Theory of constraints

THEORY OF CONSTRAINTS

Prepared By:MONZALES, MARIBEL T.

THEORY OF CONSTRAINTS• It was created by Dr Eli Goldratt and was

published in his 1984 book "The Goal."• A methodology for identifying the most

important limiting factor.• An organizational change method that is

focussed on profit improvement.•The theory says that every system, no

matter how well it performs, has at least one constraint that limits its performance – this is the system's "weakest link.

THEORY OF CONSTRAINTS

CONCEPT OF CONSTRAINTS

Big Question!Is there something that is constraining your project from reaching its GOALS?

SYSTEMS AS CHAINS

Assume a system to be a chain with a goal of transmitting force from A to be.

SYSTEMS AS CHAINS

WEAKEST LINK The link at which the system fails.

STRENGTHENING THE CHAINWhere should we focus our efforts?

THROUGHPUT, INVENTORY &OPERATING EXPENSE

Goldratt created a simple relationship chart between three system-level measurements: throughput, inventory & operating expense.

Given Goldratt’s three dimensions, organizations have three different options for system improvement: increasing THROUGHPUT, reducing INVENTORY or reducing OPERATING EXPENSE.

The potential for increasing THROUGHPUT tend to be much higher than the potential for decreasing INVENTORY AND OPERATING EXPENSE. Therefore, a basic model for system improvements focuses on increasing THROUGHPUT and making reduction of INVENTORY and OPERATING EXPENSE a secondary priority , as shown below.

THEORY OF CONSTRAINTS

EXAMPLES:Machine/equipmentManpowerResourcesProcessNo overtimeInsufficient materialsInsufficient demand

APPLYING THE THEORY

APPLYING THE THEORYStep 1: Identify the ConstraintThe first step is to identify your weakest

link – this is the factor that's holding you back the most.

INTERNALProcess Constraints-Machine-Equipment

Policy Constraints-No overtime

EXTERNALMaterial Constraints-Insufficient Materials

Market Constraints-Insufficient Demand

APPLYING THE THEORY

As a numerical example , consider the operation producing product in the figure.

QUESTION:

Which process has the constraints?

PROCESS 1Capacity= 5 per hour

PROCESS 3Capacity=4 per hour

PROCESS 4Capacity=9 per hour

PROCESS 2Capacity=7 per hour

CONSTRAINT

INPUTS

OUTPUTS

APPLYING THE THEORYStep 2: Exploit the constraints Find methods to maximize the utilization

of the constraints towards productive throughput.

For example, in many operations all processes are shut down during lunchtime or during breaks.

If a process is a constraint, the operation should consider rotating lunch periods so that the constraint is never allowed to be idle.

DECIDE HOW TO EXPLOIT THE CONSTRAINTS

QUESTION:WHAT CAN WE DO TO GET THE

MOST OUT OF THIS CONSTRAINTS WITHOUT COMMITTING TO POTENTIALLY EXPENSIVE

CHANGES?

INPUTS

OUTPUTS

APPLYING THE THEORYStep 3: Subordinate and synchronize

to the constraints“SUBORDINATE EVERYTHING TO THE

CONSTRAINTS”

OUTPUTS

INPUTS

APPLYING THE THEORY“SUBORDINATE EVERYTHING TO THE

CONSTRAINTS”

PROCESS3Capacity=6 per hour

Capacity Increased at Process

3

OUTPUTS

INPUTS

APPLYING THE THEORY

Step 4: Elevate the performance of constraint

“ELEVATING” the constraint means we take whatever action is required to eliminate the constraint.

APPLYING THE THEORY

Step 5: Repeat the process

PROCESS 1Capacity=5 per hour

PROCESS 2Capacity=7 per hour

PROCESS 3Capacity=6 per hour

PROCESS 4Capacity=9 per hour

THE CONSTRAINT

APPLYING THE THEORY

Step 5: Repeat the process

Go back to step 1, but beware of inertia.

THANK YOU!