The primary purpose of a cycle count program is to identify causes of inventory errors The primary objective of cycle counting is to identify and fix the causes of errors Turnover = COGS / Avg Inventory
Order point = Demand during lead time + Safety Stock The lot size affects the product mix cycle
Electronic data interchange (EDI) reduces paperwork
The master production schedule (MPS) is an anticipated build schedule Driver costs = variable transportation costs
Advantage of point-of-use inventory over central storage is reduced material handling
Total employee involvement will result in an increase of coaching role for first-line supervision
In projecting demand for a standard design commodity competitive pricing is typically most important. The primary activities of manufacturing planning and control are production planning and inventory management.
It is important to monitor the forecast to improve forecasting methods. Lean / JIT sees suppliers as an upstream work center.
In the Toyota Production System the control department concept was the key to breaking down the silos that cripple an organization
Load profile shows required capacity at each workcenter (where as workcenter profile shows only Rate Capacity)
Testing questions
13 сентября 2011 г.Customer does not buy a product or service, but a solution to a problem or a need [1-19].
Supply Chain: The global network used to delivery products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash [1-38].
Value Chain consists of processes that directly add value to the products and services that a company sells.
Value Chain is a high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers.
“Ultimately it is the customer who pays the price for service delivered that confirms value and not the producer who simply adds cost until that point”
SC is the subset of the VC (1-45).
KPIs should represent the 3 types of measures (1-47): Strategic • Tactical • Operational •
Balanced Scorecard (BSC) (1-47) gives a balanced perspective by including metrics and performance from the following areas:
Customer prospective • Business process p. • Financial p. •
Innovation and learning p. •
KPIs should not be generic; they need to measure in areas that are critical to the goals of the company. The major objective of materials managements is to provide the required level of customer service. Manufacturing planning and control (MP&C) is the system used by manufacturing to recognize demand for the products, plan the resourced required to produce them, and execute and control production (1-53).
Layered approach to planning (details)
Business planning long-term planning in currency
Production Plan medium to long-term at product family level Master scheduling short to medium-term at the end item product level
Material requirement planning short-term at the end item or product component level
S1: Introduction to SCM
15 июня 2011 г. 9:15
Production Environments
Env. When to choose Benefits VATI
Type
ETO Unique design or massive customization is required; complex products
Enables response to specific customer requirements ATO Product which have high number of
configurations or require customization.
Low FG inventory levels; wide range of product offerings
X MTO Simple RM, many products (variations) Customization; reduced inventory;
improved service levels
V
MTS High-volume standard products; predictable demand.
Used when required LT to customer is shorter than manufacturing LT
F.i., MTS products are expected to be available on demand.
Low manufacturing costs; meet customer demands quickly
A
MC High-volume product with large variety Environment Characteristics [MRP 6-35]
Characteristic MTS ATO MTO ETO
Interface between production and customer
low medium medium high
Customer delivery time
short medium long long
Production volume of each unit
high medium low low
Production range (# of products)
narrow medium broad broad
Basis for production planning and scheduling
forecast forecast and backlog
backlog; RM forecast backlog; RM forecast
Seasonality (likelihood)
high medium low none
Order promising based on availability of... FG components & subassemblies RM, capacity RM, capacity, engineering
Production Environments
3 марта 2012 г. 8:19Process Layout Description Flow processes Product Layout
Intermittent processes
Process (Functional) Layout
Cellular Layout Stations set up in work cells, which have equipments grouped into product families.
Operators are cross-trained on each operation.
Work cells are traditionally set up in a "U" or "L" shape. [9-23], MM pg. 118 (14.8 Process systems)
Project processes Fixed position
Layout + - Notes
Product L. low WIP inventory
high investments
Process L. each workstation is flexible capable of producing wide
variety of products
Work layouts
2 сентября 2011 г. 18:59
Marketing Mix
Product (design, qty, warranty policy, etc.) • Price • Promotion • Place •
Basic demand patterns: [2-13]
Trend: increasing, decreasing, and level •
Seasonal •
Random •
Cyclical: over long time spans •
Principles of Forecasting [2-19]
1 Forecasts are not 100% accurate They are not expected to be. 2 Forecast must include estimate of error % or min-max range
3 Forecasts are more accurate for product groups than for individual items
4 Forecasts are more accurate in the short term
It means that lead time reaction allows to react to more accurate forecasts
Forecasting techniques [2-23] (Detailed in MPR) Qualitative • Quantitative • Extrinsic • Moving Average ○ Exponential Smoothing ○ Intrinsic •
The purpose of tracking forecasting is to compare with actual demand and to measure its accuracy [2-41].
In the process, we can learn the following: Why demand differs from the forecast •
Take demand circumstances into account •
How to improve the forecast •
Forecast error types: [2-41]
S2: Demand Management
17 июня 2011 г.Tracking signal monitors any forecasts that have been made in comparison with actuals, and warns when there are unexpected departures of the outcomes from the forecasts. Forecasts can relates to sales, inventory, or anything pertaining to an organization’s future demand.
The tracking signal is a simple indicator that forecast bias is present in the forecast model. It is most often used when the validity of the forecasting model might be in doubt.
Tracking signal = Σ (at− ft) / MAD
One form of tracking signal is the ratio of the cumulative sum of forecast errors (the deviations between the estimated forecasts and the actual values) to the mean absolute deviation.[1]The formula for this
tracking signal is:
MAD = Σ|at− ft| / n
where atis the actual value of the quantity being forecast, and ftis the forecast. MAD is the mean absolute deviation. The formula for the MAD is:
Tracking signal = Σ(at− ft) / Σ|at− ft| / n
where n is the number of periods. Plugging this in, the entire formula for tracking signal is:
Et= βet+ (1 − β)Et−1 Mt= β|et| + (1 − β)Mt−1
Another proposed tracking signal was developed by Trigg (1964). In this model, etis the observed error in period t and |et| is the absolute value of the observed error. The smoothed values of the error and the absolute error are given by:
Tt= |Et/ Mt|
Then the tracking signal is the ratio:
If no significant bias is present in the forecast, then the smoothed error Etshould be small compared to the smoothed absolute error Mt. Therefore, a large tracking signal value indicates a bias in the forecast. For example, with a β of 0.1, a value of Ttgreater than .51 indicates nonrandom errors. The tracking signal also can be used directly as a variable smoothing constant.[2]
There have also been proposed methods for adjusting the smoothing constants used in forecasting methods based on some measure of prior performance of the forecasting model. One such approach is suggested by Trigg and Leach (1967), which requires the calculation of the tracking signal. The tracking signal is then used as the value of the smoothing constant for the next forecast. The idea is that when the tracking signal is large, it suggests that the time series has undergone a shift; a larger value of the smoothing constant should be more responsive to a sudden shift in the underlying signal.
