Roy Stratton - TLS - Eng

www.tocpractice.
com
2nd International TOCPA Conference,

19-20 May 2012, Moscow
TOC PA
Moscow
May 2012
TOC, Lean and Six Sigma
Dr Roy Stratton, CBP&LL, Nottingham Business School, NTU, UK

(roy.stratton@ntu.ac.uk)
www.tocpractice.com

Roy Stratton
Roy Stratton is based in the UK and is Principal Lecturer
in Operations and Supply Chain Management at
Nottingham Business School, Nottingham Trent
University where he is actively involved teaching,
research and consultancy. He is Director of the Centre
for Performance Management and Lean Leadership and
Programme Manager of the MSc Theory of Constraints
(Health Care Management). Previously Roy worked for
Rolls Royce Aero Engines in an internal consultancy role
and has since been actively involved in a wide range of
industry-based and government funded knowledge
transfer research projects. He has published widely in
both professional and academic journals and has coauthored two educational books.
Roy is a chartered Engineeer (MIMech E) and has been awarded a BSc in
Mechanical Engineering (Nottingham), an MSc in Manufacturing System
Engineering (Warwick), and a PhD in Supply Chain Management (Nottingham
Trent).
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Philosophy Theory Approach?

Philosophy is the study of general and fundamental problems,
distinguished from other ways of addressing such problems by its
critical, generally systematic approach and its reliance on rational
argument.
Theories are analytical tools for understanding , explaining and
making predictions about a given subject matter.
An Approach is a way of dealing with something
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Approach TheoryPhilosophy?
Attribute
Approach / Theory / Philosophy

Six Sigma
Lean
TOC
Process
steps
Define
Measure
Analyse
Improve
Control
Identify value
Map value stream
Flow
Pull
Perfection
Identify constraint
Exploit
Subordinate
Elevate
Go back
Origins
Shewhart
Western
Electric
1920s
Ohno
Toyota
1950s
Goldratt
Creative Output
1980s
Emphasis
Reduce
Defects
Reduce Waste
Manage Constraints
Perspective
Processes
Supply Chain
Wider system
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Approach Theory Philosophy?

Attribute

Six sigma
Lean
TOC
Environment
All processes
Inherently
stable flow
Complex flow
Key word
Variation
Flow
Focus
Key
assumption
Batching drives
Process variation
drives the cost vs. buffering and
waste
quality trade-off
Buffers need to be
strategically
managed
Distinguishing
Methodology
Plan, Do,
Study, Act
Value stream
mapping
Cause & Effect

mapping / Conflict
resolution
What to change Specific Processes
Process flow
Management Rules
Distinguishing
improvement
concept/tool
Statistical
Process
Control
Kanban control
Buffer management
Application
sequence?
1
5
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TOC, Lean, Six Sigma: some perspectives

The Scientific Method
Goldratt, Ohno and Ford in context
Standing on the shoulders of giants
TOC - changing the rules

Buffer aggregation and buffer management
Interpreting Lean using TOC thinking

Statistical Process Control and Buffer Management
Kanban and Buffer Management
Conclusion
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Adaptation of the Scientific

Method
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From the
to The Goal
Theintroduction
Viable Vision
Finally, and most importantly, I wanted to show that we can all be outstanding
scientists. The secret of being a good scientist, I believe, lies not in our brain
power. We have enough. We simply need to look at reality and think logically
and precisely about what we see. The key ingredient is to have the courage to
face inconsistencies between what we see and deduce and the way things
are done. This challenging of basic assumptions is essential to breakthroughs.
Almost everyone who has worked in a plant is at least uneasy about the use
of cost accounting efficiencies to control our actions. Yet few have challenged
this sacred cow directly. Progress in understanding requires that we challenge
basic assumptions about how the world is and why it is that way. If we can
better understand our world and the principles that govern it, I suspect all our
lives will be better.
Dr. Eliyahu Goldratt 1984
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Scientific Method
Contribution
Experiments to test
prediction
Shewhart
Process control
PDSA Cycle
Ohno
Process mapping
Broad incremental improvement
Goldratt
Focused causal mapping
Core problem identification
Challenging assumptions (clouds)
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Interpreting Lean (JIT)

using TOC Thinking
Systematically challenging assumptions
10
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The Traditional Batching Cost Model
Total cost
Cost
Inventory holding cost
Set-up cost
Batch size
Economic Batch Quantity
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Effects of JIT Production (Schonburger, 1982, p26)

(F)
Heightened awareness
of problems and
problem causes
Ideas for
cutting
lot-size
Batch size
reduction
Ideas for improving

JIT delivery
performance
Ideas for
controlling
defects
JIT
production
Deliberate
withdrawal of buffer
Inventories/workers
(E)
Fast feedback
on defects
(B)
Scrap/quality
control
(H)
Reduced buffer
Inventories &/or
workers
(G)
Smoother
output rates
(I)
(A)
Less
Inventory in
the system
Less indirect cost for:

