Theory of Constraints

Synchronous Manufacturing

Introduction
Synchronized manufacturing (SM) is any
systematic way that attempts to move
material quickly and smoothly through the
various resources of the plant in concert
with market demand
Synchronized manufacturing refers to the
entire production system working together
in harmony to achieve the goals of the firm
2

Hockey-Stick Phenomenon
In most organizations there is a rush to meet
quotas at the end of each month (or other
time period)
This rush results in the expediting of parts
through the system
Expediting of parts results in confusion,
delays, extra setups, and usually overtime
expenses
3

Hockey-Stick Phenomenon
Output
($)
1

Period

The end-of-period rush!

4

Hockey-Stick Phenomenon
Problem arises because two sets of
measurements are being used
At beginning of month, cost accounting
efficiency measures are used
High efficiencies, minimal setups, etc.

At the end of the month, financial performance

measures are used
Net profit, return on investment (ROI) and cash flow

To achieve these two types of measurement,

high levels of inventory are needed which
augments the problem even further
5

The Goal
The goal of the firm is to make money both
now and in the future
What about the following:

Providing jobs
Consuming raw materials
Increasing sales
Increasing market share
Developing technology
Producing high quality products

Measuring the Goal

Two sets of performance measures are used
to determine how well the company is
meeting its goal (making money):
Financial
Higher level measures

Operational
Shop floor measures

Financial Measures
1. Net Profits
An absolute measurement of making money
Net profit has no meaning until we know how
much investment it took to generate it, thus, we
need to index it as a return on investment

2. Return on Investment
A relative measurement
8

Financial Measures
3. Cash Flow
A survival measurement
Cash flow is important since cash is necessary
to pay bills for day-to-day operations; without
cash, the firm will go bankrupt even though it is
very sound in normal accounting terms

We need all three of these measurement

used together
9

Financial Measures
The financial measurements are good for
telling us when we are making money, but
they are inadequate in judging the impact of
specific actions on the goal
Need to bridge the gap between specific
operational decisions we must make and the
bottom line measurements of the entire firm
10

Operational Measures
Throughput
The rate at which the system generates money through
sales

Inventory
All the money the system invests in purchasing things
the system intends to sell

Operating Expense
All the money the system spends in turning inventory
into throughput
11

Operational Measures
NET PROFIT

RETURN ON
INVESTMENT

CASH FLOW

THROUGHPUT

INVENTORY

OPERATING
EXPENSE

12

Operational Measures
The Indirect Impact of Inventory and Carrying Charges
NET PROFIT

RETURN ON
INVESTMENT

CASH FLOW

THROUGHPUT

INVENTORY

OPERATING
EXPENSE

CARRYING
CHARGES

13

Operational Measures
The indirect impact of inventory on the three
bottom line measurements is typically estimated
through the use of carrying charges
Lowering inventory reduces a number of
operating expenses, such as:

interest charges
storage space
scrap
obsolescence
material handling
rework

14

The Goal Revisited

If we examine the operational measures, we
can restate the goal in their terms:
The Goal of a firm is to increase throughput
while simultaneously reducing inventory
and reducing operating expense

15

Productivity
Productivity
All the actions that bring a company closer to
its goals

Does not guarantee profitability

Has throughput increased?
Has inventory decreased?
Have operational expenses decreased?
16

Balanced vs. Unbalanced Capacity

Historically, manufacturers have tried to
balance the capacity of each resource across a
sequence of processes in an attempt to match
capacity with market demand
The goal was constant cycle time across all
stations

However, synchronous manufacturing views

constant workstation capacity as a bad
decision
Why is this the case?
Lets consider the balanced capacity situation

17

Balanced vs. Unbalanced Capacity

Consider a Balanced Capacity:
A simple process line with several stations
A

50

30

25

15

30

30

The output rate for the line has been established

Production people try to make the capacities of all
stations the same by adjusting machines or
equipment used, workloads, skills, and type of labor
assigned, tools used, overtime, etc...

18

Balanced vs. Unbalanced Capacity

Balanced Capacity (continued)
This would be possible only if the output times
of all stations were constant or had a very
narrow distribution
A normal variation in output times causes
downstream stations to have idle time when the
upstream stations take longer to process
materials than was originally planned
19

Balanced vs. Unbalanced Capacity

Balanced Capacity (continued)
D
D
B

D
E

B
B
B

C
C
C

D
D
D
D
D

20

Balanced vs. Unbalanced Capacity

Balanced Capacity (continued)
Conversely, when the upstream stations process
the materials in a shorter time, inventory builds
up between stations
This effect is called statistical variation, and it is
cumulative
The only way that this variation can be smoothed
out is by increasing work in process to absorb the
variation, or increase the capacities of each
resource downstream
21

Balanced vs. Unbalanced

Capacity
Unbalanced Capacity
Rather than balancing capacities, the flow of
product through the system should be balanced
The rule with capacities is that capacities within
the process sequence should not be balanced to
the same level
Rather, attempts should be made to balance the
flow of product through the system
22

Dependent Events and Statistical

Fluctuations
Dependent Events
In a process sequence, the ability to do the next
process is dependent on the previous one
Process Time (A)

Process Time (B)

23

Dependent Events and Statistical

Fluctuations
Statistical Fluctuations
Normal variation about a mean
When these occur in a dependent sequence
without any inventory between workstations,
there is no opportunity to achieve the average
output
When one process takes longer than average, the
next process cannot make up the time
24

Capacity Related Terminology

Capacity
Available time for production

Bottleneck
Capacity is less than demand placed on resource
A bottleneck limits the throughput.