Pasted from <http://en.wikipedia.org/wiki/Tracking_signal>
Tracking signal = Mean Deviation / MAD, MD <>0 means that bias is present
Tracking signal
16 сентября 2011 г. 11:51
Manufacturing Planning and Control
Business Planning
Sales & Operations Planning Master Scheduling Material Requirements Planning (MRP) Production Activity Control (PAC) Resource Planning (RP) Rough-Cut Capacity Planning (RCCP) Input/Output Control Operation Sequencing Capacity Requirements Planning (CRP)
Execution
Strategic PlanningProduction Planning - setting level of manufacturing output to best satisfy currently planned sales while
meeting other BP objectives.
Master Planning = Priority planning - the function of
determining what material is needed and when; 1.
maintaining proper due dates for required materials. 2.
S3: [pic] Master Planning and Control
22 июня 2011 г. 9:05
Master Scheduling Purpose:
Disaggregate PP at the product family level to the end item level •
Create priority plan (due dates and quantities) for end item manufacturing •
Basis for calculating RCCP •
Drive material requirements plan •
Item S&OP Master Scheduling
Objective Supply Rate by Product Family Anticipated Build Schedule
Item Planned Product Family End Item or Planning BOM
Planning Horizon
Longest Lead Time Resource Plant and Equipment
Longest Cumulative Lead Time for End Items
Constraints Resource Capacity Critical Workcenters
Time Periods monthly weekly or daily
Planning Focus Product volume Product mix
Process Output Production Plan Master Production Schedule
4 steps to create Master Schedule Preliminary MS for individual end items, 1.
Aggregation of individual MS, 2.
RCCP, 3.
Resolve differences between req. and available capacity. 4.
RCCP: validates resources availability for MPSat work centers level to produce end items (usually using weekly time buckets). [5-27]
Key resources: labor, machinery, WH space, supplier's capabilities
Resource Planning vs. Rough-Cut Capacity Planning [MPR, 7-48]
RP RCCP
Validates… Production Plan Production Schedule Time basis monthly daily/weekly
Controls all potentially constraining resources for identified critical workcenters Horizon medium- to long-term short- to medium-term
Input/output control
The objective of input/output control is to balance the flow of work by monitoring and controlling the input to and output from the work centers.
Layered approach to planning
Process Level Horizon
Business Planning
Sales volume ($) 2 to 10 years
S&OP Planning
Family level 1 to 3 years
Master Scheduling
End item level 3 to 18
months
MRP Component items below
the end-item level
longest lead-time
Layered approach to planning
4 марта 2012 г.Production Strategies [3-13]
Chase (demand matching)
Production = Demand Stable inventory
JIT production
Capacity at max demand level required
Workforce issues
Level Production = Average Demand Optimal
manufacturing costs
High inventory
Requires accurate sales forecast
Subcontracting Production on minimum Demand level Low inventory May be more expensive than in-house production Hybrid combines the aspects of both the
chase and level production planning methods
Production Strategies
22 июня 2011 г.Master Production Schedule (MPS) is 1 line from in Master Schedule that shows production volume [3-41].
Master Schedule example
Available-to-promise (ATP) - uncommitted portion of inventory and planned production [3-55]. For Period 1 = Inventory
Calculated for each period where MPS receipt is scheduled. (All orders until the next receipt are counted).
Master Schedule
23 июня 2011 г.Term Definition
BOM List of the components necessary to build an end product Planning BOM Material requirements for average product in a family [4-23]
Artificial grouping of BOM items used to facilitate Master Scheduling and Material Planning
Where-Used Inversion of BOM [4-25]
Pegging Shows relationship of material demand back to the parent causing it [4-25] Lead time the time it takes to make or receive the component [4-31]
Offsetting the process of determining when a planned order release is needed in advance of the planned order receipt date
Exploding the process of determining the total of each component needed for a parent Planned Order generated automatically by planning software when it encounters net
requirements (when PAB falls below SS ).
Planned Orders generate planned order receipts.
Firm Planned Order Planned order that has been frozen in quantity and time.
Fixed by the master scheduler and cannot be changed by the system. The master scheduler has the responsibility to manage firm planned orders. A tool that allows the planner to override the logic of MRP system.
Released Order A firm commitment: production or purchase order. Once released, a planned order becomes an Open Order. It appears as Scheduled Receipt at due date.
Open Order =Released order Planned Order
Receipt
The quantity planned to be received at a future date as a result of a Planned Order Release [4-61]
Scheduled Receipt Open Order that has assigned due date.
MRP - Material Requirements Planning
S4: MRP Definitions
28 июля 2011 г. 8:40
Line Time Notes
Gross requirements Week 1 Week 2 ... required at the beginning of the period Scheduled receipts available at the beginning of the period Projected Available
Balance (PAB)
projected available balance at the end of the period
Net requirements required at the beginning of the period
Net requirement = Gross requirements - On-hand Inventory - Scheduled Receipt
= неудовлетворенный спрос
Если Net requirement > 0, to PAB упадет ниже 0. Planned order receipt available at the beginning of the period
Planned order release available at the beginning of the period Intersection of a source of MPS requirement with a time period is called a time bucket [from Q&A]
MRP Record
28 июля 2011 г. 9:02
Production Activity Control [5-40]
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P
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P
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P
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Manufacturing Lead Time [5-30]
Queue (Backlog)
Setup Run Wait Move
- // - Operation time
- * - Interoperation time
//
-The queue time can comprise 95% or manufacturing lead time. [DSP 6-25] However Interoperation time is most elastic.
Load [5-29]
Load - Demand on resources
The following steps result in the calculation of load per period at each work center:
Component requirement are generated by MRP: planned and released order quantities and due dates; •
Component requirements are converted into operation time required at each work center. •
Production Activity Control objectives: [5-41] Execute MPS and MRP
•
Optimize use of resources •
Minimize WIP (work in progress) •
Maintain customer service •
Input/output control
The objective of input/output control is to balance the flow of work by monitoring and controlling the input to and output from the work centers.
I/O report compares what occurs at a work center against what was planned, manages queues and lead-times.
S5: Capacity Management and Production Activity Control
7 августа 2011 г.Term Definition
Utilization = Hours actually worked / Available hours
Efficiency = Standard hours of work produced / Hours actually worked Rated Capacity = Available time * Utilization * Efficiency [standard hours] Operation time per piece = Setup time + Run time (per routing or work center file) Operation time per order = order quantity * operation time per piece
[DSP, 6-37]
Available time The number of hours a work center can be used Maximum
demonstrated capacity
The highest amount of actual output produced in the past when all efforts have been made to optimize the resource
Capacity available The capability of a system or resource to produce a quantity of output in a particular time period
Theoretical capacity The maximum output capacity, allowing no adjustments for preventive maintenance, unplanned downtime, shutdown, etc.
