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CHAPTER 18 SYNCHRONOUS MANUFACTURING AND THEORY OF CONSTRIANTS

Review and Discussion ues!ions

1. State the global performance measurements and operational performance measurements and briefly define each of them. How do these differ from traditional accounting measurements? Global performance measurement: Net profitmeasurement in dollars Return on in estmentgenerally a percent of the in estment !ash flowthe amount of cash a ailable for day to day operations. "rom an accounting standpoint# deductions such as for depreciation are added bac$ in since depreciation is not really money spent

%perational measurement: &hroughputthe actual rate of sales generated by the system 'n entoryall the money in ested in things that are intended to be sold. &his includes raw materials# e(uipment# etc.# but at the cost price# less any depreciation )which is operating e*pense+. %perating e*pensemoney spent to con ert in entory into throughput. &his includes direct and indirect labor# materials# depreciation# administrati e costs# etc.

&raditional accounting methods wor$ with such things as standard costs# allocation of burdens )which may consist of indirect labor# administrati e costs# insurance# ta*es# depreciation# etc.+# and gross profits# net profits# cost centers# profit centers# all of which may be based on standards and allocations. &hese may not ha e any basis in reality. ,any e*amples can be cited where traditional accounting forces wrong decisions. %ne specific e*ample that one of the authors has confronted is of a -. .. of manufacturing who is terminating a ery profitable product line# because on paper this product line is losing money. /hy? 0ecause o erhead is allocated based on the amount of direct labor and this product line is almost all1direct labor# with ery little e(uipment in ol ed. His allocation of e eryone else2s burden creates a paper loss. 3nder these circumstances he would lose his annual bonus and be rated down in his performance. %ther areas of accounting differences: in entory in traditional accounting is carried the same as cost of goods sold# i.e.# with all the labor and burdens included. 'n operational measurement2s terminology# in entory is carried as the cost of the raw materials.

!hapter 14

5. 6iscuss process batch and transfer batches. How might you determine what the si7es should be? .rocess batch si7e is the total number of units that are scheduled to be processed within the same setup. 8arger process batches in ol e fewer setups and# therefore# ha e more output. &he re erse is true for smaller process batches. &ransfer batches refers to the mo ement of part of the process batch# rather than waiting for the entire 9ob to be completed. : process batch of 1;;;# for e*ample# can be transferred in ten batches of 1;; each. .rocess batch and transfer batch si7es can be controlled from a bottlenec$ or capacity constrained resource. <. !ompare and contrast ='&# ,R.# and synchroni7ed manufacturing# stating their main features# such as where each is or might be used# amounts of raw materials and wor$1in1 process in entories# production lead times and cycle times# and methods for control. >uestion /here used /'. .roduction cycle time Schedule fle*ibility Regard for capacity limits 8abor s$ills ='& !ontinuous flow# ma$e1to1stoc$ -ery low -ery short 8e el production for min. of <; days High. &ries to balance capacity ,ulti1s$illed to help out other areas ,R. =ob shop# custom shop -ery high -ery long ,R. fro7en for <; days# but ariable in wor$ centers &errible. ,ay start off o.$.# but (uic$ly becomes inaccurate Speciali7ed in own wor$ area Synchroni7ed ,anufacturing =ob shop# custom shop low Short !an be changed daily as needed 's founded on capacity limitations Same as ,R.

?. !ompare the importance and rele ance of (uality control in ='&# ,R.# and synchronous manufacturing. >uality control is e*tremely important at each wor$station in ='&# ='& cannot tolerate poor (uality since the result is loss of throughput. &herefore# each wor$er or wor$station is responsible for ensuring that only high (uality wor$ passes through. >uality control in ,R. is somewhat hapha7ardly applied. 6efects can occur anywhere and full responsibility for (uality does not lie within each wor$station. 'nspection points are placed within the system# generally with the placement decided by the algorithm @when the e*pected cost of bad (uality output e*ceeds the cost of inspection# we will place an inspection point there.A >uality control in synchronous manufacturing is specifically decided based on importance. "irst# a bottlenec$ or !!R is identified as the constraint of the system. &his critical resource

