© washington state university-20101 fundamental exam review toc philosophy segment the theory of...

© Washington State University-2010 1

Fundamental Exam Review

TOC Philosophy Segment

The Theory of Constraints

[email protected]://www.engrmgt.wsu.edu/

James R. Holt, Ph.D., PEProfessor

Engineering Management

mailto:[email protected]

http://www.engrmgt.wsu.edu/


Larger ProcessInput Output

Input Process Output Input Process OutputInput Process Output

Process Theory

Input Process Output


Systems Concepts

• Organizations / Systems exist for a purpose

• That purpose is better achieved by cooperation of multiple, independent elements linked together

• Each Inter-linked event depends in some detail upon the other links.

• The system owner determines purpose


There is a “Weakest Link”

• Different link capabilities, normal variation and changing workload make it impossible to balance everything.

• One element of the system is more limited than another.

• When the whole system is dependent upon the cooperation of all elements, the weakest link determines the strength of the chain.

100


Interconnections are non-Trivial

• Every Systems have relatively few constraints The generic problem with physical systems The Five Focusing Steps The Generic Physical Solution

• Physical and Non-Physical Processes Flow systems (I, A, V, T structures / combinations) Distribution and Supply Chain Management control of these systems


Interconnections are non-Trivial

• A simple chain over simplifies reality

• Link 1 has a relationship with Link 5

• Link 5 has a different relationship with 1

1 2 3 4 5 6 7 8 9


Management of the Links Vs. Linkages

1 2 3 4 5 6 7 8 9

• Maybe the Simple Chain isn’t so simple

Link 1 and 2 can get togetherand lean on Link 3 or Link 8

Link 8 and 9 can combine to push on both Link 6 and Link 7

There are 40,000 first order effects

and 1,000,000+second and higher

order effects!


Traditional Approach:Divide and Conquer

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

• Which is harder to manage? Left or Right?

Left Right


Complexity Simplicity

• Controlling many independent parts requires many independent control mechanisms.

• Controlling many interconnected parts only requires controlling the one part (for few parts) that determine the resulting actions of the rest of the parts (Steering, Accelerator and Brake).

• Find the Constraint to the System and Every System is Simple.


The Five Focusing Steps

Step 1. IdentifyIdentify the system’s constraint.

Step 2. Decide how to Decide how to ExploitExploit the system’s constraint.

Step 3. SubordinateSubordinate everything else to the above decision.

Step 4. ElevateElevate the system’s constraint.

Step 5. WARNING, WARNING! If a constraint is broken, go back to Step 1. But don’t allow InertiaInertia to become a constraint.


The Problem: People Measure Operational Efficiency

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

Process A B C D E

RM FG

CapabilityParts 7 9 5 8 6per Day

Excellent Efficiency--Near 100%Chronic Complainer

Too Much Overtime

MarketRequest

11


Reward Based on Efficiency

• Work flows from left to right.

Process A B C D E

CapabilityP/D 7 9 5 8 6

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

RM FG


What Happens In Reality...

Process A B C D E

PotentialP/D 7 9 5 8 6

Reality 5 5 5 5 5

• Processes A and B won’t produce more than Process C for long.

RM FG


Then, Variability Sets In

• Processing times are just AVERAGE Estimates

Process A B C D E

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

RM FG


What’s an Average? 50%

Process A B C D E

Reality 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2Probability 0.5 0.5 0.5 0.5 0.5

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

• Probability of being 5 or more on the same day:

Two at a time: 0.25 0.25

Over all: 3% Chance of 5 per day

RM FG


Traditional Solution: Add Inventory

WIP 5 5 5 5 5 Total 25ProcessA B C D E

Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2Process

• Put a day of inventory at each process!

RM FG


System Variability Takes Over--Chaos

WIP 3 0 10 8 4 Total 25

Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2ProcessInventory (WIP) quickly shifts position.Inventory manager/expediter tries to smooth it out.Shifting work-in-process creates large queues at somelocations. This makes work wait longer to be processed. Distribution problems result.Costs go up.

RM FG

An Average of 5 means sometimes 3 and some times 7

Process A B C D E


System Variability Leads to Starvation

WIP 3 0 10 8 4 Total 25

Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2ProcessSome workstations can be starved for work. Management hates to pay for idle resources.So...

RM FG

Process A B C D E


Starvation Leads to More Inventory

WIP 3 5 10 8 4 Total 25

Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2ProcessSo… Management Helps! Management puts in more work(Inventory) to give everyone something to do! Result: It takes longer and longer from time of releaseuntil final shipping. More and more delay!