Demonstrated capacity
proven capability calculated from actual performance data and expressed in standard hours
Rated capacity = Theoretical capacity * Utilization * Efficiency
Productive capacity The maximum of the output capabilities of a resource OR
the market demand for that output for a given time period
Protective capacity quantifiable capacity that is, or can be made available, at a nonconstraint work center that contributes to protection (against idle time) of the constraint.
Safety capacity quantifiable capacity that is available over and above productive capacity that includes an allowance for planned events, maintenance, as well as unplanned events. It includes protective capacity.
Excess capacity output capability at a nonconstraint work center that exceeds productive and protective capacity
Idle capacity generally not used capacity including protective and excess capacity Activation the use of nonconstraint resources to produce above the rate required by
the system constraint
Capacity Terms & Calculation
7 августа 2011 г.Data requirements [5-29]
Data Source
Open shop orders Shop order file Planner order releases MRP
Where work is done Routing file Time needed (st. hours) Routing file
Lead times Routing file or Work center file Work center capacity Work center file
Routing Data [DSP, 6-27]
Operation number (for sequencing) Operation description
Planned work center Standard setup times
Additional data for sequence-dependent setups F.i., changeover matrix Standard run time per unit, quantity, or batch
Tooling
Information flow
8 августа 2011 г.Priority control establishing sequence in which orders are to be run (at each workstation).
[5-65] Dispatching selecting and sequencing of available jobs to be
run at individual workstations and the assignment of these jobs to workers
APICS Dictionary
Dispatching process of translating production plan into output (action)
( http://www.transtutors.com/homework- help/industrial-management/production-planning-and-control/dispatching.aspx)
Dispatching rules [5-65] First come, first served (FCFS) Earliest job due date (EDD) Earliest operation due date (ODD) Shortest process time (SPT)
Critical ratio (CR) CR = time to due date / work remaining In case CR < 1 the order will be late. Lowest CR orders are run first.
Dispatching & Priority Control
9 августа 2011 г. 0:40
Inventory - stocks or items used for: Production RM, WIP
Operations Maintenance, Repair, Operating supplies (MRO) Customer service FG, repair parts, spares
Aggregate Inventory Management objectives: Support business strategy and operations •
Ensure that inventory management supports financial objectives •
Balance customer service, operations efficiency, and inventory investment cost objectives •
or, shortly [7-7] to provide SL •
to minimize the sum of all costs involved •
Operating Efficiency [6-17]
Inventory can make manufacturing operations more productive Dealing seasons demand with load leveling by building up anticipation inventory during periods of low demand
Reduces changeover costs
Allowing inventory to build up enables longer production runs Distributes setup costs over a larger quantity of products
Higher purchasing quantities Taking advantage of discounts and
lower order costs per unit. Functions of Inventory [6-15]
Anticipation inventory is build up in advance of future demand, such as a peak selling season, or production shutdown
Safety stock
(Fluctuation inventory)
covers random fluctuation in supply, demand, and lead time. Prevents or reduces the probability of stockout.
Lot-size inventory (Cycle stock) consists of items purchased or manufactured in lot-size quantity greater than needed.
Transportation inventory (pipeline stock)
in transit in the distribution network
Hedge inventory buildup to buffer against some event that may not happen f.i.: expected price increase at the market
Buffer - A quantity of materials awaiting further processing. Inventory costs [6-21]
Item costs
Carrying costs = Capital + Storage + Risks Ordering costs Factory orders: [6-25]
Production control costs •
Setup and teardown costs •
Lost capacity costs •
Purchase orders: Purchasing costs
S6: Aggregate Inventory Management
9 августа 2011 г.costs [6-29] Overtime • Hiring/layoff • Training •
Balance Sheet [6-33]
Account Description Examples
Assets Items of value to the company
Cash, inventory, machinery, buildings, accounts receivable (AR), patents
Liabilities Obligations of the business
Accounts payable (AP), wages payable, long and short-term debt
Owner's equity
Net worth of business = Assets - Liabilities
Income Statement [6-33]
Account Description Examples
Revenue Income from sales of goods and services
Cash, accounts receivable
Expense Cost of goods sold Direct labor, direct materials, and factory overheads
Expense General and administrative expenses All other costs: advertising, taxes, wages Performance Measures [6-45]
Inventory Turns (Turnover) = COGS / Avg Inventory
Days of supply (DOS) = Inventory on hand / Avg daily usage
Financial Inventory
9 августа 2011 г. 18:24
Lot-size decision rules [7-9]
Lot-for-lot Items are ordered in amounts necessary, when they are needed
F.i., dependent demand items. Used for A-items (expensive) Fixed order quantity The same amount each time even if it exceeds what
is needed; interval between orders may vary
Easy to implement
Economic order quantity (EOQ) see below
Order n periods of supply Used for C-items (inexpensive) Part period balancing (PPB)
[APICS Dictionary]
A dynamic lot-sizing technique that uses the same logic as the least total cost method, but adds a routine called look ahead/look back.
When the look ahead/look back feature is used, a lot quantity is calculated, and before it is firmed up, the next or the previous period’s demands are evaluated to determine whether it would be economical to include them in the current lot.
See: discrete order quantity, dynamic lot sizing.
Wagner-Whitin algorithm [APICS Dictionary]
A mathematically complex, dynamic lot-sizing technique that evaluates all possible ways of ordering to cover net requirements in each period of the planning horizon to arrive at the theoretically optimum ordering strategy for the entire net requirements schedule.
See: discrete order quantity, dynamic lot sizing. Cost to carry inventory
Storage facility cost •
Counting, transporting, and handling •
Risk of obsolescence •
Insurance and taxes • Risk of loss • Opportunity costs • EOQ [7-13], [MM p. 80]
EOQ model manages the tradeoff between ordering costand inventory carrying cost. EOQ point is reached when Ordering costs = Carrying costs [7-21].
Q order (lot) size (Q/2 - average inventory level) с cost per unit of inventory
i annual carrying cost rate
A annual demand (MA: any other period can be taken as well) S ordering cost (per 1 order)
S7: Item Inventory Management
9 августа 2011 г. 18:00
Minimum days’ supply can be used to prevent multiple orders for the same period
Maximum day’s supply is used to support inventory turns and targets, and to recognize shelf-life constraints
Service Levels [7-39], [MM p. 86]
The costs of stockout, all of which are difficult to calculate precisely, include: Backorder costs • Lost sales • Lost customers • Safety Factors [7-41], [MM p. 86], [DSP 2-17]
Desired Service Level % σ Safety Factor the Safety Factor
50% 0 0
80% 0.84 1.05
90% 1.28 1.60
95% 1.65 2.06
98% 2.05 2.56
Safety Stock = MAD Safety Factor * MAD [7-40]
1 σ of SS = 84% customer service.
