Transcript Session 1 - Washington State University

Lecture 1 of 15
EM 530 Applications in Constraints
Management
Introduction to TOC Topics
DBR, Critical Chain, Replenishment Overview
James R. Holt, Ph.D., PE
Professor
Engineering Management
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[email protected]
http://etm.wsu.edu/
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Angel eLearning Pages
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Class Schedule
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A Word about Angel
• Finding the Video/Archive
Under the
Communicate Tab
Stream
Elluminate Options
History of Recordings /
Video Archives available
through search.
Today’s Lecture
shows up
automatically
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Elluminate Screen
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Angel Calendar
• Calendar has current, past
and future links to Video
Conferencing.
Links here give the Live
Video Conference in
Elluminate (during the
time for class) or Archived
Video.
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Communication Options
• Class Lecture Material in Angel Learning System:
https:LMS.wsu.edu
Elluminate Webstreamed Lectures (on links within Angel)
Elluminate Communications Tab email.
•
•
• Dr Holt’s Email: [email protected]
• Skype at: HoltJames
• Dr Holt’s Home Office:
•
(540) 412-5315 (7:00 AM to 10:00 PM)
• Join the EM530-List:
 Visit Lists.wsu.edu, select <Join a List> and enter EM530List to join
 Send messages to [email protected]
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Introduction to the
Theory of Constraints
• Every system is a subset of a larger system.
• Within any complex system there is one constraint
(or very few).
• Three main factors impact every system:
 Interdependence
 Statistical Variation
 Behavior of individuals
• (Humans trying to deal with the first two factors)
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Emphasis for this Course
• Physical Processes
 Process Flows
• Manufacturing, Paperwork, Service Processes
 Project Management Scheduling
• Single Project, Multi Project
 Distribution Systems
• Retail Model, Replenishment
 Supply Chains
• Cooperative and Non-Cooperative Members
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Class Materials
• Texts:
 The Goal, Eli Goldratt
 Critical Chain, Eli Goldratt
 Project Management in the Fast Lane, Rob
Newbold
 Isn’t It Obvious? Eli Goldratt
• Software:
 Production Simulation,
Project Management Simulation,
Lots of individual Games,
 Excel based DBR model
 Scitor PS8.5
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Individual Learning Experiences
• Simulations:
• Games:
Mostly on you own
 Dice Game
 Job Shop Game
 Bead Experiment
 Project Management Games
 Supply Chain Game
• Research
 Searching known areas
 Searching publications
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Process View of Systems
Larger Process
Process
Input
Input
Process
Output
Input
Process
Output
Output
Input
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Process
Output
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System Complexity
• Division of Labor breaks down the linkages of
complex systems into manageable chunks.
• Which is harder to manage? System A or B?
System A
System B
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Interdependence
The excess capacity at some
links is of little value since there is
usually some other factor that
prevents links from functioning at
maximum capacity
100
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Operational Efficiency
• Work flows from left to right through
processes with capacity shown.
Process
A
B
C
D
E
RM
Capability
Parts
per Day
Market
Request
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FG
7
9
5
8
6
Too Much Overtime
Chronic Complainer
Excellent Efficiency--Near 100%
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Behaviors
• Workers will find a way!
Process
A
B
C
D
Market
Request
11
E
RM
Capability
Parts
per Day
FG
5
7
9
5
8
5
6
Both found ways to look busy and
appear to have a capacity of 5 parts/day.
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Behaviors
• Workers will find a way!
Process
A
B
C
D
E
RM
Capability
Parts
per Day
Market
Request
11
FG
5
7
5
9
5
5
5
Process B doesn’t have a choice
Process A slowed to reduce building WIP
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Then Variability
Sets In
• Processing times are just AVERAGE
Estimates
Process
A
B
C
D
E
RM
Reality
FG
5+/-2
5+/-2
5+/-2
5+/-2
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5+/-2
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What does an Average of 50%
mean?
• Half the time there are 5 or more per day at
each process--Half the time less
Process
A
B
C
D
E
RM
Reality
Prob:
Two at a time:
Over all:
FG
5+/-2
0.5
0.25
5+/-2
0.5
5+/-2
0.5
5+/-2
0.5
5+/-2
0.5
0.25
3.125% Chance of 5 per day
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The TOC Approach to
Solving Physical Problems
• The Five Focusing Steps
 Step 1. Find the Constraint
 Step 2. Decide How to Exploit the Constraint
 Step 3. Subordinate all others to the
Constraint
 Step 4. Elevate the Constraint
 Step 5. Warning!!! If the Constraint moves,
start over at Step 1.