Synchronous ,anufacturing and &heory of !onstraints

will then be guaranteed that it will not waste time wor$ing on bad parts since inspection will be done on its incoming side. "low after this bottlenec$ should not be interrupted or scrapped. &herefore# all parts that 9oin into this product after the bottlenec$ will ha e passed inspection. :lso# all processing after the bottlenec$ will be of high (uality so that scrap will not be created. 'n summary# inspect before the 0N# and inspect all parts entering the flow after the 0NC also perform high (uality wor$ at all stations after the 0N D. 6iscuss what is meant by forward loading and bac$ward loading. "orward loading is similar to pro9ect scheduling. &as$s are scheduled from some pint into the future. /hen resources are limited# tas$s are assigned until capacity is reached and then carried forward to the ne*t period. 0ac$ward loading is the ,R. type scheduling# where the finished product or re(uired part is needed. "rom that future point# a schedule is created bac$ to the present# allowing for processing and lead time re(uirements at each step of the way. E. 6efine and e*plain the cause or causes of a mo ing bottlenec$. Generally# a mo ing bottlenec$ is caused by batch si7es that are too large. /hat happens is that a large batch scheduled on a machine or resource which1on the a erage has e*cess capacity1pre ents other products from being completed that also need the same resource. &his interrupts the flow and star es downstream resources. "rom their perspecti e loo$ing upstream# they see that particular resource as the bottlenec$. Howe er# days or wee$s later# because of the product mi*# this apparent bottlenec$ will disappear. :nother large batch si7e somewhere else in the system will appear which does the same thing# i.e.# star es downstream operations. F. G*plain how a nonbottlenec$ can become a bottlenec$. : non1bottlenec$ can become a bottlenec$ when it is scheduled with a batch si7e that is too large. "or e*ample# assume that machine 1 pro ides wor$ to machine 5 and machine <. Say that machine 1 wor$s F hours out of each 4 hours and so is not a bottlenec$. Suppose# howe er# that someone decides to sa e some setup time by scheduling wor$ on machine 1 in much larger batches1say 5; hours for machine 5 and 1D hours for machine < )D times larger batch si7es+. ,achine < will be star ed for wor$ since it will be dealing with a ?; hour cycle rather than an 4 hour cycle# and will ha e to wait until machine 1 produces the parts which it needs. &hus# from machine <2s point of iew# machine 1 has become a bottlenec$. 4. /hat are the functions of in entory in ,R.# ='&# and synchronous manufacturing scheduling? ,R. assumes /'. in entories and times the production of these in entories to coincide with the preplanned deli ery dates. &he costs of in entories are computed based on carrying costs. 'n entories are seen as necessary. ,R. systems allow for economic order (uantities# buffer stoc$s# and safety stoc$s. 'n ,R. systems# in entories are pushed through the producti e processes. =ust1in1time# on the other hand# sees in entories as wasteful. ,eans are sought by which in entories can be reduced or eliminated. !onstant attention is gi en to the reduction of unnecessary in entories. &his creates a producti e system where stability is important and