RM FG

Process A B C D E

X 30


Attempts to Control WIP


Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2ProcessJust-In-Time uses Kanban Cards to limit the queuesbuilding in the system. No more than 5 parts are allowed at any station.Looks good, but is it?

• Put a Lid on It-Use Kanban Cards-JIT

RM FG


Effects of Inventory Limits on Production


Variable 5+/-2 5+/-2 5+/-2 5+/-2 5+/-2Process

• What does a Kanban card of 5 Mean?

RM FG

5+/-2Average = 5

BeforeKanban

5+/-2Average = 3.5

Can’t exceed

5

AfterKanban


Operation’s Dilemma

Injection: Put a large inventory where its needed and low inventory everywhere else!

Manage productioneffectively

Produce a lot

Costs & delivery in

control

Increase work-in- process

Decrease work-in-process

Assumption:

We can’t both increase WIP and decrease WIP at the same time.


The Five Focusing Steps

Step 1. IdentifyIdentify the system’s constraint.

Step 2. Decide how to Decide how to ExploitExploit the system’s constraint.

Step 3. SubordinateSubordinate everything else to the above decision.

Step 4. ElevateElevate the system’s constraint.

Step 5. WARNING, WARNING! If a constraint is broken, go back to Step 1. But don’t allow InertiaInertia to become a constraint.


The Five Focusing Steps Applied to Flow Operations

A B C D E

7 9 5 8 6

WIP Total

Step 3. Subordinate Everything Else (Rope)

Step 4. Elevate the Constraint ($?)

X 5.5

Step 5. If the Constraint Moves, Start Over

XXX7

Five Focusing Steps

RM

Step 1. Identify the Constraint (The Drum)

FG

Step 2. Exploit the Constraint (Buffer the Drum)

12 12


FG

Understanding Buffers

A B C D E

7 9 5 8 6

RM

• The “Buffer” is Time! • In general, the buffer is the total time from work release

until the work begins work at the constraint.• Contents (positions of the WIP) in the buffer ebb and flow

over time.• If different items spend different time at the constraint, then

number of items in the buffer changes depending upon product mix.

• But, the “Time in the buffer remains constant”“Time in the buffer remains constant”.

WIP Total 12/5=2.5 Days


We need more than one Buffer

FG

A B C D E

7 9 5 8 6

RM

There is variability in the Constraint. To protect our delivery to our customer we need a finished goods buffer.

Finished Goods Buffer

There is variability in our suppliers.We need to protect ourselves from unreliable delivery.

Raw Material Buffer


Buffer Time is Constant-Predictable

FG

A B C D E

7 9 5 8 6

RM

Finished Goods Buffer

Constraint Buffer

2.5 Days

Raw Material Buffer

Finished Goods Buffer1 Day

Processing Lead Time is Constant!

Raw Material Buffer2 Days


FG

Capacity Constrained Resource Buffer Management

A B C D E

7 9 5 8 6

RM

Constraint Buffer WIP Total 12/5=2.5 Days

Time until Scheduled at Constraint

0 2.5 Days

WO17

WO14WO15WO16

WO10WO11WO12WO13

WO18WO19

• The Constraint is scheduled very carefully

• Buffer Managed by location• Individual activities in the

buffer are not scheduled

WO21WO20


A B C D E

FG

Problem Identification

7 9 5 8 6

RM

Time until Scheduled at Constraint

02.5 Days

WO10

WO20 WO12WO13WO21

WO15WO16WO17

WO18

WO19Delayed

PartsWO11

WO14WO19

WO19 OK (GreenGreen)

Watch WO14 (YellowYellow))

Constraint schedule is in jeopardy!

(RedRed Zone Hole)

RM


The TOC Approach to Solving Problems

• The Five Focusing Steps are a Subset of the Three Main Questions What to Change?

• This question deals with finding the Constraint of the System.

What to Change to?• This question deals with what is needed to solve the

problems. How to Cause the Change?

• The emphasis on the last question is ‘cause’. What few actions will we do to cause the system to change itself.


Conflict Management

• Conflicts Exist. They are evidence improvement is needed (conflicts are problems). What to change? What to change to? How to cause the Change?

• A well worded Conflict is half the Battle.

