Just in Time and Theory of Constraints

Textbook Readings

 Chapter 8, pages 322-345; Chapter 20, pages 788-824 

Videos on CD

 Just_In_Time_Defined, JIT_Little, Waste_Defined 

Downloads or Links

 Linear Programming Example

Deliverables (% Value)

Due: June 8
  1. Identify waste areas for your "Class process". Determine the source of each waste and propose ways to eliminate it. What about a JIT type process implementation? (30%) 
  2. Utilize the TOC concepts to find the bottleneck resources in the CP or in the organization. Propose ways in which the bottleneck(s) can be eliminated, or at least improved (besides just adding staff or equipment). What about a modification of the Drum-Buffer-Rope approach? (30%) 
  3. Problem #6 in Excel. (20%) 
  4. Problem #8 in an Excel Spreadsheet. Set up as a Linear Program (see page 293 for a refresher in LP formulations and see the example Excel file). (20%)   - Include #3 and #4 in one spreadsheet (separate worksheets).

Additional Notes

Identification/Elimination of Waste

Waste is defined as all the excess material, resources, and time used during the transformation process. Basically, any step on a process that does not add value to the item (or to the customer) is a waste. Seven types of waste have been identified (Fujio Cho).
  1. Waste from overproduction. The costs of overproduction are related to the costs of holding inventory described in chapter 8 (obsolescence, storage costs). Having items available when a customer arrives has value, having too much is a cost.
  2. Waste of waiting. When materials or customers are waiting, no value is being added, instead, money is tied up, or a customer is becoming impatient.
  3. Transportation waste. Similar to the cost of waiting; while materials are being moved there is no value being added.
  4. Inventory waste. Also related to holding inventory costs.
  5. Processing waste. It is possible that some activities of the process are either unnecessary (not adding value) or not very efficient (adding very little value for all the effort required).
  6. Waste of motion. The cost of workers performing unnecessary movements and actions.
  7. Waste of product defects. Cost of scrap and reworking un-conforming work or products.

Bottlenecks, Near Bottlenecks, and Non-Bottlenecks

A bottleneck is defined as a resource which has a demand requirement greater than its capacity and which limits the output capacity of the complete system (planned utilization larger than 100% of capacity). A bottleneck, as the name implies, is the point of a system where the "space narrows" and the flow is constrained. If you think in term of highways, traffic problems typically occur when the number of lanes is reduced (changing the capacity) and thus becoming a bottleneck. Other resources can be close to becoming bottlenecks given they are used close to full utilization (or above), but are not the process bottleneck since there is another activity with a lower capacity. However, if the current bottleneck somehow had an increase in capacity, this resource could become the bottleneck. Finally, resources whose capacity is greater than demand by a reasonable margin are called non-bottlenecks.

Identifying Bottlenecks

The capacity analysis process discussed earlier allows us to understand the utilization of resources/activities in a process. Based on a forecasted or historical product demand, and the times to perform activities (standard times) we can define the utilization of each area and what are possible bottlenecks. However, in systems with multiple products, the product mix can change from month to month, changing the bottleneck resource. This situation is called a shifting bottleneck problem and is addressed by demand management and the theory of constraints (TOC) techniques discussed in this chapter.

Working with Bottlenecks

Recognizing what activities and resources are bottlenecks or near bottlenecks is important in order to devise ways to reduce the effect they have on the total output. Let's look at the first scenario in the example above. If the bakery had a scheduling problem and no dough was prepared for two hours, but there was enough dough in the cooling area, nothing will be lost, as the oven will continue production (dough preparation has a slack of about 5 hours). However, if the oven was shut down for 2 hours, production will completely stop for two hours. The critical message here is: time lost in the bottleneck is lost production time and thus lost output. On the other hand, time lost on a near bottleneck or on a non-bottleneck may not affect the output.

This message is very important as we analyze process capacity and look for ways to improve the output capabilities of a process - improving the bottleneck improves the system capacity, improving the non-bottlenecks will have no effect in system capacity. The focus is on either improving the capacity of the bottleneck activity or in maintaining the bottleneck activity operating at all times. While there are several methods to increase the capacity of an activity (discussed later in the text), this is sometimes infeasible due to physical, spatial, cost, or other requirements/limitations. For example, the oven cannot cook quicker (bread and bagels will burn), and the space cannot be expanded. The only way to add capacity then is to buy another oven, but this may be financially infeasible due to cash flow or facility space. Thus the capacity is fixed. The question is then, how to maintain the oven operating to its fullest capacity.

A powerful approach to address bottlenecks (and system improvement) is the Theory of Constraints developed by Eliyahu Goldratt (1980). The TOC basics are:

  1. Identify the system constraints. (No improvement is possible unless the constraint or weakest link is found.)
  2. Decide how to exploit the system constraint. (Make the constraints as effective as possible.)
  3. Subordinate everything else to that decision. (Align every other part of the system to support the constraints even if this reduces the efficiency of non-constraint resources.)
  4. Elevate the system constraints. (If output is still inadequate, acquire more of this resource so it no longer becomes a constraint.)
  5. If, in the previous steps, the constraints have been broken, go back to step 1, but do not let the inertia become the system constraint. (After this constraint problem is solved, go back to the beginning and start over.)
The TOC proposes a method to maintain the bottleneck activity operating to capacity called the Buffer, Rope, Drum system. The buffer refers to having an amount of work in process inventory always in front of the bottleneck resource. The rope refers to the signal sent upstream from the bottleneck calling for additional production once the buffer has reached a predetermined level. The drum refers to the bottleneck that maintains the production rhythm (alignment of all other activities to the bottleneck activity).
 

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