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!hapter 14

(uality must be assured. Synchronous manufacturing treats in entory as a loan gi en to the manufacturing unit. 'n entories are measured by raw materials cost. 0uffer in entories are utili7ed to assure throughput. % erall# synchronous manufacturing discourages in entory if it ser es no purpose. 'n entory is measured in terms of dollar days with the goal of minimi7ing dollar days. B. 6efine process batch and transfer batch and their meaning in each of these applications: ,R.# ='& and bottlenec$ or constrained resource logic. 'n an assembly line# process batch refers to the batch si7e associated with a production process. &heoretically# this batch si7e can be infinite. &he transfer batch refers to the number of parts produced in a se(uence. &his may be as small as one. 'n ,R.# process batch refers to the o erall output of production process while transfer batch would be e(ual to the calculated re(uirements for a gi en time buc$et. 'n ='&# the transfer batch si7e is preferably one. .rocess batches are infinite# as fle*ible production lines are capable of producing an entire product family with minimal setups. .rocess batch might be synonymous with the daily production (uotas. 'n synchronous manufacturing# a process batch is of a si7e large enough to be processed in a particular length of time. &ransfer batches refer to the mo ement of part of the process batch. &his allows parts to be mo ed to succeeding wor$stations in the process. : transfer batch can be e(ual in si7e to a process batch but not larger. 1;. 6iscuss how a production system is scheduled using ,R. logic# ='& logic# and synchronous manufacturing logic. 'n ,R.# production is scheduled based on lead time re(uirements for a particular part of subassembly. .roduction dates for components are calculated based on lead times offset from deli ery due dates. 'n ='&# production is controlled using a $anban or @ isual record.A /hen wor$ is completed at a downstream station# a mo e $anban is released and materials are transferred from the upstream station. 6aily production schedules are determined based on a daily production (uota. Smooth production schedules are sought to minimi7e disruptions to operations. 'n synchronous manufacturing# the production flows are controlled by the drum. &he drum regulates the flow of materials throughout the entire system. 11. 6iscuss the concept of @drum1buffer1rope.A &he drum is a bottlenec$. 't is referred to as the drum because it stri$es the beat that the rest of the system uses to function. &he buffer is in entory that is pro ided )typically prior to the drum+ to ma$e sure that the drum always has something to do. 0uffers are also used to ma$e sure that throughput is maintained throughout the production system. &he rope is upstream communication from the bottlenec$ so that prior wor$stations only produce the materials needed by the drum. &his $eeps /'. in entories from building up. 15. "rom the standpoint of the scheduling process# how are resource limitations treated in an ,R. application and how are they treated in a synchronous manufacturing application? /ith ,R.# re(uirements are e*ploded using ,R. logic. .lanned order release schedules are calculated by the system. !apacity re(uirements planning )!R.+ pro ides feasibility chec$ of these schedules. !R. matches planned production with actual capacity to ensure that schedules can be met# synchronous manufacturing paces the entire production process by the bottlenec$s. &herefore# if additional )less+ capacity is needed# capacity is added )restricted+ at

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Synchronous ,anufacturing and &heory of !onstraints

the bottlenec$s. 'n this way the flow is controlled at each bottlenec$ or !!R to bring the capacities in line. 1<. /hat are operations people2s primary complaints against the accounting procedures used in most firms? G*plain how such procedures can cause poor decisions for the total company. &he primary complaints against accounting departments ha e to do with the fact that accounting systems measure the wrong things# are infle*ible and reward counterproducti e or dysfunctional beha ior. :ccounting systems conform to rigid guidelines established by G::.. :s such# accounting data are often not useful for accomplishing the superordinate goals of the firm. :n e*ample is machine utili7ation. ,achine utili7ation measures the proportion of time that a machine is in use. 'n an accounting sense# high machine utili7ation is preferable because it means that the in estment in the machine is producing a return. "rom an operations point of iew# this beha ior results in high /'. in entory. :nother e*ample is (uality. &he generally accepted accounting definition of (uality is that of conformance. Howe er# manufacturing may desire to adopt a definition of (uality that considers customer needs. :ccounting would be unable to accept the latter definition as it is more difficult to (uantify. &he two alternati e definitions of (uality will reward different beha ior within the firm. 1?. ,ost manufacturing firms try to balance capacity for their production se(uences. Some belie e that this is an in alid strategy. G*plain why balancing capacity does not wor$. 'n synchronous manufacturing# balancing all capacities is iewed as a bad decision. 'f capacity is truly balanced# completion deadlines may not be met due to ariability in processing times. : better strategy is to balance the flow of product through the system. 1D. 6iscuss why &ransfer batches and process batches many times may not and should not be e(ual. &ransfer batches may be e(ual to or smaller in si7e than process batches. Rather than wait for an entire batch to be finished# it may be preferable to release part of a batch to the ne*t downstream wor$station so that smooth product flow can be maintained. &his will also result in lower le els of /'. in entory.

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!hapter 14

P"o#$e%s
&ype of .roblem
0ottlenec$ analysis .lacement of buffers# inspections# etc. .roduct mi* !ompany type

.roblem 1 5 < ? D E F 4

6ifficulty

New .roblem

,odified .roblem

!hec$ "igure in :ppendi* :

Hes Hes Hes Hes Hes Hes Hes Hes Hes

Gasy ,oderate ,oderate ,oderate Gasy ,oderate ,oderate ,oderate

Hes

Hes

1.

