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Revised ASQ 711 THEORY of CONSTRAINS JUNE 13 2017

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Revised ASQ 711 THEORY of CONSTRAINS JUNE 13 2017 THEORY OF CONSTRAINTS Presented by CHHANUBHAI (C.G.) MISTRY JULY 19, 2017 ASQ 711 THEORY OF CONSTRAINTS AGENDA Introduction Basics of Theory of Constraints TOC The Thinking Process Throughput, Inventory and Operating Expenses Different types of Constraints TOC, Lean and Six Sigma ASQ 701 6/13/2017 2 THEORY OF CONSTRAINTS INTRODUCTION Book: The GOAL Author: Dr. ELiyahu M. Goldratt • What to change---find and use the leverage point • What to change to---create the simple, practical solutions • How to cause the change---build a secure and stable improvement environment. ASQ 701 6/13/2017 3 THEORY OF CONSTRAINTS INTRODUCTION Every process has a constraint (bottLeneck) and focusing improvement efforts on the constraint is the fastest way to improved profitability. TOC heLps to prioritize the improvement activities. TOC heLps to improve bottom Line profits. It heLps to focus on rapid improvements. TOC heLps to identify constrains in compLex systems. ASQ 701 6/13/2017 4 THEORY OF CONSTRAINTS BOTTLENECK ASQ 701 6/13/2017 5 THEORY OF CONSTRAINTS BASICS OF THEORY OF CONSTRAINS • TOC – It is a methodoLogy used to identify the factor most responsibLe for not aLLowing the achievement of throughput at maximum efficiency and output. • It is a scientific approach to continuous improvements • TOC uses Management tooL - Thinking Process. ASQ 701 6/13/2017 6 THEORY OF CONSTRAINTS THINKING PROCESS When reaL constrain is poLicy or practice, Thinking process is very heLpful: • What to change: What core problem bedeviLs the organization • What to change to: What action wiLL provide a breakthrough soLution • How to create the change: Actions needed to create the desired environment and how they can be executed. ASQ 701 6/13/2017 7 THEORY OF CONSTRAINTS THE THINKING PROCESS Management skiLLs needed for Thinking Process • Win-Win conflict resolution • Effective communication • Team buiLding skiLLs • DeLegation • Empowerment • Looking out of the box. ASQ 701 6/13/2017 8 THEORY OF CONSTRAINTS THE THINKING PROCESS THE CHAIN IS AS STRONG AS THE WEAKEST LINK ALL Processes are a chain of events or sub processes that Lead to finaL output product. A simpLe representation may be a link as shown above. ASQ 701 6/13/2017 9 THEORY OF CONSTRAINTS THROUGHPUT, INVENTORY AND OPERATING EXPENSES GOAL – The ultimate goal of any for–profit business is to make profit. TOC, Looks at the three areas mentioned beLow: • Increasing throughput (Money coming in) • Reducing inventory (WIP) (Money tied Inside the process) • Reducing operating expenses (Money Going Out) ASQ 701 6/13/2017 10 THEORY OF CONSTRAINTS THROUGHPUT, INVENTORY AND OPERATING EXPENSES THROUGHPUT: It is the rate at which the entire system generates money through saLes. INVENTORY and INVESTMENT: It is aLL the money the business invests on products it intends to seLL. Inventory incLudes raw materiaL procurement cost, WIP, Purchased parts, outside services, etc. OPERATING EXPENSES: The money spent on converting raw materiaLs and inventory into final finished goods to be sold. It is money going out of the system. ASQ 701 6/13/2017 11 THEORY OF CONSTRAINTS THROUGHPUT, INVENTORY AND OPERATING EXPENSES To achieve the aforementioned goaLs there are five focusing steps: • IDENTIFY the system constraint • Decide how to EXPLOIT the constraint • SUBORDINATE Everything eLse to the decision above • ELEVATE the system constraint • REPEAT the above four steps. ASQ 701 6/13/2017 12 THEORY OF CONSTRAINTS ASQ 701 6/13/2017 13 THEORY OF CONSTRAINTS IDENTIFY THE CONSTRAINT Identify the current constraint (the singLe part of the process that Limits the rate at which the goaL is achieved). Lean Tool used: Value Stream Mapping, Gemba Six Sigma – TooLs from Define stage ASQ 701 6/13/2017 14 THEORY OF CONSTRAINTS EXPLOIT THE CONSTRAINT • Make quick improvements to the throughput of the constraint using existing resources (i.e. make the most of what you have). • Lean TooL Used - 5S, Kaizen, standard work, visual factory or other continuous improvement tooL from six sigma tooL box. ASQ 701 6/13/2017 15 THEORY OF CONSTRAINTS SUBORDINATE AND SYNCHRONIZE THE CONSTRAINT Review