• Conflict is based upon a mutually desirable Goal

• Conflict is based upon different Needs requiring different Actions

• The different Actions are opposites (The Conflict)


The Evaporating Cloud

A. The Goal

B. My Need

C. Other’s Need

D. What I Want

D’. What the

Others Want


Creating the Evaporating Cloud

D. What I Want

1. What is it that I Want (that I’m having trouble getting)?



D. What I Want

D’. What the

Others Want


2. What is it that the Others Want (that I don’t want them to have)?



B. My Need

D. What I Want

D’. What the

Others Want



3. Why do I want what I want? What Need am I trying to fulfill?



B. My Need

C. Other’s Need

D. What I Want

D’. What the

Others Want




4. Why do the Others want what they want? What Need do they have?



A. The Goal

B. My Need

C. Other’s Need

D. What I Want

D’. What the

Others Want




4. Why do the Others want what they want? What Need do they have?

5. What Goal do we mutually share? Why are we still arguing?

Reading the Cloud:In order to <point> I must have <tail>.


Let’s Do Some Examples

A. We all are ready for the Fundamental

Exam

B. Learn a lot about

what I wnat

C. Get through all the topics

D. I want to ask a lot of questions

D’. Depack doesn’t take

over.


The Approach to Solving Problems

• There are Three Main Questions What to Change?

• This question deals with finding the Constraint of the System.

What to Change to?• This question deals with what is needed to solve the

problems. How to Cause the Change?

• The emphasis on the last question is ‘cause’. What few actions will we do to cause the system to change itself.


Communicating the Evaporating Cloud

A. The Goal

B. My Need

C. Other’s Need

D. What I Want

D’. What the

Others Want

5. And you WANT to meet your Need as well.

3. Acknowledge the Other side Wants to act on meeting their Need.

4. Point out that you also have a significant Need.

2. Recognize you understand the Other’s Need must be meet to reach the Goal.

1. Start the Mutual Goal. It is common ground. Both interested.

Reading the Cloud:In order to <point> I must have <tail>.


Evaporating the Evaporating Cloud

A. Manage Production Effectively

B. Produce a

Lot

C. Keep Costs and Delivery

in Control

D. Increase the Work-In-

Process

D’. Decrease

the Work-In-Process

Assumption: We are measured upon our Production Level

Assumption: All machines must be keep busy all the time.

Assumption: We can’t increase WIP and Decrease WIP at the same time.

Assumption: WIP is expensive. High WIP delays flow time.

Assumption: Our profits are not high. Customers demand on-time delivery.


Jobs Process Flow

Projects Are Handled the Same Way

A B

C D

Type I A->B->C->D

Type III A->B->B->DType IV C->B->A->B

Resources A, B, C, D each receive work as it flows in different patterns

Each Job type has four days of processing for the four resources.Hum? Release one job per day and every body is busy. Right?

Type II C->A->B->D


TDD=Effectiveness in DeliveryIDD =Effective use of resources (and tracking improvements)

Projects Are Handled the Same

Jobs Process FlowA B

C D

Type I A->B->C->DType II C->A->B->DType III A->B->B->DType IV C->B->A->B

There are 16 processes on the 4 job times but 6 of them go through B. C and D only have 3 processes.

Internally, B is the constraint. We can treat it just like the product line


Projects are Balancing Acts

Quality andScope

Timing andSchedule

BudgetedCosts


Then things Combine

Precedence Structure

Statistical Variation

HumanBehavior

Quality andScope

Timing andSchedule

BudgetedCosts


And Reality Sets In

Quality andScope

Timing andSchedule

BudgetedCosts

Precedence

Structure

Statistical Variation Human

Behavior

Bumpy Road of Reality


The Project Dilemma

• There is Always a Trade-Off

Meet Original Commitments

Meet Commitment

in Danger

Compensate for Early Mis-

Estimates

Not Jeopardize

Other Original Commitments

Not Compensate for Early Mis-

estimates


Resolving Project Problem Options

Meet Original Commitments

Meet Commitment in

Danger

Compensate for Early Mis-Estimates

Not Jeopardize Other Original Commitments

Not Compensate for Early Mis-

estimates

Add more time&money and decrease scope

Use our Safety Buffer Correctly


Consider the Aspects of Projects

Good Statistics

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


Typical Activity Duration

Mean

Standard Deviation

Normal Duration Time

Mean50% Probable

85% Probable

Project Task Duration Time


So, what is the Behavior?

