chapter 15

©The McGraw-Hill Companies, Inc. 2008McGraw-Hill/Irwin

Chapter 15

Constraint Management:Simplifying Complex

Systems

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Learning Objectives

• Define a constraint.• Compare utilization and activation from a constraint management perspective.• Describe the global measures of throughput, inventory, and operating expense,

and compare them to traditional global measures.• Explain the five-step focusing process of constraint management.• Explain how systems can be protected from disruptions by using time buffers.• Describe how time buffers function and how they affect the exploitation of a

constraint.• Explain what is meant by a constraint buffer, a shipping buffer, and an assembly

buffer.• Differentiate between a production batch and a transfer batch.• Compute the appropriate product mix for a constrained production system.• Compare the kanban system to the buffering system used in constraint

management.

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Introduction: Maximizing System Output

• The early development of constraint management (CM) can be credited to one individual, Eliahu Goldratt.– The 1984 book The Goal brought Constraint Management, or as it is

sometimes known “The Theory of Constraints” to the forefront.– Numerous extensions, applications, and associated techniques have

been developed since.

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Defining a Constraint

• A constraint is anything that inhibits a system’s progress toward its goals.– It could be a resource (labor, machine capacity, warehouse space, etc.)– It could be a policy (no deliveries on Sunday, no more than 6 hours of

overtime per employee, etc.)– It could be inputs (raw material availability, electricity availability,

etc.)– It could be an external force (demand)

Constraint Management: A framework for managing the constraints of a system in a way that maximizes the system’s accomplishment of its goals.

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• Work center 3 is a constraint. – The system cannot produce at a rate faster than 9 minutes per unit. – If all the other work centers slowed down to match work center 3, the

system would not get any slower

Exhibit 15.1 Simple Productive System with Constraint

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• Utilization (constraint management definition)– The time a resource is used and contributing to throughput divided by

the time the resource was available.

• Activation (constraint management definition)– Running a machine or resource when it doesn’t contribute to

throughput.

Exhibit 15.2 Constraint’s Determination of Work Center Utilization

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• Work center 3 determines the utilization rates of all the other work centers.– Increasing utilization rates for any of the other work centers will not increase

system performance. It would only cause inventory to build up.– Speeding up work center 3 from 9 minutes to 8 minutes would increase output.

Making work center 3 go any faster than 8 minutes would not help, because work center 3 would no longer be the constraint. Work centers 3 and 4 would be the constraints.

Exhibit 15.2 Constraint’s Determination of Work Center Utilization

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Global Performance Measures

• Constraint management uses a unique set of global performance measures.

• Throughput– CM definition: Dollars generated by sales– Traditional definition: The rate at which products are produced,

regardless of whether or not they are sold• Inventory

– CM definition: Money invested in things the system intends to sell. Includes equipment and facilities.

– Traditional definition: Does not include equipment and facilities• Operating Expenses

– CM definition: Money the system spends turning inventory into throughput

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Global Performance Measures

• The global measures of constraint management can be equated to traditional business performance measures:

Exhibit 15.3 Constraint Management Global Measures and Traditional Measures

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The Constraint Management Focusing Process

• The five-step focusing process is:Step 1: Identify the constraint

Step 2: Exploit the constraint

Step 3: Subordinate all other decisions to step 2 and step 3

Step 4: Elevate the constraint

Step 5: If, in steps 2 through 4, the constraint is eliminated, go back to step 1

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The Constraint Management Focusing Process: Step 1. Identification

• Some constraints are obvious.

• In more complex environments, may need an analysis.– Compare demand for a resource with

available capacity.– Any resource that does not have

sufficient capacity to meet demand would be considered a constraint

• Nonresource constraints can be more difficult to identify.

Identify

Exploit

Subordinate

ElevateRepeat

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Identify

Exploit

Subordinate

ElevateRepeat

The Constraint Management Focusing Process: Step 2. Exploitation

• The exploitation of a constraint means it should be used to its fullest extent.– Prevent it from ever being idle– Make sure it never runs out of

materials to process– Don’t waste capacity of the

constraint on products that already have quality problems

• Policy constraints differ- a constraining policy must be eliminated or modified.

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The Constraint Management Focusing Process: Step 3. Subordination

• The subordination step means that any system change should be analyzed to make sure it doesn’t inhibit the exploitation done in Step 2.– All decisions should be checked

to make sure they do not conflict with efforts to exploit

Identify

Exploit

Subordinate

ElevateRepeat

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The Constraint Management Focusing Process: Step 4. Elevation

• If exploitation does not remove the constraint, the constraint must be elevated by actually increasing the capacity of the resource.– Buy additional capacity– If cash is the constraint, take out a

loan– If inputs are a constraint, get a new

supplier

Identify

ExploitSubordinat

eElevate

Repeat

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The Constraint Management Focusing Process: Step 5. Repeat

• Check if the resource is still the constraint. If it is no longer a constraint, stop exploiting and elevating it, go back to Step 1 and identify the new constraint

Identify

ExploitSubordina

teElevate

Repeat

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The Role of Disruptions in Productive Systems: Protecting the System

• Nonconstraints, because they have excess capacity, can experience a level of disruption without reducing system output.