all other activities in the process to ensure that they are aligned with and truLy support the needs of the constraint. TooL used: Kanban, Line controL SimiLar to improve stage of Six sigma methodoLogy. ASQ 701 6/13/2017 16 THEORY OF CONSTRAINTS ELEVATE THE PERFORMANCE OF THE CONSTRAINT If the constraint stiLL exists (i.e. it has not moved), consider what further actions can be taken to eLiminate it from being the constraint. NormalLy, actions are continued at this step untiL the constraint has been “broken” (untiL it has moved somewhere eLse). In some cases, capital investment may be required. Lean tooL used: SMED, Poka Yoke, Jidoka, TPM VaLue Stream Mapping Six Sigma stage: Improve ASQ 701 6/13/2017 17 THEORY OF CONSTRAINTS REPEAT THE PROCESS The Five Focusing Steps are a continuous improvement cycle. Therefore, once a constraint is resoLved the next constraint shouLd immediateLy be addressed. This step is a reminder to never become compLacent – aggressively improve the current constraint…and then immediately move on to the next constraint. Six Sigma stage: ControL and move forward with next constrain ASQ 701 6/13/2017 18 THEORY OF CONSTRAINTS EXAMPLE Process 1 Process 2 Process 3 Process 4 Process 5 • Capacity • Capacity • Capacity • Capacity • Capacity 20 Units 22 Units 15 units 23 units 18 units per day per day per day per day per day ASQ 701 6/13/2017 19 THEORY OF CONSTRAINTS EXAMPLE Where is the constraint in the process chain? Process 3 We have to increase the productivity of the process by various means. Use Lean and Six Sigma to provide a very efficient process producing say 23 units per day. Where is the constraint now? Process 5. FoLLow the same ruLe and appLy TOC, Lean and six Sigma to provide a continuous improvement to the overaLL system. ASQ 701 6/13/2017 20 THEORY OF CONSTRAINTS TYPES OF CONSTRAINTS 1. Resources 2. MateriaL 3. PoLicy 4. PoLiticaL 5. Market ASQ 701 6/13/2017 21 THEORY OF CONSTRAINTS CONSTRAINTS Resource constraint • SkiLLed Labor and operators • PhysicaL Location • Transportation ASQ 701 6/13/2017 22 THEORY OF CONSTRAINTS CONSTRAINTS MateriaL Constraint: • Shortage in the market • MateriaL banned by circumstances beyond control ASQ 701 6/13/2017 23 THEORY OF CONSTRAINTS CONSTRAINTS PoLicy Constraint • The way the company choses to operate • System procedures constraint ASQ 701 6/13/2017 24 THEORY OF CONSTRAINTS CONSTRAINTS PoLiticaL Constrains: • This constraint depends on politicaL conditions. A good exampLe is the OiL pipeLine from ALaska to Texas via Canada • Another good exampLe can be the internationaL poLiticaL situation Like the worldwide reduction of poLLutants to stop erosion of Ozone Layer.. ASQ 701 6/13/2017 25 THEORY OF CONSTRAINTS CONSTRAINTS Market Constraint • This affects gLobaL companies that ship raw materiaLs and products across the globe. • Another fact is change in technoLogy that can bring constraints. • Global Competitions forcing changes to current processes. ASQ 701 6/13/2017 26 THEORY OF CONSTRAINTS Integration of TOC, Lean and Six Sigma Harmonizing interaction of TOC, Lean, and Six Sigma in a synergic way yields significantly larger financial resuLts than appLying these techniques individuaLLy. ASQ 701 6/13/2017 27 THEORY OF CONSTRAINTS • BALANCING ASQ 701 6/13/2017 28 THEORY OF CONSTRAINTS Integration of TOC, Lean and Six Sigma • Step one is to Use TOC for identification of area needing improvement. • Next step is to appLy Lean and eLiminate the seven wastes. • After the system is fLushed out of aLL wastes, the next step is to use Six sigma if necessary to reduce the variation in the process and get maximum error free outputs. ASQ 701 6/13/2017 29 THEORY OF CONSTRAINTS SUMMARY TOC is the starting point of continuous improvement activity. It points to the weak Link which is expLoited and removed as bottLeneck This wiLL open up next bottle neck and so on tiLL a baLanced system is obtained. TOC is used in conjunction with Lean. Six Sigma and aLso 8D root cause corrective action systems. It couLd be the root cause of company not able to produce desired profits. Greatest advantage is achieved by looking at the business as a system of systems and encompassing the whole chain of SIPOC. ASQ 701 6/13/2017 30 THEORY OF CONSTRAINTS THANK YOU ❓ ASQ 701 6/13/2017 31.
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