The method taken from Materials Management by Arnold/Chapman. Here Service Level is linked to σ.
Note that the service level is the percentage of order cycles without a stockout.
The reorder point (ROP) is the level of inventory when an order should be made with suppliers to bring the inventory up by the Economic order quantity ("EOQ").
Order point [7-29]
Order point = Demand during lead time + Safety Stock OP = DDLT + SS
Target inventory level (max stock) = Demand (Review period + Lead time) + SS The next several demand periods are estimated (not average of all known demand). Determining when the Order Point is reached [7-43], [MM p. 87]
Имеется в виду способ физического учета. Two-bin
system
A quantity of an item equal to the order point quantity is set aside and not touched until all the main stock is used up. When this stock needs to be used, the production control or purchasing department is notified and a replenishment order is placed.
Used for C-items, which are not expensive and it is best to spend min. time and money controlling them. Perpetual
inventory record system
A perpetual inventory record is a continual account of
inventory transaction as they occur. At any instant, it holds an up-to-date record of transactions. At a minimum, it contains the balance on hand, but it may also contain the quantity on order but not received, the quantity allocated but not issue and the available balance.
Ex.: SAP system
Kanban Lean/JIT method that uses a signal (see S9). Order systems [7-47], [MM p. 88]
Characteristic Order Point system Periodic Review system (Fixed-interval order system) Interval between orders Variable Fixed
Order quantity Fixed Variable
ABC Inventory Control [7-55], [MM p. 76] Based on Pareto's Law.
Possible ABC characteristics: Annual usage (amount) •
Scarcity of material •
Quality problems •
Auditing Inventory Records [7-65], [DSP 2-39]
Order point
14 сентября 2011 г. 13:18
Cycle Counting Options [2-41]
ABC Classification A items should be counted more frequently than B and C items At a reorder point Assuming that inventory level will be low and there be a smaller qty
to count When a replenishment lot is
received
When remaining stock is minimum
At zero balance When remaining stock is minimum At negative balance which indicates error
Types of purchased items [8-7]
RM and components Are consumed during the production process Capital items Includes equipment and technology
MRO Used in general operations and maintenance
Services Activities that support the production or distribution functions Purchasing Cycle [8-23]
Generate requisition (PR)
A need for an item may be identified by a user, an MRP system, or a purchase plan
Issue PO Purchasing reviews PR and selects a supplier.
PO includes: quantity, part number, delivery date, etc.
Follow up PO tracking
Receive goods
Approve payment Once goods are received and accepted, payment is approved. PO is closed.
Types of sourcing [8-15]
Sole S. Only one supplier, no alternative suppliers exist
Not ideal, however unavoidable if the goods are unique
Single S. One active supplier, but other suppliers are available
The purpose is to focus on a long-term relationship with a single partner
Multiple S.
More than one supplier Reduces risks of unavailability, can lower costs through competition
Distribution Inventory Planning Systems [8-43]
System Characteristic Advantages Disadvantages
Pull Decentralized system Each center acts
independently Demand data may be more timely and accurate
Lack of coordination Risk of low SL Disrupted factory schedules
Push Centralized system; based on centrally made forecast
Coordination within the system
Not fully responsive to local developments
Distribution requirements planning (DRP)
Collaboration between
Distribution Center (DC), central supply, and the factory.
S8: Purchasing and Physical Distribution
18 августа 2011 г.Service functions of Warehouses [MM p. 107]
Type Storage time Activities Purpose
General WH long period min. operations Protect goods until they are
needed
F.i., anticipation inventory Distribution
WH
brief Focus on movement and handling Movement and mixing
Role of Warehouses [MM p. 108] [8-71] Transportation
consolidation
Reduce transportation costs by receiving consolidated shipments in truckload (TL) quantities and breaking them down into shipments of same or mixed products for further distribution ( TL -> LTL) and vice versa (LTL -> TL) when purchasing from suppliers.
Product mixing Mixing of products that are produced at different location (received in different loads)
Service Provide better delivery times and reliability to customers by being close to the market
Warehouse Process [8-71]
Warehousing
18 августа 2011 г. 9:24Physical distribution activities - affect customer service level and the cost of providing it. [MM pg. 100] Transportation typically the largest component (30-60%)
Transportation adds place value to the product. Distribution inventory includes all FG at any point in the distribution system
second most important item (25-30%)
Inventory create time value by placing product close to the customer.
Warehouses (DC) Storage of inventory
Material handling Protective packaging Order processing [and communication]
Transportation costs Depend on...
Line-haul c. distance moved
Pickup and delivery c. pickups number, weight moved
Terminal handling c. number of operations (number of times a shipment is handled, loaded, and unloaded)
Billing and collecting c. (paperwork)
number of shipments
Line-haul costs (LHC) include: [8-67] fuel
•
wages •
wear and tear of the vehicles •
Distribution
14 сентября 2011 г. 12:39Laid-down cost (LDC) is the delivered cost of product to a particular geographic point. [MM p. 109] LDC =ProductCosts +TransportationPerKm * DistanceKm.
Market boundary. The market boundary is the line between 2 or more supply sources where the laid-down cost is the same.
Market boundaries
19 января 2012 г.Product and Quality Cycle [9-7]
Step Location Quality management system objectives (Ensure quality of …)
Product Definition Marketplace Market
Tangible and intangible characteristics Price
Estimate of sales volume [MA: incorrect sales volume forecast means low quality of Product Definition]
Voice of the customer is valuable for this process
Product Design Create product specs, performance requirements, materials, dimensions, tolerances
Product Manufacturing
Manufacturing must make the product to the specifications
Product Consumption (Use)
Marketplace Customer satisfaction through value to the customer:
Performance (fitness-for-use) - primary characteristics (to the customer) •
Features - secondary characteristics •
Conformance - standards and government regulations •
Warranty •
Definitions [9-9]
Lean/JIT minimizing activities that do not add value to the customer (value chain)
Quality management systems (QMS)
system that documents the structure, responsibilities, and procedures required to achieve effective quality management
Total quality management (TQM)
A never-ending process to improve everything an organization does to satisfy customers.
Continuous improvement is necessary because of the competition. MA: No competition = Monopoly = No improvements
Quality function deployment (QFD)
methodology designed to ensure that all the major requirements of the customer are identified and met or exceeded (House of Quality)
Quality at the source A system that eliminates the need for incoming inspection by the customer.
