1 to M2 so that M2 is utilized. M2 will have a production batch of 20 but will have a transportation batch of 1 to it from M1.

Solution
Considering P, we have time for only one setup in M2 and therefore M2 will produce a batch of 20. M1 and M3 have more time. M1 can produce P in more than 1 batch. It has enough time to produce in two batches of 10. It can start with a batch of 10 for P and change into a batch of 25 for Q and then come back to P and so on. The process batch is different for P and Q. Though M3 can produce faster than M2 it is guided by the output of M2 and most of the time it is idle. It can produce in smaller batches but only after the batches arrive from M2. Its idle time can be used to process other parts or products (where it is before the bottleneck in the process).

Control Drum buffer rope

The manufacturing system (A to C) has three machines and an assembly (D). Product P has two raw materials, R and S. R gets processed in A and then B and goes to assembly. S goes to C and then to assembly. A, B, C and D can do 40, 20, 30 and 35/hour. The demand is 25/hour. Assume that there is a second product Q that has the same process sequence. The rates are 30, 25, 40 and 30/hour. The demand is 25/hour. Figure 8.1 shows the manufacturing process. Determine the schedule using principles of TOC?

Solution
We consider product P first. Machine B is the bottleneck with 20/hour. Since the demand is 25/hour, the system can produce only 20/hour. All the machines and assembly produce 20/hour. The drum buffer is in front of B so that the bottleneck is not starved. There is an assembly buffer between machine C and D so that the assembly is not starved. There is a shipping buffer after the assembly so that there is some buffer between assembly and the demand. Let the drum buffer be 30 minutes, shipping buffer be 20 minutes and assembly buffer be 10 minutes. To make 20 of P, machines A, B, C and D take 30, 60, 40 and 34.2 minutes. We take the assembly time as 35 minutes. The release for A is time for A, drum buffer, B, assembly and shipping buffer. This is equal to 30 + 30 + 60 + 35 + 20 = 175 minutes. Release for C is the time for C, assembly buffer, assembly time and shipping buffer. This is equal to 40 + 10 + 35 + 20 = 105 minutes. Material for 20 can be release at A 175 minutes before the end of the hour and 105 minutes before for C.

Solution
If we consider a transfer batch of 10, the release times become 130 minutes before for A and 85 minutes before for C. For product Q, the bottleneck is the demand. The release times with only shipping buffer are 148 minutes before for A and 90 minutes before for C. We can add an assembly buffer of 10 minutes and make it 158 minutes for A and 100 minutes for C. We release material for 20 units of Q to meet the demand by the hour.