TOC_PMPINSA_English_Version_20081219
TOC_PMPINSA_English_Version_20081219
Constraints
J.Skorkovský, PhD.; KPH ESF MU
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Introduction
2
Introduction
Author: Eliyahu Moshe Goldratt
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The Goal by Eliyahu Goldratt
The goal of a manufacturing company?
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Introduction -novels
TOC has became popular particularly thanks to the novels :
The Goal - A Process of Ongoing Improvement
It
It´´s Not Luck
The Race
The Critical Chain
The Haystack Syndrome
Necessary But Not Sufficient
Late night discussion
TOC was together with TQM (Total Quality Management )
and JIT (Just-
(Just-In-
In-Time) TOC classified as one of the most
important managerial methods
methods of the last two decades of the
twentieth century .
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Some impacts of TOC implementation
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Some impacts of TOC implementation
Revenue: $3,000,000,000
Number of employees: 15,000
Implementation Date: 1991
TOC Applications: DBR
Comment:: Drum-
Comment rum-Buffer
uffer--Rope : will be presented later in
this course)
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Some impacts of TOC implementation
IMPLEMENTATION RESULTS
Inventory Decrease: Reduced 100 million dollars (50%)
On
On--time performance: From 89% - to 98%
Lead times: From 6.4 days with JIT to 2.6 days
Cost efficiency: Reduced floor space by 57%
Quality: Reduced quality defects by 50%
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LEAD Time explanation-
explanation-purchase
Quantity
Ordered Quantity
Lead time
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LEAD Time explanation-
explanation-purchase
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LEAD Time explanation-
explanation-production
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Some impacts of TOC implementation
Revenue: $8,000,000
Number of employees: 100
Implementation Date: 2000
TOC Applications: DBR
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Some impacts of TOC implementation
IMPLEMENTATION RESULTS
Revenue Increase: 28% Yr 1; 17% Yr 2
On
On--time performance: From 70% - To 98%
Lead times decrease: 20 %
Net profit increase: over 300%
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Some impacts of TOC implementation
MOTOROLA
GENERAL MOTORS
BAE SYSTEMS
………
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Measuring the goal (TOC metric)
Net profit (NP=T=OE) : ( T,
T, I and OE will be explained later in
this course)
Cash
Return on Investment (ROI=NP/I)
(ROI=NP/I)
For a manufacturing enterprise, the goal can also be measured by:
by:
Throughput
Inventory
Operating Expenses
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Definition (TOC metric)
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TOC
A B
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Process Theory – more complex than one way chain
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Process Theory – more complex than one way chain
RM FG
Raw Material Linear or “I” system FG Finished Goods
RM RM
RM
RM
RM
RM
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RM
TOC – system approach
Organizations / Systems exist for a purpose
That purpose is better achieved by cooperation of
multiple, independent elements linked together
Each Inter-
Inter-linked event depends in some detail upon
the other links.
The system owner determines purpose
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TOC
Most real systems could be seen in such a way, that
there are only a few or better only one element
(factor),, which is the key point, where and only there
(factor)
all possible managerial methods have to be focused
in order to control whole system
„Every system is based on inherent simplicity”.
simplicity”.
This element in TOC is called Constraint of the
system = bottleneck
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23
TOC-- bottleneck I
TOC
Different link capabilities, normal variation
and changing workload make it impossible to balance
everything.
One element of the system is more limited than another.
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TOC-- bottleneck II
TOC
When the whole system is dependent upon the cooperation
of all elements, the weakest link determines the strength of
the chain.
An exactly balanced chain (system) is stronger than a non-
non-
homogeneous chain, but when close to the breaking point, all
links must be managed
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TOC
Why constraint ?