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1. Identify the Constraint
• The Constraint is the “Drum” for total
production (Identify can also mean ‘Select’)
Process
A
RM
Reduced Capability
Parts
5
per Day
B
C
D
E
FG
5
5
5
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2. Exploit the Constraint
Make sure there is work available for the constraint
just-in-case (Buffer)
Process
A
RM
Reduced Capability
Parts
5
per Day
B
C
D
E
FG
5
5
5
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3. Subordinate All Else
Each process should operate at maximum capacity
(Road Runner Work Ethic)
Process
A
RM
Real Capability
Parts
7
per Day
B
C
D
E
FG
9
5
8
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Prevent Over Production
Control release of material to the process at the
rate the constraint demands (Rope). The Art of
Subordination.
Process
A
B
C
D
E
RM
FG
Capability
Parts
per Day
7
9
5
8
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Protect Yourself to be Predictable
Protect from Variability in
Receiving
Protect from Variability in
Constraint
Process
A
B
C
D
E
RM
FG
Capability
Parts
per Day
7
9
5
8
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Step 4. Elevate the Constraint
When more capacity is needed than the constraint can
produce, often it is necessary to increase the capacity of
the constraint.
Process
A
B
C
D
E
RM
FG
Capability
Parts
per Day
7
9
5
8
6
10
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Step 5. Avoid Inertia
When the constraint moves, change your controls.
Process
A
B
C
D
E
RM
FG
Capability
Parts
per Day
7
9
10
8
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A better option,
To avoid the difficulty of constantly moving the constraint
and changing culture, it is often better to elevate the whole
chain rather than just the constraint. (McDonalds)
Process
A
B
C
D
E
RM
FG
Capability
Parts
per Day
17
14
10
18
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Simple Test
What is the constraint? Where are the buffers? The
Rope?
RM 1
7
6
RM 2
8
3
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Demand
50
9
FG
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Simple Diversion
What is the constraint? Where are the buffers? The
Rope?
FG Demand
20
RM
15 A
40
18
5
10
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15 B
15 C
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Tough Complex
What is the constraint? Where are the buffers? The
Rope?
9
9
FG Demand
RM1
8
RM2
RM3
RM4
20
10
6 A $$
12
10
12
10
15 B$
RM5
14
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Simple Complex
What is the constraint? Where are the buffers? The
Rope?
RM
5
5
5
5
5
5
FG
Demand
5
5
5
5
3
5
5
5
5
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Projects as Processes
• Projects Are:
 Unique
 Dependent on Precedence
 Activities Not Well Known
 Highly Variable
 Share Resources
 Concurrent with Other Projects
 Valued by Scope, Schedule and Cost
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Project Problems
• Projects Are:
 Usually Late
 Have Too Many Changes
 Often Over Budget
 Lots of Rework
 Many Priority Battles
 Resources Not Available When Needed
 Jeopardize Scope for Cost or Schedule
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Projects are Balancing Acts
Quality and
Scope
Timing and
Schedule
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Budgeted
Costs
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Then things Combine
Quality and
Scope
Precedence
Structure
Timing and
Schedule
Statistical
Variation
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Budgeted
Costs
Human
Behavior
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And Reality Sets In
Quality and
Scope
Bumpy Road of Reality
Timing and
Schedule
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Budgeted
Costs
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The Project Dilemma
• There is Always a Trade-Off
Meet
Commitment
in Danger
Compensate
for Early MisEstimates
Not
Jeopardize
Other Original
Commitments
Not
Compensate
for Early Misestimates
Meet Original
Commitments
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Resolving Project Problem
Options
Add more time&money and decrease scope
Meet
Commitment in
Danger
Compensate for
Early MisEstimates
Not Jeopardize
Other Original
Commitments
Not Compensate
for Early Misestimates
Meet Original
Commitments
Use our Safety Buffer Correctly
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Consider the Aspects of Projects
Good Statistics
Central Limit Theorem
(add enough things
together and the total
looks normal)
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Typical Activity Duration
Normal Duration Time
Standard Deviation
Project Task Duration Time
Mean
Mean
50% Probable
85%
Probable
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So, what is the Behavior?
•Engineering Pessimism:
Estimate a safe value (85%)
Level of
Effort
•Engineering Optimism:
I’m good, I can beat 50%.
•Student Syndrome: “Why
start now? It isn’t due
until Friday?” (There is
more urgent work/party!)
•Parkinson's Law: “Work
Expands to full the time
available” (Just keep
tweaking! More is better!)