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

Assigned Date

Time-->

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

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

Level of Effort

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

shows most tasks complete on or after the due date


Engineering Perpetual Motion (overtime)

Assigned Date

Time-->

Level of Effort

NormalWork Load

Actual Work Load


The result is Bad Multi- Tasking

A1

A2A3

B1

B2B3

Ten Days Each Task

Project Manager A

Project Manager B


Politically Correct Schedule

A1 A2 A3

B1 B2 B3

10 20 30 40

30 Days Flow

50


More Like Actual Schedule

A1 A2 A3

B1 B2 B3

10 20 30 40

40 Days Flow

50


Elements of the Project Management Solution

• Prioritize

• Don’t Schedule Conflicts

• Avoid Bad Multi-Tasking

• Don’t Release Too Early/Too Late

• Buffer Critical Chain Buffers: Project / Feeding / Resources

• Schedule 50% Estimate Completion

• Communicate “Time Remaining”

• Negotiate Capability Not Dates

• No Milestones


TOC Flow Time

A1 A2 A3

B1 B2 B3

10 20 30 40

20 Days Flow

50


Don’t Schedule Conflict

Before

After TOC Leveling


Buffer the Project and NOT Individual Activities

Before with 85% Estimates

TOC Aggregated Buffer of Activities

Task Task Task Task Buffer

Task Buffer

Actual 50% Estimates with Individual Buffers


Protect the Critical Chain

Project Buffer

Feeding Buffer


Buffer Resources on the Critical Chain

Project Buffer

Feeding Buffer

Lt. Green be readyBuffer

Blue be ready

Green be ready

Cyan Resource be ready


The Simple Line Diagram Was Too Simplistic

RM FG

Aircraft assembly is more of an “A” Plant

RMRM

RMRM

RM

RM

RMRM

RM

FG


The “A” Plant Has Some Long Duration Processes

RMRM

RMRM

RM

RM

RMRM

RM

FG


Pull Tight the Longest Path (and Shake)

RM

RM

RM

RM

RMRM

RM

FG

RM RM

Fastest Possible Flow Time (Critical Path)

Critical Assembly Joins


How Could we Fairly Measure Feeder Chains?

RM

RM

RM

RM

RMRM

RM

FG

RM RM

TDD-On Missed Delivery to main line

IDD-On Effective Use of Resources (and monitoring improvements) Hum? Could this also

apply to suppliers?


There is an Injection for Every Conflict

• Arrow Assumption Injection

• ABProductive Deliver Max Capacity

• ACCost Effective Price on Value

• BDBusy Machines Keep Constraint 100%

• CD’ Expensive WIP Throughput Focus

• D/D’ Can’t do Both Buffer Constraint only

Chosen Injection:Focus on the Capacity Constrained Resource. Release work to the system at the rate of the Capacity Constrained Resource a Buffer Time in Advance (no sooner, no later).Use Buffer Management to improve the system.


The Key Points of TOC Solutions

• TOC only accepts Win-Win Solutions Win-Lose, Lose-Win, Lose-Lose are

unacceptable.

In the Evaporating Cloud, The Goal is achieved! Usually, both sides needs are met.

Everyone is happy.• Stake Holders, Employees, Customers, Economy,

Ecology, Behaviors, Friendships (even competitors benefit).


Sometimes TOC Solutions Are Counter Intuitive

• DBR: To get more out, put less in.

• CCPM: To finish project sooner, delay the Start.

• CCPM: To be safer, remove the safety.

• Replenishment: To get your products quicker to the customer, store them farther away.

• To Solve the Conflict, Ignore the conflict.

• To Make More Money, Sell at below Cost.

If you can’t find an injection, then just do what is opposite of what everyone else is doing (and do whatever it takes to make it work).

Core TOC Concepts

Wish to have a meaningful life

Enough meaningful successes

Stamina to overcome failures

OpportunitiesCollaborate with

people

Think clearly

Overcome four obstacles

Don’t accept conflicts

Overcome perception that

reality is complex

Don’t think you know it all

Avoid blaming

Every conflict can be removed

Every situation is simple

Every situation can be substantially

improved.

There is always a win-win solution

This is Efrat’s logic diagram of The Choice as shown at the TOCICO International Conference in Tokyo, Japan, November 2009. Recorded by James Holt

This is necessary based logic but the arrows are shown going in the opposite direction (because that is how most people would interpret them. “If you want (tail of arrow) you need to have (head of arrow).”


Next Topics

• TOC Thinking Processes

• TOC Applications Operations Project Management Replenishment

• TOC Finances and Measures

• Some TOC Philosophy will be blended into these additional topics.

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