Non-bottleneck
Capacity is greater than demand placed on resource
Avoid changing a non-bottleneck into a bottleneck

Capacity-constrained resource (CCR)

Capacity is close to demand placed on resource
25

Whats Going to Happen?

Bottleneck feeding a non-bottleneck
Case A
X

Demand/month
Process time/unit
Avail. time/month

Y
X
Bottleneck
200 units
1 hour
200 hours

Market
Y
Nonbottleneck
200 units
45 mins
200 hours
26

Whats Going to Happen?

Non-bottleneck feeding a bottleneck

Case B
Y

Demand/month
Process time/unit
Avail. time/month

X
X
Bottleneck
200 units
1 hour
200 hours

Market
Y
Nonbottleneck
200 units
45 mins
200 hours
27

Whats Going to Happen?

Output of bottleneck and non-bottleneck
Case C
assembled into a product
Market
Assembly
X

Demand/month
Process time/unit
Avail. time/month

X
Bottleneck
200 units
1 hour
200 hours

Y
Nonbottleneck
200 units
45 mins
200 hours

28

Whats Going to Happen?

Bottleneck and non-bottleneck have independent
markets for their output
Case D
Market
X

Demand/month
Process time/unit
Avail. time/month

Market
Y
X
Bottleneck
200 units
1 hour
200 hours

Y
Nonbottleneck
200 units
45 mins
200 hours

29

Basic Manufacturing
Building Blocks
The previous four cases can be thought of as
the basic building blocks for manufacturing
A production process can be simplified into
one of these four building blocks to simplify
analysis and control
Group all non-bottleneck resources together and
display them as a single non-bottleneck resource

30

Components of Production
Cycle Time
Setup time
the time that a part spends waiting for a resource
to be set up to work on this same part

Process time
the time that the part is being processed

Queue time
the time that a part waits for a resource while the
resource is busy with something else
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Components of Production
Cycle Time
Wait time
the time that a part waits not for a resource but
for another part so that they can be assembled
together

Idle time
the unused time
the cycle time less the sum of the setup time,
processing time, queue time, and wait time
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Finding the Bottleneck

Two ways to find a bottleneck
1. Capacity resource profile
As examined in the simulation

2. Use knowledge of plant, look at the system

in operation, and talk to supervisors and
employees
As seen in THE GOAL

33

Saving Time
Bottleneck

Non-bottleneck

An Hour Saved
For Entire Plant

A Mirage

34

Drum-Buffer-Rope
Drum
Control point to control flow of product through
the system
Located at the bottleneck or the CCR

Buffer
Inventory in front of a bottleneck (time buffer)

Rope
Communication to entry point of material to be
processed
35

Drum-Buffer-Rope
A Rope tying
Market Demand
to the CCR
schedule

Drum

Raw
Materials

50

30

25

15

30

30

Finished
Goods

Market
Demand

Major Capacity Constraint

A Rope tying the
gating operation to
the buffer

Time Buffer

36

Drum-Buffer-Rope
Two major constraints on a firm
The market demand for its products
The capacity of the CCR

Thus, we need to base the schedule on the

CCR by taking into account only its limited
capability and the market demands that it is
trying to satisfy
37

Drum-Buffer-Rope
Once the CCRs schedule is established,
we need to determine how to schedule all the
non-constraining resources
Schedule for succeeding operations can be
derived easily
After a part has been processed at the CCR it is
scheduled to start at the next operation

38

Drum-Buffer-Rope
The challenge is to schedule the preceding
operations and to protect the CCR from
disturbances that might occur at the
preceding resources
If disturbances at preceding operations can be
overcome in two days, then set the time buffer at
three days
Schedule the operation immediately preceding
the CCR to complete the needed parts three days
before they are scheduled to run at the CCR
Then back schedule the remaining operations
39

Drum-Buffer-Rope
The procedure laid down so far will protect
the throughput of the plant
BUT, meeting customer due dates is also
important and needs to be protected
Need to create a buffer of parts at final
assembly for items that do not go through the
CCR to protect against disturbances in
procurement and manufacturing
40

Drum-Buffer-Rope
Final Assembly

Subassembly
CCR
Subassembly

41

How to Beat the Drum

A CCR limits the throughput of the plant
and controls due-date performance
Must ensure that the CCR is not scheduled
to produce more than its capacity and not to
waste any of its capacity by allowing any
slack in its schedule

42

How to Beat the Drum

First:
Schedule forward in time form the present
Decide what product to schedule first, second, etc...
When the available capacity of the CCR for the first
day is used up, begin scheduling the second day, etc...