Assigned
Date
Time-->
•Empirical evidence shows
most tasks complete on or
after the due date
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Engineering Perpetual Motion
(overtime)
Actual Work
Load 2X
Level of
Effort
Assigned
Date
Normal
Work Load 1X
Time-->
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The result is Bad Multi- Tasking
A1
A3
Project Manager A
A2
Ten Days
Each Task
B1
B3
B2
Project Manager B
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Politically Correct Schedule
30 Days Flow
A1
A2
A3
B1
10
B2
20
30
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B3
40
50
45
More Like Actual Schedule
40 Days Flow
A1
A2
B1
B2
10
20
30
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A3
B3
40
50
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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
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TOC Flow Time
20 Days Flow
A1
A2
A3
B1
10
20
B2
30
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B3
40
50
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Don’t Schedule Conflict
Before
After TOC Leveling
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Buffer the Project and NOT
Individual Activities
Before with 85% Estimates
Actual 50% Estimates with Individual Buffers
Task Buffer
TOC Aggregated Buffer of Activities
Task Task Task Task Buffer
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Protect the Critical Chain
Project Buffer
Feeding Buffer
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Buffer Resources on the Critical
Chain
Lt. Green be ready
Buffer
Blue be ready
Green be ready
Cyan Resource be ready
Project Buffer
Feeding Buffer
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Distribution System
• Retail Systems include time delay between demand
cycles
• Production occurs to forecast
• Delivery Systems focus on efficiency--Transfer in
large batches (long time between shipments)
• Errors in forecast are magnified ten fold
• Too much of the wrong inventory, too little of the
right
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Forecast Accuracy
Point where the world
changes
100%
Accuracy of
Forecast
Effective
Response
Zone
Now
--->
Death
Response
Zone
Future
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Pushing Inventory to the
Retail Store
BEFORE
Manufacturing
Warehouse
Distribution
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Stores
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Locate Inventory Where it
Provides Best Protection
After-Fast Production-Fast Delivery
Aggregated Variability
Manufacturing
Warehouse
Distribution
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Stores
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Supply Chain Processes
• Supply Chain is made up of many independent
links (Businesses or Business Units)
• Individual links do not provide a completed
product
• There is significant interface problems
 Timing, Quality, Price, Value
• Links are in competition with each other / Leverage
each other
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Typical Supply Chain
Raw
Materials
Refine /
Prepare
Distribute
Produce
Retail
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Transport
Customer
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Long and Short Duration Supply
Chains
Dairy
Cows
Creamery
Deliver
Retail
Customer
Farmer
Cannery
Wholesale
Retail
Customer
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Complex Combinations
Brakes
Car
Lot
Tires
Bumpers
Manuf.
Car
Upholstery
Engine
Transmission
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Car
Lot
Car
Lot
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Dedicated Chains
Mine
Independent
Business
Unit
Smelter
Rolling
Mill
Product
Independent
Business
Unit
Steel
Sales
Independent
Business
Unit
Single Firm - Totally Owned Industry - Sole Source
Transfer Prices Fixed by Policy
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Competitive Chains
Oil
Well
Refinery
Chemical
Plant
Cloth
Mill
Dress
Factory
Oil
Well
Refinery
Chemical
Plant
Cloth
Mill
Dress
Factory
Customer
Oil
Well
Refinery
Chemical
Plant
Cloth
Mill
Dress
Factory
Customer
Customer
Transfer Prices at Market Prices
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DBR Approach to Supply Chains
Constraint Buffer Protects
Replenishment
Raw
Materials
Shipping Buffer Protects
Short Lead Demand
Constraint
Machine
Warehouse
Low inventory system is very responsive to customer
needs.
Low inventory system is product change.
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In Non-Cooperative Worlds
Raw
Material
Produce
Constraint
Transport
Distribute
Retail
Customer
Watch
Diligently
Watch
Diligently
Supply
Constraint
Client
Just-in-Time Production Using DBR
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Reference Supply Chains
Snow
Water
Well
River
Dam
Water
Distribution
Treatment
Generator
Power
lines
Electricity
Customer
Water
Tower
Local
Lines
Water
Customer
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In A Cooperative World
Individual Links Must Share
the Profits and Risks
Raw
Material
Produce
Constraint
Transport
Distribute
Retail
Customer
In the best world, individual business units cooperate and receive
payment only when final customer pays.
Inventory is greatly reduced. Quick delivery and response to
change is possible.
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Homework
• Read THE GOAL as fast as possible.
• Play the Dice Game as outlined in the SelfStudy Session1a of this class. Report on
your findings by email to [email protected]
• You will receive an email grading in response.
• The overall class Homework Status is linked
at the top of the schedule and under the
Angel <Lessons> Tab.
Keep Thinking!
Dr Holt
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