Interest on idle inventory, space &
equipment to handle inventory,
inventory accounting, Physical
inventory control
Fewer rework
Labour hours
(D)
Less material
waste
Less material, labour and indirect inputs for the same or higher output= higher productivity
Less inventory in the system=faster market response, better forecasting and less administration.
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The Lean (JIT) challenge to the batching cost

model
Inventory holding cost
Cost
Set-up cost
Batch / Order Size
Continuous Improvement
13
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A TOC interpretation (Cloud diagram)

Cost/unit
Total cost
Carrying cost
Set-up cost
EOQ
Need
Objective
Save set-up
cost per part
Batch size
Action
Enlarge the
batch size
Save total
cost per unit
Save carrying cost
per unit
Reduce the batch

size
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Challenging the assumptions underpinning

the batching cost model
False
assumption:
Set-up costs are
directly related to
time.
False assumption: setup times are fixed

Save set-up
cost per unit
Enlarge the
batch size
Save carrying
cost per unit
Reduce the
batch size
Save
cost-per-part
False objective
A cost world view
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The Reconstructed cloud

A Throughput world view
Need
Action
Dont turn a
non-bottleneck into
a bottleneck
Enlarge the
batch size
Reduce production
lead time
Reduce the
batch size
Objective
Run production
effectively
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The generalised cloud of managers

Because...
Local impact IS EQUAL TO
impact on the organization.
B
Control cost.
D
Judge
according to
local impact.
C
Protect
throughput.
D'
Do not judge
according to
local impact.
A
Manage well.
Because...
Local impact
IS NOT EQUAL TO
impact on the organization.
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Goldratt (TOC), Ohno (lean)

and Ford (flow line) in
context
01 July 2012
18
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Underlying guidelines for supply chains

(Goldratt, 2008)
1. Improving flow (or equivalently lead time) is a
primary objective of operations.
2. This primary objective should be translated into a
practical mechanism that guides the operation when
not to produce (prevents overproduction).
Ford used space; Ohno used inventory; Goldratt used time and
inventory.
3. Local efficiencies must be abolished.

4. A focusing process to balance flow must be in
place.
Ford used direct observation.
Ohno used the gradual reduction of the number of containers and
then gradual reduction of parts per container.
Goldratt used red zone buffer penetration signals.
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The effects of choking the release of work

Management
attention
(Goldratt, 2008;p19)
Insufficient
Reaction
time
Jambs,
missed
priorities
Work in progress
20
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TOC challenging the

management rules!
Buffer aggregation
Buffer management
21
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Scissors jump Olympic winner 1928

22
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Straddle high jump technique
01 July 2012
23
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Rule changes enable step change improvements
Dick Fosburys 1968 Olympic record was

65mm higher than the 1964 Olympic record
24
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Buffer aggregation and

Drum-Buffer-Rope
Traditional Make To Order
Intermediate due dates protected by separate queues
Material
Release
time
DD
Manufacturing lead time (MLT)
DBR
Buffer is aggregated: No intermediate due dates
(Assumes touch time is insignificant <10%)
Buffer
DD
Material
Release
Rope = MLT
time
Drum
25
Touch time:
Buffer:
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Flow related distribution

DBR and buffer management
Buffer time (Rope)

Buffer origin (Drum)
Red
Yellow
Green
Probability to
finish
Time
26
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The functions of buffer management applied to

Make to Order (DBR)
Prioritise the flow of work

buffer penetration
Identify when to expedite potential delays.

Respond to individual red zone penetration
Signals when there is a need to escalate intervention.

Respond to significant and growing red zone penetration
Identify and target main sources of delay for improvement

Pareto analysis causes of red zone penetration
27
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Buffer Aggregation and Critical Chain

Critical Path Method
Critical Chain
5(D)
5(D) FB
2(B)
2(B)
4(C)
1(A) 3(B)
1(A)
4(C)
PB
Time
3(B)
Critical path
FB: Feeding Buffer
PB: Project Buffer
Resources: A,B,C,D
28
Touch time:
Buffer:
Mixed:
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Functions of Buffer Management applied to

Project Management
Based on a ratio of buffer penetration to project CC completions

Respond locally at the task level to minimise consumption of the
buffers
Signals when there is a need to escalate intervention

Respond to red zone penetration at the project/programme level.

Pareto analyse causes of red zone penetration.
29
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Buffer Aggregation in a distribution network
01 July 2012
30
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Functions of Buffer Management applied to

MTA and Distribution
% Buffer penetration

If the stock buffer availability shows red the next order is chased
Signals when there is a need to escalate intervention

If the red zone is repeatedly in the red increase the target level

Pareto analyse causes of red zone penetration due to supply.
31
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Statistical Process Control

and Buffer Management
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Variation has wide consequences!