Example: a producer's responsibility to provide 100% acceptable quality material to the consumer. [9-65]
Employee Involvement (EI)
Using experience, creative energy, and intelligence of all employees be treating them with respect, keeping them informed, and including them and their ideas in decision-making process [9-31]
Employee Empowerment
Giving nonmanagerial employees the responsibility and the power to make decisions regarding their jobs of tasks
делегирующий стиль руководства Statistical Process
Control (SPC)
Application of statistical techniques, such as control charts, to monitor and adjust an operation [9-49].
SPC is used to look for trends and can spot changes in variation that may be due to
S9: Lean/JIT and Quality Systems
1 сентября 2011 г. 19:00
Eliminate Waste x x x
Work cells x
Total Productive Maintenance x
Employee Focus x x x x
Supplier Partnership x x x x
Quality-Related Costs x x x
Statistical Process Control x x
Quality Tools x x
Six sigma x x x x
Customer Focus [9-13]
Customers have requirements to their suppliers: High quality level
•
High flexibility (volume, specifications, delivery) •
High service level •
Short lead time •
Low variability in meeting targets •
Low cost •
QFD uses a structured process "House of Quality" [9-14]
Identify customer requirements <- The Voice of the Customer
Identify supporting technical design requirements
Compare the customer requirements to the technical design requirements and assign relationship ratings
Assign importance to the customer requirements Evaluate competitors
Identify technical features to be deployed in the final design of the product
Waste [9-19]
Process Taking unneeded steps; inefficiencies Movement (transportation) Moving products unnecessarily
Methods (motion) Wasted time/efforts by operators (MA: or other employees) Product defects Products and service that do not meet specifications Waiting time Queuing delays
Overproduction Making more product that required
Excess inventory Holding stock not required to fulfill customer orders Unused people skills Waste of knowledge or capabilities
Quality-Related Costs [9-41]
Costs related to making defect-free products:
Costs of Failure Internal The cost of correcting problems while the goods are still in the production facility
Rework, spoilage
External …after the goods or services have been delivered to the customer
Quality Control Tools [9-43]
Flowchart visualizes the sequence of steps Cause and effect fishbone
Control charts A graphical comparison of process performance data with control limits [9-65] Check sheet Summarizes count of different type of event occurrences
Histogram Shows events by frequency
Pareto Tool for ranking causes from most to least significant Scatter diagram Used to analyze relationship between two variables
Lean production 5S system is design to create a visual workspace.
Sort All unneeded tools, parts and supplies are removed for the area Set in Order A place for everything and everything is in its place
Shine The area is cleaned as the work is performed
Standardize Cleaning and identification methods are consistently applied Sustain 5S is a habit and is continually improved
Six sigma - Set of concepts and practices that focus on reducing variation in processes. [9-57] Sigma = standard deviation
Six sigma is about problem solving and improving all business processes. It is build on 3 major concepts: Understand what the customer wants
•
Variation causes defects •
The quality of the output of a process is a function of the variation in the process •
Causes of Variation [9-59]
Variation causes defects. Therefore, it is important to identify the types of variation.
Special cause Sources of variation that can be isolated and are assignable to a particular source. Operator error, broken equipment, emergency power shut down, etc.
Common cause ... that are inherent in a process Phases of Six Sigma project: DMAIC [9-61]
Define Identify the customer's problems and the processes Quantify improvement goals along with potential benefits Measure All the data necessary to understand the process
Analyze Determine the cause and effect relationships that produce the variation of waste Improve Develop and implement solutions
Control Ensure that the gains are maintained
Six Sigma
8 сентября 2011 г. 18:56
Kanbans maintain inventory levels; a signal is sent to produce and deliver a new shipment as material is consumed. These signals are tracked through the replenishment cycle and bring extraordinary visibility to suppliers and buyers.[1]
Kanban (看板?), also spelled kamban, and literally meaning "signboard" or "billboard", is a concept
related to leanand just-in-time(JIT) production. According to Taiichi Ohno, the man credited with developing Just-in-time, kanban is one means through which JIT is achieved.[2][3]
Kanban is not an inventory control system. Rather, it is a scheduling system that tells you what to produce, when to produce it, and how much to produce.
The need to maintain a high rate of improvements led Toyotato devise the kanban system. Kanban became an effective tool to support the running of the production system as a whole. In addition, it proved to be an excellent way for promoting improvements because reducing the number of kanban in circulation highlighted problem areas.[4]
Contents
[hide] 1 Origins • 2 Operation • 2.1 Kanban cards •2.2 Toyota's six rules •
2.3 Three-bin system •
3 Electronic kanban systems • 4 See also • 5 References • 6 Further reading • 7 External links •
Origins
In the late 1940s, Toyota began studying supermarkets with a view to applying store and shelf-stocking techniques to the factory floor, based on the idea that in a supermarket, customers get what they need at the needed time, and in the needed amount. Furthermore, the supermarket only stocks what it believes it will sell, and customers only take what they need because future supply is assured. This led Toyota to view a process as being a customer of preceding processes, and the preceding processes as a kind of store. The customer process goes to this store to get needed components, and the store restocks. Originally, as in supermarkets, signboards were used to guide "shopper" processes to specific restocking locations.
"Kanban" uses the rate of demand to control the rate of production, passing demand from the end customer up through the chain of customer-store processes. In 1953, Toyota applied this logic in their main plant machine shop.[5]
Operation
Number of kanbans means inventory in circulation.
Kanban
5 сентября 2011 г. 17:35
Kanban cards
Kanban cards are a key component of Kanban that utilizes cards to signal the need to move materials within a manufacturing or production facility or move materials from an outside supplier to the production facility.
The Kanban card is, in effect, a message that signals depletion of product, parts or inventory that when received will trigger the replenishment of that product, part or inventory. Consumption drives demand for more. Demand for more is signaled by Kanban card. Kanban cards thus, in effect, help to create a demand-driven system. It is widely espoused by proponents of Lean production and manufacturing that demand-driven systems lead to faster turnarounds in production and lower inventory levels, helping companies implementing such systems to be more competitive.
Kanban cards, in keeping with the principles of Kanban, should simply convey the need for more materials. A red card lying in an empty parts cart would easily convey to whomever it would concern that more parts are needed.
In the last few years, Electronic Kanban systems, which send Kanban signals electronically, have become more widespread. While this is leading to a reduction in the use of Kanban cards in aggregate, it is common in modern Lean production facilities to still find widespread usage of Kanban cards.
Toyota's six rules
Do not send defective products to the subsequent process •
The subsequent process comes to withdraw only what is needed •
Produce only the exact quantity withdrawn by the subsequent process •
Level the production •
Kanban is a means to fine tuning •
Stabilize and rationalize the process •
Three-bin system
A simple example of the kanban system implementation might be a "three-bin system" for the supplied parts (where there is no in-house manufacturing) — one bin on the factory floor (demand point), one bin in the factory store, and one bin at the suppliers' store. The bins usually have a removable card that contains the product details and other relevant information — the kanban card.