Constraint pre
prevents to reach the goal (make money now
and in the future)
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TOC : of the costs
Traditional approach – world of where the aim ooff
any endeavour is to optimize locally every segment
chain, meaning balancing the capacity of
of the chain,
every element and not the flow through the chain
Maximization of the efforts
Shipment
Marketing
Orders Packaging
Purchase Production
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TOC : of the throughput
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TOC
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TOC
World of costs: World of throughput:
main metric – the main metric –the
weight of the chain compactness of the
(every decrease of the chain
weight of any Only improvement of
components will result bottleneck will improve
in better efficiency performance of the
(performance) whole chain
Total improvement = Total improvement =
sum of local improvement of the
improvements bottleneck
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Life show
http://www.tocca.com.au/
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TOC
Five steps process:
Step 0. Identify the Goal of the System/Organization
Step 0.5 Establish a way to measure progress to Goal
Step 1. Identify the system’s constraint.
Step 2. Exploit the system’s constraint.
Step 3. Subordinate everything else to the above decision.
Step 4. Elevate the system’s constraint.
Step 5. If a constraint is broken (that is, relieved or improved), go back
to Step 1. But don’t allow inertia to become a constraint.
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TOC
„Cost Accounting is enemy number one of
productivity“.
productivity “. *
Impact on the behaviour of the people and they
habits of finding and improvements of local elements
having reason in optimising of these particles.
New metrics were introduced – already presented
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Throughput
TOC –required trends
Operational Expense
Inventory
T,I,OE,NP and ROI example
NP=T-OE
NP=T-
ROI=(T--OE)/I=NP/I
ROI=(T
where T=total throughput
A B C D E
10 13 7 9 11
A B C D E
10 13 7 9 11
CCR=Capacity
CCR=Capacity
Constraint Resource=
=weakest link
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T,I,OE,NP and ROI example
T will not increase
NP (net profit) will decrease based on increased OE (41,67 USD /month)
Based on NP decrease ROI is negative
Bad suggestion !!!!!!
A B C D E
10 13 7 9 11
CCR=Capacity
CCR=Capacity
Constraint Resource=
=weakest link
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T,I,OE,NP and ROI example
2nd suggestion is to optimize C from 7-
7->7,1 parts/hour
part of the 2nd suggestion is an extra load of E so it goes
from 11-
11->10
Necessary investment is 5000 USD
Increase of the production/month = 0,1*176=17,6 parts
Increase of the company T= 17,6*65 USD= 1 14 144 USD
A B C D E
10 13 7->7,1 9 11
11-->10
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T,I,OE,NP and ROI example
Necessary investment is 5000 USD = I
Increase of the production/month = 0,1*176=17,6 parts
Increase of the company T= 17,6*65 USD= 1 1 14
44 USD
OE/month =(5000 * 0,1)/12= 41,67 -> 42 USD
OE will be increased by 41,67 USD/month
Annual increase of the NP = (T-
(T-OE)*12=(
OE)*12=(11441144--42)*12 =13 244 USD
ROI=NP/I = 13 244244//5000 = 265 % !!!
T does not measure local efficiencies, except at the constraint
A B C D E
10 13 7->7,1 9 11
11-->10
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Implementation of TOC is complicated switchover
process
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Implementation of TOC is complicated switchover
process
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Implementation of TOC is complicated switchover
process
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Socratic teaching
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Implementation of TOC is complicated switchover
process
1. What to change?
2. To what to change to ?
3. How to make the change happen?
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Implementation of TOC is complicated
switchover process
What to change?
Objectives : Situation assessment, description of “current
reality,” and identification of the core problem or conflict and
assumptions that sustain it. Diagnosis, systemic root cause analysis.
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RESISTANCE
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Implementation of TOC is complicated
switchover process
To what
what to change?
Objectives : Verbalization of vision/solution, description of strategy to attain
the desired state, and avoidance of undesirable side effects. Prescription, decision-
decision-
making, and solution development.