The central problem of management in all its
aspects, including planning procurement,
manufacturing, research, sales, personnel,
accounting and law, is to understand better the
meaning of variation and to extract the information
contained in variation.
Deming, 1986, p20
33
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Process control charting

99.7% of points
3 standard
deviations
2 standard
deviations
+3 standard
deviations
95.4% of points
+2 standard
deviations
+1 standard
deviation
Frequency
1 standard
deviation
68% of points
A standard
deviation
=
sigma
40
100
Elapsed time of call (seconds)
160
The chances of measurement points deviating from the average

are predictable in a normal distribution
34
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Signalling: special and common cause

Outer tolerance value (specification limit)
3
2
Action limit
Warning limit
Measure
Of
Quality 1
2
3
Warning limit
Action limit
Time
Statistical Process Control Chart
35
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Shewhart Cycle

Six Sigma Cycle
Define
Plan
Do
Control
Act
Outline:
Study
Improve
Measure
Analyze
http://www.youtube.com/watch?v=xzAp6ZV5ml4
Detail: http://www.youtube.com/watch?v=QgmtXRoVVc0&feature=related
01 July 2012
36
01
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03 03
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09
at
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07 03
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09
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at
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13 03
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un
9/
14 03
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M
on 09/
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200.0
180.0
160.0
100.0
Data

Evidence of common cause variation

improvement due to system change
Upper and Lower limits narrowed
Common cause variation minimised
140.0
120.0
Target
80.0
60.0
40.0
20.0
0.0
Date
graph average
graph UCL
graph LCL
37
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Buffer Management also provides

signals to support statistical control
Buffer time (Rope)
Buffer origin (Drum)
Red
Yellow
Green
Probability
to finish
Time
Functions of BM: Prioritise; Expedite; Escalate; Target

38
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Time Buffer Management signals in emergency care

Split the 4 hour process into 3 zones: green, yellow and red.
Rope 4 hours
Drum
patient arrival
4 Functions of BM
Prioritise patients; Expedite in red zone; Escalate instability; Target
causes of delay.
39
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Functions of Buffer Management

% buffer penetration (green / yellow)

Respond to individual red zone penetration
Signals when there is a need to escalate increased capacity.

Respond to significant and growing red zone penetration

Pareto analysis and target improvement activities
40
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How do SPC and BM relate?

The need to gain statistical control also applies to operations flow.
We need signals to predict if the delivery system is becoming
unstable.
In BM the level of stability is determined by the level of variation, in
combination with the level of buffering (inventory and capacity).
Entry into the red zone is a signal that an order needs to be
monitored to ensure there isnt a special cause and ensure it is
expedited if necessary.
Experience has shown the red zone penetration is expected to be
around 5% if the system is to remain in control the equivalent of 2
sigma.
41
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How do SPC and BM relate?

If the protective inventory and capacity is too high or too low the
buffers will need corresponding adjustment.
This would also appear to corresponds to a 3-sigma buffer size in
SPC terms with the red zone starting at 2-sigma.
Growing red zone penetration (typically over 5-10%) signals the
system was going out of control.
As with common cause variation, analysis of the causes of red
zone penetration over time enables focused improvement effort
utilising lean and 6 sigma tools (e.g. set-up reduction, machine
availability, process reliability, etc).
42
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Kanban Control and Time

Buffer Management
43
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TPS kanban management system

In reality practicing these rules [the six rules of
kanban] means nothing less than adopting the
Toyota Production System as the management
system of the whole company. (Ohno, 1988:41)
44
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Kanban illustration
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Kanban functions/rules
Fu nctio ns of k an ban
K a nb an ru les o f u se
1. Provides pic k-up or

transm i ssion inform ation.
1. Later process pi cks up the

num ber of item s i ndicated by the
k anban at the earli er process .
2. Provides production
inform ati on.
2. E arlier process produces item s

in the quantity and sequence
indicated by the kanban.
3. Prevents over production and

excessive transport.
3. N o item s are m ade or

transported without a k anban.
4. Serves as a work order

attac hed to goods.
4. A lways attached a kanban to

the goods .
5. Prevents defective products by

identifying the process m aki ng
the defec tives.
5. D efective products are not sent

on to the s ubsequent proces s.
T he result is 100% defect free
goods .
6. Reveals exis ting problem s and

m aintains inventory control.
6. R educing the num ber of

k anban increases their sesiti vity.
The functi ons and rul es of kanban (sourc e: O hno, 1988: 30)
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Interpreting Ohnos Functions