When the bin on the factory floor becomes empty, i.e., there is demand for parts, the empty bin and kanban cards are returned to the factory store. The factory store then replaces the bin on the factory floor with a full bin, which also contains a kanban card. The factory store then contacts the supplier’s store and returns the now-empty bin with its kanban card. The supplier's inbound product bin with its kanban card is then delivered into the factory store completing the final step to the system. Thus the process will never run out of product and could be described as a loop, providing the exact amount required, with only one spare so there will never be an oversupply. This 'spare' bin allows for the uncertainty in supply, use and transport that are inherent in the system. The secret to a good kanban system is to calculate how many kanban cards are required for each product. Most factories using kanban use the coloured board system (Heijunka Box). This consists of a board created especially for holding the kanban cards.
Electronic kanban systems
Main article: Electronic kanbanMany manufacturers have implemented electronic kanban systems.[7]Electronic kanban systems, or
E-Kanban systems, help to eliminate common problems such as manual entry errors and lost cards.[8]
E-Kanban systems can be integrated into enterprise resource planning (ERP)systems. Integrating E-Kanban systems into ERP systems allows for real-time demand signaling across the supply chain and improved visibility. Data pulled from E-Kanban systems can be used to optimize inventory levels by better tracking supplier lead and replenishment times.[9]
TOC Holistic management philosophy that is based on the principle that complex systems exhibit inherent simplicity.
TOC is based on the premise that the rate of goal achievement is limited by at least one constraining process. Only by increasing flow through the constraint can overall throughput be increased.
TOC deems that constrains determine system performance Types of Constraints [10-9]
Throughput-based C. •Internal physical resource constraints: machine, supplier, skills. External market c.: insufficient demand for the product/service •
Behavior-based C. •Lack of understanding of the causes and effects of problems Not knowing where to start making the improvement •
True bottleneck resource whose capacity is less than of equal to the demand [10-9] Capacity-constrained
resource (CCR)
Any resource that is likely to compromise the throughput of organization if its capacity is not carefully managed.
VATI analysis [10-11]
V-type basic raw material; range of products Wood
furniture A-type Converging operations: multiple RM, components end up in a final product Jet engine T-type Number of basic units are configured into many end products during the final
assembly stage
Computers
X-type Subset of T-type: high number of RM/components, low # of subassemlies, high # of final assemblies or configurations [MPR 1-20]
Computers I-type Linear product flow: same operations that produce many different products Packaged
food
Throughput Accounting
Goal of operations is to make money.
Making money can be broken down to 3 measurable quantities: T, I, OE
TOC relies on 3 global measures that are applied in a structured approach for the business decisions [10-29]:
Throughput (T) T = Sales Revenue - True Variable Cost Will it increase sales revenue so that
S10: Theory of Constraints
8 сентября 2011 г. 19:32
Five focusing steps [10-19]
Step 1: Identify the C. Compares all system components against market requirements
Step 2: Exploit the C. Use constraint to its maximum capability Step 3: Subordinate everything else to the
C.
DBR method
Step 4: Elevate the C. Step 5: Start Over
Drum The schedule of CCR
Rope Communication system between the Drum and the release of materials (input of the system). The rope controls the time buffer between input and CCR.
Buffer management is a key control mechanism that allows the CCR and shipping to stay on schedule. Time (constraint) buffer Lead time with some safety built into it.
Stock buffer Safety time in time buffer leads to WIP in front of the CCR and Shipping (output).
Protective capacity Idle capacity is maintained as a safeguard against unexpected events. Critical Chain Method assumes that it takes strategic buffering at high-risk control points and prevent delays and ultimately protect (minimize) manufacturing lead time [10-31]
Completion buffer at the end of production •
Constraint buffers at the CCR •
Feeding buffer on resources that feed into the critical chain. •
Buffer zones
Red zone Expedite Missing orders need to be expedited immediately. If <5% or work is expedited, the buffer if too big. If >5% or work is expedited, the buffer if too small. Yellow
zone
Monitor Coordination is needed to make sure that missing order arrive at the Red zone on time.
Green zone Don’t worry
Keep track of missing orders but there is no urgency required.
Simplified Drum-Buffer-Rope (S-DBR, SDBR) is used when the constraint is no longer internal (f.i., market).
Simplified drum-buffer-rope is an excellent reminder to heed the 5th step of the 5 focusing steps; don’t allow inertia to become a system constraint. When most drum-buffer-rope implementations move the
Drum-Buffer-Rope
15 сентября 2011 г. 12:14
buffer instead of two or more. How do we schedule such a system?
Well, instead of having a constraint schedule and a shipping schedule we now have only a shipping schedule with a gating process off-set by a full shipping rope length. The schedule is still loaded against the capacity of the internal constraint – available hours per day, or available hours per week, over the average manufacturing lead time, but the only detailed schedule is for shipping. More correctly the schedule is loaded against up to 80% of the aggregate capacity of the internal control point. A queue of some duration will still naturally build and maintain itself in front of the weakest link, but it is no longer scheduled.
The title Theory of Constraints (TOC) adopts the common idiom "A chain is no stronger than its weakest link" as a new management paradigm. This means that processes, organisations, etc., are vulnerable because the weakest person or part can always damage or break them or at least adversely affect the outcome.
The analytic approach with TOC comes from the contention that any manageable system is limited in achieving more of its goals by a very small number of constraints, and that there is always at least one constraint. Hence the TOC process seeks to identify the constraint and restructure the rest of the organization around it, through the use of Five Focusing Steps.
1.1 Key assumption ○
1.2 The five focusing steps ○ 1.3 Constraints ○ 1.4 Buffers ○ 1.5 Plant types ○ 1 History • 2.1 Operations ○
2.2 Supply chain / logistics ○
2.3 Finance and accounting ○
2.4 Project management ○
2.5 Marketing and sales ○
2 Applications •
3 The TOC thinking processes •
4 Development and practice •
5.1 Claimed Suboptimality of Drum-Buffer-Rope ○ 5.2 Unacknowledged debt ○ 5 Criticism • 6 See also • 7 References • 8 Further reading • 9 External links •
Contents
History
Theory of Constraints (TOC) is an overall management philosophyintroduced by Dr. Eliyahu M. Goldratt in his 1984 book titled The Goal, that is geared to help organizations continually achieve their goals.[1]
Dr. Eliyahu M. Goldratt adopted the concept with his book Critical Chain, published 1997. The concept was extended to TOC with respectively titled publication in 1999.