Layers of resistance:
Lack of agreement on a possible direction for a solution
Lack of agreement that the solution will truly address the problem
Concern that the solution will lead to new undesirable side effects (“Yes,
but…”)
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Thinking Process Tools
offer the answers to three TOC questions about
changes
help to clear away every layers of resistance
visualisation of the thinking process
verbalization of the thinking process
use of casual logic (cause ->effect)
use of sufficiency logic - „IF - AND - THEN“
use of necessity logic - „IN ORDER TO - THEN - BECAUSE“
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Thinking Process Tools
Necessity logic
IN ORDER TO - THEN - BECAUSE
I am eating truffles
I will survive
every day
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Thinking Process Tools
Sufficiency logic
IF - AND - THEN
I have in my room a
lot of light
AND
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We have to solve the crucial question:
what is a core problem (what should be changed)
A tool for solving such a task : Current Reality Tree
Why to change something and what is something (core
problem=constraint, bottleneck)
Summary of all undesirable effects (UDE) and their layout
based on casual logic - sufficiency logic
Core Problem – common cause of all UDE
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We have to solve the crucial question: what is
a core problem (what should be changed)
UDE 1
UDE 5
UDE 8 UDE 9
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We have to solve the crucial question: what is
a core problem (what should be changed)
Causality:
IF a lot of snow AND snowboarding in restricted area THEN avalanche
AND
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We have to solve the crucial question: what is
a core problem (what should be changed)
Necessity logic:
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Current Reality Three
I am alone
I am obese
(overweight)
No rendezvous No girl
Oversupply of
calories
I am very shy I visit often
No time for
to negotiate
rendezvous
fast food
dating
List of UDE´
UDE´s :
UDE1 : lack of financial consultants (FC)
UDE2 : late hand-
hand-over of required services during implementation and support
UDE3 : a modern design of ERP is not easily understood by rigid customer´
customer´s
accountants
UDE4 : the customer´
customer´s accountants tend to use old fashioned methods and
processes which are difficult to manage by using a modern ERP
UDE5 : rigi
rigid
d remuneration do
doees not allow to pay more FC than the others
UDE6 : high level of fluctuation and job-
job-hopping
UDE7 : overburdened FC as a consequence of bad multitasking (will (will be explaine
explained
later in Critical Chain PWP)
UDE8 : FC are fed up by permanent repetitive explanation to the customer
customer´´s
accountants who do no want to understand
UDE9 : bad multitasking
UDE10 : FC are unhappy because of a salary, which is much more lower then their
expectations
UDE11 : The management sticks to Cost world and tend to decrease costs by
minimising payroll and having all resources as a CCR (Critical Constraint Resources)
UDE12 : Customer is unhappy
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Current reality three
Customer is unhappy
1
12
10
8
7
4
9
5 3
11
ROOT PROBLEM
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We have to solve another crucial question:
the direction of solving a core problem
(what is the main reason (injection) supporting the change)
Evaporating Cloud Tree
the change without any compromise - basic and starting
impulse for the change
„necessity logic“
use of „necessity logic“ – common goal, necessary condition
to reach this goals, what have to be done and where is a
conflict
„well thought out from the scratch“
scratch“ of the problem,
disclosure and verbal definition of hidden assumptions
Win--win solution of the whole conflict = injection
Win
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We have to solve another crucial question:
the direction of solving a core problem
Requirement Prerequisite
Necessary
Activity D
condition B
Objective
Goal A Conflict
Necessary
Activity D´
condition C
Requirement Prerequisite
Evaporating Cloud tree ( a conflict tree, a conflict resolution diagram) 59
How to read this Evaporation tree
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Evaporation cloud tree-
tree- example 1
Performance Management
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Evaporation cloud tree-
tree- example 2
Implementation of TOC
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Evaporation cloud tree-
tree- example 3
idea FRT
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Future Reality Tree (FRT)
The FRT is similar to the CRT in structure, but with new proposed actions,
policies, and behaviour injected into it in order to create a new vision of
system.
the future reality of the system.
"if--then
The power of the logical "if then"" construction is that if any one of the
lower--level causes are removed or mitigated, everything that is above it is
lower
subject to change.
If any one of the three „IFs
„IFs“ are removed or modified, the „THEN „THEN“ may be
removed from consideration as a problem
I do not have
FRT a fire
CRT I have
a fire
INJECTION
I do not have
I have I have I have I have I have
oxygen in contact
fuel ignition oxygen fuel ignition
with fuel
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Future Reality Tree (FRT)
DE
DE
DE
DE
Injection
DE
DE DE
Sales increase
Market share increase
Competitive
price More flexible reaction
Stock value
decreased to requirements
Cost Delivery due date
decrease performance improved
Better
liquidity
Higher efficiency
ATP,CTP
of resources
NEW ERP
IMPLEMENTATION
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YES,, this could be managed BUT
YES BUT……
……
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YES,, this could be managed BUT
YES BUT……
……
FC will be partly satisfied The result could be worse that
others will be angry the current situation
(Prerequisite Tree):
Tree):
use of necessity logic – identification of obstacles
use of the human ability to invent any reason
WHY IT IS NOT FEASIBLE
setup of the necessary intermediate objectives
setup of the schedule for change process
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We cannot implement it, because…..