Functions/rules 1, 2 and 4 are concerned with the transfer and
production of information associated with standard predefined
specifications, routings and transfer data.
Function 3 is vital to the lean focus on Just-in-Time production and
ensuring inventory between each work centre is kept to a
predefined maximum level.
Function 5 ensures the source of defects is made immediately
visible, therefore ensuring rapid problem identification and
resolution.
Function 6 enforces continuous improvement. The number of
kanbans in the replenishment cycle represents the inventory
currently needed to ensure reliable supply. Reducing the number
of kanbans reduces the buffer inventory and therefore time, so
making the system more sensitive to problems in the drive towards
perfection.
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Buffer Management (BM) and Kanban:

Functional Comparison
TBM Functions
Kanban Functions
Prioritize Provides relative priority based F1 Pull intermediate inventory

on planned completion time or availability
F2 Pre-planned quantity and routing
rather than intermediate processing
sequence
steps and inventory.
F3 Prevents over production at each
Choke material release (e.g. Rope)
stage
F4 Predefined works order data
Expedite Proactive time based signalling
of potentially late completion or
F5 Quality (variability in the process)
shortages (red zone penetration).
signals immediate action.
Escalate Proactive signalling of growing
levels of expediting
Targeting the repeated causes of
expediting (red zone penetration)
reduces the need for buffer (time or
stock) and improves flow
F6 Reducing the number of kanbans

(inventory) is used to highlights causes of
disruption to flow.
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Kanban and Buffer Management Assumptions

TPS/Kanban assumes:
TBM assumes:
Predefined process steps
No predefined processing steps
Buffering is based on inventory

and held at each processing
step
Buffering is based on time or

stock and pooled
Process delays (quality

problems) are not passed on to
the next process
Delays are only expedited when

they threaten delivery /
availability
Level scheduling
Demand may vary, triggering

(timely) escalation
Continual improvement is
encouraged through reducing
inventory to expose problems
that are then targeted.
Continual improvement is
enabled by targeting the causes
of delay (e.g. red zone
penetration) then reducing the
buffer.
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Conclusion
Attribute

Six sigma
Lean
TOC
Environment
All processes
Inherently
stable flow
Complex flow
Key word
Variation
Flow
Focus
Key
assumption
Batching drives
Process variation
drives the cost vs. buffering and
waste
quality trade-off
Buffers need to be
strategically
managed
Distinguishing
Methodology
Plan, Do,
Study, Act
Value stream
mapping
Cause & Effect

mapping / Conflict
resolution
What to change Specific Processes
Process flow
Management Rules
Distinguishing
improvement
concept/tool
Statistical
Process
Control
Kanban control
Buffer management
Application
sequence?
50
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Questions
01 July 2012
51

Roy Stratton - TLS - Eng

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www.tocpractice.

2nd International TOCPA Conference,

TOC, Lean and Six Sigma

Dr Roy Stratton, CBP&LL, Nottingham Business School, NTU, UK

2nd International TOCPA Conference,

2nd International TOCPA Conference,

Philosophy Theory Approach?

2nd International TOCPA Conference,

Approach / Theory / Philosophy

2nd International TOCPA Conference,

Approach Theory Philosophy?

Approach / Theory / Philosophy

Cause & Effect

What to change Specific Processes

2nd International TOCPA Conference,

TOC, Lean, Six Sigma: some perspectives

TOC - changing the rules

Interpreting Lean using TOC thinking

2nd International TOCPA Conference,

Adaptation of the Scientific

2nd International TOCPA Conference,

2nd International TOCPA Conference,

2nd International TOCPA Conference,

Interpreting Lean (JIT)

2nd International TOCPA Conference,

The Traditional Batching Cost Model

2nd International TOCPA Conference,

Effects of JIT Production (Schonburger, 1982, p26)

Ideas for improving

Less indirect cost for:

2nd International TOCPA Conference,

The Lean (JIT) challenge to the batching cost

2nd International TOCPA Conference,

A TOC interpretation (Cloud diagram)

Reduce the batch

2nd International TOCPA Conference,

Challenging the assumptions underpinning

False assumption: setup times are fixed

A cost world view

2nd International TOCPA Conference,

The Reconstructed cloud

2nd International TOCPA Conference,

The generalised cloud of managers

2nd International TOCPA Conference,

Goldratt (TOC), Ohno (lean)

2nd International TOCPA Conference,

Underlying guidelines for supply chains

3. Local efficiencies must be abolished.

2nd International TOCPA Conference,

The effects of choking the release of work

2nd International TOCPA Conference,

TOC challenging the

2nd International TOCPA Conference,

Scissors jump Olympic winner 1928

2nd International TOCPA Conference,

Straddle high jump technique

2nd International TOCPA Conference,

Rule changes enable step change improvements

Dick Fosburys 1968 Olympic record was

2nd International TOCPA Conference,

Buffer aggregation and

2nd International TOCPA Conference,

Flow related distribution