An earlier propagator of the concept was Prof.h.c. Wolfgang Mewes[2]in Germany with publications on
power-oriented management theory (Machtorientierte Führungstheorie, 1963) and following with his Energo-Kybernetic System (EKS, 1971), later renamed Engpasskonzentrierte Strategie[3]as a more
advanced theory of bottlenecks. The publications of Wolfgang Mewes are marketed through the FAZ Verlag, publishing house of the German newspaper Frankfurter Allgemeine Zeitung. However, the paradigm Theory of constraints was first used by Dr. Eliyahu M. Goldratt.
Key assumption
The underlying premise of Theory of Constraints is that organizations can be measured and controlled by
Theory of Constraints
8 сентября 2011 г. 19:32
"The Goal" itself is to "make money". All other benefits are derived, in one way or another, from that single primary goal.
The five focusing steps
Theory of Constraints is based on the premise that the rate of goal achievement is limited by at least one constraining process. Only by increasing flow through the constraint can overall throughput be increased.[1]
Identify the constraint (the resource or policy that prevents the organization from obtaining more of the goal)
1.
Decide how to exploit the constraint (get the most capacity out of the constrained process) 2.
Subordinate all other processes to above decision (align the whole system or organization to support the decision made above)
3.
Elevate the constraint (make other major changes needed to break the constraint) 4.
If, as a result of these steps, the constraint has moved, return to Step 1. Don't let inertiabecome the constraint.[5]
5.
Assuming the goal of the organization has been articulated (e.g., "Make money now and in the future") the steps are:
The five focusing steps aim to ensure ongoing improvement efforts are centered around the organization's constraints. In the TOC literature, this is referred to as the "Process of Ongoing Improvement" (POOGI).
These focusing steps are the key steps to developing the specific applicationsmentioned below.
Constraints
A constraint is anything that prevents the system from achieving more of its goal. There are many ways that constraints can show up, but a core principle within TOC is that there are not tens or hundreds of constraints. There is at least one and at most a few in any given system. Constraints can be internal or external to the system. An internal constraint is in evidence when the market demands more from the system than it can deliver. If this is the case, then the focus of the organization should be on discovering that constraint and following the five focusing steps to open it up (and potentially remove it). An external constraint exists when the system can produce more than the market will bear. If this is the case, then the organization should focus on mechanisms to create more demand for its products or services.
Equipment: The way equipment is currently used limits the ability of the system to produce more salable goods/services.
•
People: Lack of skilled people limits the system. Mental models held by people can cause behaviour that becomes a constraint.
•
Policy: A written or unwritten policy prevents the system from making more. •
Types of (internal) constraints
The concept of the constraint in Theory of Constraints differs from the constraintthat shows up in mathematical optimization. In TOC, the constraint is used as a focusing mechanism for management of the system. In optimization, the constraint is written into the mathematical expressions to limit the scope of the solution (X can be no greater than 5).
Please note: Organizations have many problems with equipment, people, policies, etc. (A breakdown is just that - a breakdown - and is not a constraint in the true sense of the TOC concept) The constraint is the thing that is preventing the organization from getting more Throughput (typically, revenue through
before the constraint and adequate offloading space behind the constraint.
Buffers are not the small queue of work that sits before every work center in a Kanbansystem although it is similar if you regard the assembly line as the governing constraint. A prerequisite in Theory of Constraints is that with one constraint in the system, all other parts of the system must have sufficient capacity to keep up with the work at the constraint and to catch up if time was lost. In a balanced line, as espoused by Kanban, when one work center goes down for a period longer than the buffer allows, then the entire system must wait until that work center is restored. In a TOC system, the only situation where work is in danger, is if the constraint is unable to process (either due to malfunction, sickness or a "hole" in the buffer - if something goes wrong that the time buffer can not protect).
Buffer management therefore represents a crucial attribute of the Theory of Constraints. There are many ways to do it, but the most often used is a visual system of designating the buffer in three colours: Green (OK), Yellow (Caution) and Red (Action required). Creating this kind of visibility enables the system as a whole to align and thus subordinate to the need of the constraint in a holistic manner. This can also be done daily in a central operations room that is accessible to everybody.
Plant types
I-Plant: Material flows in a sequence, such as in an assembly line. The primary work is done in a straight sequence of events (one-to-one). The constraint is the slowest operation.
•
A-Plant: The general flow of material is many-to-one, such as in a plant where many
sub-assemblies converge for a final assembly. The primary problem in A-plants is in synchronizing the converging lines so that each supplies the final assembly point at the right time.
•
V-Plant: The general flow of material is one-to-many, such as a plant that takes one raw material and can make many final products. Classic examples are meat rendering plants or a steel
manufacturer. The primary problem in V-plants is "robbing" where one operation (A) immediately after a diverging point "steals" materials meant for the other operation (B). Once the material has been processed by A, it cannot come back and be run through B without significant rework. •
T-Plant: The general flow is that of an I-Plant (or has multiple lines), which then splits into many assemblies (many-to-many). Most manufactured parts are used in multiple assemblies and nearly all assemblies use multiple parts. Customized devices, such as computers, are good examples. T-plants suffer from both synchronization problems of A-T-plants (parts aren't all available for an assembly) and the robbing problems of V-plants (one assembly steals parts that could have been used in another).
•
There are four primary types of plants in the TOC lexicon. Draw the flow of material from the bottom of a page to the top, and you get the four types. They specify the general flow of materials through a system, and they provide some hints about where to look for typical problems. The four types can be combined in many ways in larger facilities.
For non-material systems, one can draw the flow of work or the flow of processes and arrive at similar basic structures. A project, for example is an A-shaped sequence of work, culminating in a delivered project.
Applications
The focusing steps, or this Process of Ongoing Improvement has been applied to Manufacturing, Project Management, Supply Chain/Distribution generated specific solutions. Other tools (mainly the "Thinking Process") also led to TOC applications in the fields of Marketingand Sales, and Finance. The solution as applied to each of these areas are listed below.
Operations
Within manufacturing operations and operations management, the solution seeks to pull materials through the system, rather than push them into the system. The primary methodology use is Drum-Buffer-Rope (DBR)[6]and a variation called Simplified Drum-Buffer-Rope (S-DBR).[7]
Drum-Buffer-Rope is a manufacturing execution methodology, named for its three components. The drum is the physical constraint of the plant: the work center or machine or operation that limits the
shipping and manages the flow of work across the drum through a load planning mechanism. The rope is the work release mechanism for the plant. Orders are released to the shop floor at one "buffer time" before they are due. In other words, if the buffer is 5 days, the order is released 5 days before it is due at the constraint. Putting work into the system earlier than this buffer time is likely to generate too-high work-in-process and slow down the entire system.
Supply chain / logistics
In general, the solution for supply chains is to create flow of inventory so as to ensure greater availability and to eliminate surpluses.