The only remaining problem is how to

choose the sequence in which the various
products are to be done by the CCR
43

How to Beat the Drum

Customers due dates for the various products
will provide the first cut schedule
There are four case where we may need to
modify the customer due-date schedule for
sequencing products through the CCR
Completion times for the various products are
greatly different
One CCR feed another CCR
Setups on the CCR
A CCR produces more than one part for the same
product
44

Locating the Time Buffers

Concentrate protection not at the origin of
disturbance, but before critical operations
Inventory of the right parts in the right
quantities at the right times in front of the
right operations gives high protection
Inventory anywhere else is destructive

45

Ropes
Release and process materials according to
the schedule determined by the plants
constraints
Do not release materials in order to supply
work to workers, or for any other reason

46

Example
The following diagram contains the product structure, routing,
and processing time information for product A. The process
flows from the bottom of the diagram upward. Assume one unit
of items B, C, and D are needed to make each A. The
manufacturing of each item requires three operations at machine
centers 1, 2, and 3. Each machine center contains only one
machine. a machine setup time of 60 minutes occurs when ever a
machine is switched from one operation to another (within the
same item or between items)
Design a schedule of production for each machine center that will
produce 100 As as quickly as possible

47

Example
A
1

B3 1

C3

15

D3 3

B2 2

C2

10

D2 2

B1 1

C1

D1 3 10

48

Example
Solution:
Identify the bottleneck machine
To keep the bottleneck busy, schedule the item
first whose lead time to the bottleneck is less
than or equal to the bottleneck processing time
Forward schedule the bottleneck
Backward schedule the other machines to
sustain the bottleneck schedule
Remember that the transfer batch size does not
have to match the process batch size
49

Example
The bottleneck machine is calculated by
summing the processing times of all operations
to be performed at a machine

Machine 1
B1
5
B3
7
C2 10
22

Machine 2 Machine3
B2
3
C1
2
C3 15 D3
5
D2
8
D1 10
26*
17
50

Example
Machine 2 is identified as the bottleneck, so we
schedule machine 2 first. From the product
structure diagram, we see three operations that are
performed at machine 2 - B2, C3, and D2. If we
schedule item B first, a B will reach machine 2
every 5 minutes (since B has to be processed
through machine 1 first), but B takes only 3
minutes to process at machine 2, so the bottleneck
will be idle for 2 minutes of every 5 minutes. A
similar result occurs if we schedule item D first on
machine 2. The best alternative is to schedule item
C first

51

Example
We will process the items in batches of 100 to
match our demand requirements
Bottleneck Completion Time Total Idle
Total
Sequence for 100 As (mins) Time (min) Processing
Time (min)
C3, B2, D2
2,737
994
3,731
C3, D2, B2

3,135

1,447

The bottleneck sequence is C3, B2, D2

Machine center 1 sequence is C2, B1, B3
Machine center 3 sequence is C1, D1, D3

4,582

52

Quality Implications
More tolerant than JIT systems
Excess capacity throughout system, except at
the bottleneck
Quality control needed before bottleneck
Want quality assurance at each process downstream
from the bottleneck to ensure passing product is not
scrapped

53

Batch Sizes
What is the batch size?
One?
Transfer batch

Infinity?
Process batch

Using transfer batches that are smaller than the

process batch quantity causes shorter
production times and less WIP inventory
54

How to Treat Inventory

The negative impact of inventory is not only
in its additional carrying costs, but in
longer lead times
creating problems with engineering changes

Dollar Days
A measurement of the value of inventory and the
time it stays within an area
(value of inventory)(number of days within a department)

55

How to Treat Inventory

Benefits from Dollar Day Measurement
Marketing
discourages holding large amounts of finished goods
inventory

Purchasing
discourages placing large purchase orders that on the
surface appear to take advantage of quantity
discounts

Manufacturing
discourage large work in process and producing
earlier than needed

56

Comparing SM to MRP
MRP uses backward scheduling
Works backward in time from the desired
completion date (BOM explosion)

Synchronous manufacturing uses forward

scheduling
Focuses on the critical resources which are
scheduled forward in time, ensuring the loads
placed on them are within capacity
The non-bottleneck resources are then scheduled
to support the resource

57

Comparing SM to JIT
JIT:
is limited to repetitive manufacturing
requires a stable production level
does not allow very much flexibility in the
products produced
still requires work in process when used with
kanban so that there is "something to pull"

Vendors need to be located nearby because

the system depends on smaller, more frequent
deliveries

58

Conclusion
Five steps in the Theory of Constraints

1. Identify the system constraints

2. Exploit the system constraints
3. Subordinate everything to that decision
4. Elevate the system constraints
5. If the constraints have been broken, go back
to step 1. Do not let INERTIA take over
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