(Prerequisite Tree):
Tree):
The pre-
pre-requisite tree ought to be considered the most important tree in
the Thinking Process suite.
It is the tree that allows us to overcome the obstacles that stop us from
implementing our plan.
It is also the tree that in fact becomes the implementation plan. And it is
the tree to which timelines, responsibilities, and accountabilities can be
assigned to. It is also the tree that I have most often seen skimmed over.
There is an English saying that you can plan to fail, or you can fail to plan.
The pre-
pre-requisite tree occupies the position of “plan” amongst the
Thinking Process tools.
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Prerequisite tree - construction
So our first step will look like this
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after obstacles
were overcome
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Prerequisite tree - example
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Prerequisite tree - example
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We cannot implement it, because…..
(Transition Tree):
detailed schedule of change implementation process
what actions have to be taken in order to reach
intermediate objectives using sufficiency logic (IF-
(IF-
THEN--ELSE)
THEN
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We cannot implement it, because…..
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We cannot implement it, because…..
Action
Reason
Need
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Thinking Process Tools Relationships
DE
CRT FRT
UDE DE
DE
DE
UDE UDE
UDE
Injection
UDE (DE) NBR-
DE
UDE
UDE (DE)
Příčina UDE UDE Evaporating DE DE
cloud tree
UDE Příčina Injekce
UDE
Injekce
Injekce
Injekce
CP Opposite OBJ
Top
Objective=injectio
n O
Injection
B
5
OB
OB 4
3 IO 7
TT IO 2
IO 2
IO 6
O
O B
REASON NEED ACTION 2
B
1 IO 5
IO 4
IO 1
Prerequisite tree
Starter IO 3
REASON NEED ACTION
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Additional metrics of TOC (appendix 1)
Inventory dollar days (IDD)
A measure of the effectiveness of a supply chain – i.e., did it do things that
it shouldn’t have done and as a result is the supply chain holding
inventory of products the customer doesn’t want? IDD accounts for two
things: 1. the time from when a unit is placed in stock until it is actually
needed by a customer; and, 2. the monetary value of the inventory being
held. IDD is calculated by multiplying the monetary value of each
inventory unit on hand by the number of days since that inventory
entered the responsibility of that link. The system should strive for the
minimum IDDs necessary to reliability maintain zero throughput dollar
days.
NOTE: The resulting unit of measure is "dollar-
"dollar-days". It is neither
monetary nor time based. Attempts to compare dollar-
dollar-days to other
monetary measures are invalid. IDDs can be compared only to other IDD
levels.
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Additional metrics of TOC (appendix 2)
Throughput dollar days (TDD)
A measure of the reliability of a supply chain. TDD considers two things: 1.
the monetary value of the things a link is committed to deliver but does
not; and, 2. the number of days by which the link misses its commitment
to deliver. TDD is the summation of the commitments not delivered on
time during the chosen time period. The TDD value of individual missed
commitments is calculated by multiplying the dollar value of the end
product times the number of days the commitment is/was overdue. The
system should strive for zero throughput dollar-
dollar-days.
NOTE: The unit of measure "dollar-
"dollar-days" is neither monetary nor time
based. Attempts to compare dollar-
dollar-days to other monetary measures are
invalid. TDD levels can be compared only to other TDD levels.
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Literature
Goldratt, E., M.:
The Goal
The Race
It is Not Luck
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Internet
www.goldratt.cz
www.goldratt.com
www.toc--goldratt.com
www.toc
www.focusedperformance.com
www.tocc.com
www.tocca.com.au
www.ciras.iastate.ecu/toc/
http://www.ciras.iastate.edu/library/toc/measurements.a
sp
……...
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