The TOC distribution solution is effective when used to address a single link in the supply chain and more so across the entire system, even if that system comprises many different companies. The purpose of the TOC distribution solution is to establish a decisive competitive edge based on extraordinary availability by dramatically reducing the damages caused when the flow of goods is interrupted by shortages and surpluses.
This approach uses several new rules to protect availability with less inventory than is conventionally required. Before explaining these new rules, the term Replenishment Time must be defined.
Replenishment Time (RT) is the sum of the delay, after the first consumption following a delivery, before an order is placed plus the delay after the order is placed until the ordered goods arrive at the ordering location.
1. Inventory is held at an aggregation point(s) as close as possible to the source. This approach ensures smoothed demand at the aggregation point, requiring proportionally less inventory. The distribution centers holding the aggregated stock are able to ship goods downstream to the next link in the supply chain much more quickly than a make-to-order manufacturer can. Following this rule may result in a make-to-order manufacturer converting to make-to-stock. The inventory added at the aggregation point is significantly less than the inventory reduction downstream.
2. In all stocking locations, initial inventory buffers are set which effectively create an upper limit of the inventory at that location. The buffer size is equal to the maximum expected consumption within the average RT, plus additional stock to protect in case a delivery is late. In other words, there is no advantage in holding more inventory in a location than the amount that might be consumed before more could be ordered and received. Typically, the sum of the on hand value of such buffers are 25-75% less than currently observed average inventory levels.
3. Once buffers have been established, no replenishment orders are placed as long as the quantity inbound (already ordered but not yet received) plus the quantity on hand are equal to or greater than the buffer size. Following this rule causes surplus inventory to be bled off as it is consumed.
4. For any reason, when on hand plus inbound inventory is less than the buffer, orders are placed as soon as practical to increase the inbound inventory so that the relationship On Hand + Inbound = Buffer is maintained.
5. To ensure buffers remain correctly sized even with changes in the rates of demand and
replenishment, a simple recursive algorithm called Buffer Management is used. When the on hand inventory level is in the upper third of the buffer for a full RT, the buffer is reduced by one third (and don’t forget rule 3). Alternatively, when the on hand inventory is in the bottom one third of the buffer for too long, the buffer is increased by one third (and don’t forget rule 4). The definition of “too long” may be changed depending on required service levels, however, a general rule of thumb is 20% of the RT. Moving buffers up more readily than down is supported by the usually greater damage caused by shortages as compared to the damage caused by surpluses.
One caveat should be considered. Initially and only temporarily, the supply chain or a specific link may sell less as the surplus inventory in the system is sold. However, the immediate sales lift due to
improved availability is a countervailing factor. The current levels of surpluses and shortages make each case different.
Finance and accounting
The solution for finance and accounting is to apply holistic thinking to the finance application. This has been termed throughput accounting.[8]Throughput accounting suggests that one examine the impact of
investments and operational changes in terms of the impact on the throughput of the business. It is an alternative to cost accounting.
The primary measures for a TOC view of finance and accounting are: Throughput (T), Operating Expense (OE) and Investment (I). Throughput is calculated from Sales (S) - Totally Variable Cost (TVC). Totally Variable Cost usually considers the cost of raw materials that go into creating the item sold.
Project management
Critical Chain Project Management(CCPM) is utilized in this area.[9]CCPM is based on the idea that all
projects look like A-plants: all activities converge to a final deliverable. As such, to protect the project, there must be internal buffers to protect synchronization points and a final project buffer to protect the overall project.
Marketing and sales
While originally focused on manufacturing and logistics, TOC has expanded lately into sales management and marketing. Its role is explicitly acknowledged in the field of sales process
engineering.[10]For effective sales management one can apply Drum Buffer Rope to the sales process
similar to the way it is applied to operations (see Reengineering the Sales Process book reference below). This technique is appropriate when your constraint is in the sales process itself or you just want an effective sales management technique and includes the topics of funnel management and conversion rates.[citation needed]
The TOC thinking processes
Main article: Thinking Processes (Theory of Constraints)
Gain agreement on the problem 1.
Gain agreement on the direction for a solution 2.
Gain agreement that the solution solves the problem 3.
Agree to overcome any potential negative ramifications 4.
Agree to overcome any obstacles to implementation 5.
The Thinking Processesare a set of tools to help managers walk through the steps of initiating and implementing a project. When used in a logical flow, the Thinking Processes help walk through a buy-in process:
TOC practitioners sometimes refer to these in the negative as working through layers of resistance to a change.
Recently, the Current Reality Tree (CRT) and Future Reality Tree (FRT) have been applied to an argumentative academic paper.[11]
Development and practice
TOC was initiated by Dr. Eliyahu M. Goldratt, who until his recent death was still the main driving force behind the development and practice of TOC. There is a network of individuals and small companies loosely coupled as practitioners around the world. TOC is sometimes referred to as "Constraint Management". TOC is a large body of knowledge with a strong guiding philosophy of growth.
While TOC has been compared favorably to linear programming techniques,[12]D. Trietsch from
University of Auckland argues that DBR methodology is inferior to competing methodologies.[13][14]
Linhares, from the Getulio Vargas Foundation, has shown that the TOC approach to establishing an optimal product mix is unlikely to yield optimum results, as it would imply that P=NP.[15]
Unacknowledged debt
Duncan (as cited by Steyn)[16]says that TOC borrows heavily from systems dynamicsdeveloped by
Forresterin the 1950s and from statistical process controlwhich dates back to World War II. And Noreen Smith and Mackey, in their independent report on TOC, point out that several key concepts in TOC "have been topics in management accounting textbooks for decades."[17]
People claim[citation needed]Goldratt's books fail to acknowledge that TOC borrows from more than 40 years of previous Management Science research and practice, particularly from PERT/CPMand JIT. A rebuttal to these criticisms is offered in Goldratt's "What is the Theory of Constraints and How Should it be Implemented?", and in his audio program, "Beyond The Goal". In these, Goldratt discusses the history of disciplinary sciences, compares the strengths and weaknesses of the various disciplines, and
acknowledges the sources of information and inspiration for the Thinking Processes and Critical Chain methodologies. Articles published in the now-defunct Journal of Theory of Constraints referenced foundational materials. Goldratt published an article[citation needed]and gave talks[18]with the title
"Standing on the Shoulders of Giants" in which he gives credit for many of the core ideas of Theory of Constraints. Goldratt has sought many times to show the correlation between various improvement methods. However, many Goldratt adherents often denigrate other methodologies as inferior to TOC[citation needed].
Linear programming •
List of Theory of Constraints topics •
Systems thinking—Critical systems thinking—Joint decision traps •
Twelve leverage pointsby Donella Meadows • Constraint (disambiguation) • Thinklets • Throughput •