• Constraints have no excess capacity, and so they must be protected from disruptions.– In constraint management, this is done by decoupling the constrained

resource: reducing the direct dependency of a process step on its predecessor using inventory

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The Role of Disruptions in Productive Systems

• Random fluctuation is present in many processes. – Variability can cause disruptions because of statistical fluctuation

among dependent events– When processes depend on each other, variability in processing times

accumulates

Exhibit 15.4 Simple System with Processing Variability

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The Role of Disruptions in Productive Systems: Buffering to Protect Constraints

• Disruptions to a system can generally be measured by their duration. So protection must also be measured in time.

• Time buffer– A buffer of inventory that will keep a resource busy for a specified amount

of time.

• How much protection is needed?– The size of the buffer (the amount of time it protects) should be

proportional to the size of potential disruptions

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• If work center 1 broke down for eight hours, it would create an eight hour disruption at work center 3 (the constraint). WC3 would be idle for 8 hours.

– We would need an eight hour buffer of inventory in front of the constraint for protection– 8 hours = 480 minutes. 480/9 (nine minutes to process a unit) = 53.3, or 54. So inventory

of 54 units would protect for eight hours.

Exhibit 15.6 Inventory Flow In and Out of a Time Buffer

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• If we have specific orders with due dates, buffers make it necessary to start orders earlier.– If an order of 27 units were due on day 14, it would be started on day 11

without a buffer: It takes half a working day (4 hours) for each work center to process the order, for a total of 3 days.

– With a buffer, the order must wait in queue for 8 hours. So it would be started on day 10 instead

Exhibit 15.7 Order Processing in System with Time Buffer

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• Time buffers placed immediately prior to a constraint are called constraint buffers.– If there are never disruptions, constraint buffers would always be full. That

would mean that they really aren’t needed.– If sized appropriately, a time buffer should be, on average, two-thirds full.

Large enough to cover serious disruptions but not so large that most of it is never used

• An assembly buffer is a time buffer placed immediately prior to an assembly for nonconstrained components. It ensures that the parts needed to be assembled with a part that has gone through the constraint are ready so that the part that has gone through the constraint is not delayed.

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• The constraint buffer protects orders from being late because of disruptions prior to work center 3.

• Another buffer at the end of the line, the shipping buffer, will protect against disruptions after the constraint.

Exhibit 15.8 System with Shipping Buffer Added

Protects from disruptions here

Protects from disruptions here

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Constraint Management and Batch Sizes

• Production batch: The quantity produced at a workcenter before changing over to produce something else.– Larger production batches increase utilization– This is a form of exploitation. Constraints should use larger production

batches– For nonconstraints, smaller production batches are more desirable (to lower

inventory, improve quality...) All nonconstraint idle time should be used for changeovers, under the best scenario

• Transfer batch: The quantity produced at a workcenter before transferring the products to the next step in the process.– Transfer batches should always be as small as possible

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The Role of the Constraint: A Product Mix Example

• A manufacturer makes two products, P and Q:

Exhibit 15.9 Production System

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• There are four work centers (A,B,C, &D).• Each work center must accomplish two tasks.• There are no changeovers required when switching tasks.

Exhibit 15.9 Production System

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• We have the following production system data:

Exhibit 15.10 Production System Data

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• What combination of Ps and Qs should be produced to maximize profit?

• Step 1. Identify the constraint.– Compute demand requirements on each resource and compare

them to availability

Exhibit 15.11 Identification of Constraint

Identify

Exploit

Subordinate

ElevateRepeat

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• Work center B is the constraint: We need 3,000 minutes to meet demand and we only have 2,400.

• Step 2. Exploit the constraint– The goal of this system is to maximize profit– What is the best use of the constrained resource: Making Ps

or making Qs?

Exhibit 15.12 Calculation of Dollar Return per Constraint Minute

Making Ps is a better use of the constrained resource

IdentifyExploitSubordinat

eRepeat

Which is best?

Elevate

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• The solution is to keep making Ps until demand for them is met. Whatever amount of time is left over on the constrained work center can then be used to make Qs.– Produce 100 Ps at 15 minutes each = 1,500 minutes on the constraint– 2,400 – 1,500 = 900 minutes remaining for Q– 900 minutes, at 30 minutes to make one Q = 30 Qs

Exhibit 15.13 Profit Calculation

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Exhibit 15.13 Profit Calculation

• A product mix of 100P and 30Q yields a profit of $300

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• Basing our decision strictly on contribution margin would have resulted in producing all of the Qs and then using the remaining capacity to make P.– A solution based on contribution margins would actually have resulted in a

loss of $300– Commissions based on selling price would similarly lead to selling more Qs

than Ps, which is the wrong thing to do

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Lean Systems and Constraint Management

• Lean systems and constraint management frameworks do not necessarily conflict.– CM buffering is similar to the kanban system– Kanban provides small buffers between work centers, however, while CM

buffers only at critical points– Lean systems provide a larger buffer at the finished-goods point, CM has a

shipping buffer

• A key difference is that lean systems focus on elimination of waste, while constraint management focuses on maximizing throughput.

chapter 15

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kanban system

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