&he goal of a firm in operational measurements is to increase throughput while reducing in entory and operational e*penses. 'n these cases# the throughputs are limited by the bottlenec$. /e should a oid the o eruse of nonbottlenec$ resources# resulting in e*cess in entories. !ase ':

Market

I: )1?;; *?;+JE; K B<<.<< hours# I used 1;;L H: )1?;;*<;+JE; K F;; hours# H used FDL

!ase '':

Market

H: )1?;;*<;+JE; K F;; hours# H used FDL or wor$ in process will build up. I: )1?;; *?;+JE; K B<<.<< hours# I used 1;;L

1<

Synchronous ,anufacturing and &heory of !onstraints

!ase ''':

Market

Assembly

I K B<<.<< hour# H is used F;; hours or FDL or spare parts will accumulate at assembly.

!ase '-:

Market

Market

I is used for B<<.<< hours# and H is used for F;; hours or finished goods in entory will build up for H.

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!hapter 14

!ase ' '' ''' '-

%utcome with no restrictions No problems G*cess /'. for H G*cess of spare parts for H G*cess finished goods for H

5.

Market A B C

Buffer Buffer Buffer

Drum Drum
Buffer Buffer

1D

Synchronous ,anufacturing and &heory of !onstraints

<.

Market
High Quality

Final Assembly
High Quality

Buffer Buffer
Inspection

Inspection

Buffer

High Quality

High Quality

High Quality

X
Inspection

Buffer

1E

!hapter 14

?.
High Quality

High Quality

Buffer
Inspection

High Quality

O
Buffer
Inspection

# M $ % &
CC'

!
High Quality

I H " F

Inspection

D
High Quality

C
High Quality

Bottleneck Buffer

B A

1F

Synchronous ,anufacturing and &heory of !onstraints

D.
rocessing(time )etup(time

Bottleneck

rocessing(time

)etup(time

I*le(time

#onbottleneck

rocessing(time

)etup(time

I*le(time

#onbottleneck

rocessing(time

)etup(time

I*le(time

#onbottleneck

rocessing(time

)etup(time

I*le time

CC'

E. a. .roduct ! has the highest selling priceC therefore# sell only product !. b.
.roduct : 0 ! .rice per unit MD; ME; MF; !ost per unit M?; M?D ME; Gross profit per unit M1; M1D M1;

&he answer is to sell only 0 with the highest gross profit of M1D. c.
.roduct : 0 ! 8imiting wor$ center H I / .rocessing time )minutes+ < E D %utput per hour 5; 1; 15 .rofit per unit M1; M1D M1; .rofit per hour M5;; M1D; M15;

&he answer is to sell only :# with the highest profit per hour. Note: this can be sol ed as an 8. problem. &he best solution may ery well be a combination of products rather than a single product.

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!hapter 14

F. 0ecause of the arrangement gi en in the diagram# the /illard 8oc$ !ompany plant will e*hibit the following characteristics: &wo distincti e process and flows )fabrication and assembly+. 6ue date performance is ery poorC either ery early or ery late. % ertime and e*pediting in fabrication are random and fre(uent. : ery high commonality of parts e*ists. &he assignment of parts to orders occurs ery late in the production process. "abrication is in huge batches.

&he reasons for the problems are probably as follows: 'mpro ement in due date performance is attempted through hea y reliance on in entory. &he dri e to attain efficiencies and dollar shipped: 3ndermines assembly acti ity ob9ecti es of due date performance and assemble to order. 3ndermines fabrication acti ity ob9ecti e of purchase and fabricate to forecast. !auses intentional misallocation of parts and cannibali7ation at assembly and subassembly areas.

&he core problem in the /illard 8oc$ !ase is that due date performance is poor and deli ery lead times are (uite long. &he following actions are recommended: !ontrol the flow of product through the fabrication portion of the process. Reduce batch si7es to eliminate wa eli$e motion. Stop the stealing of parts and components at subassembly.

1B

Synchronous ,anufacturing and &heory of !onstraints

4. a. 6etermine the constraint )bottlenec$+. &he demand on each machine is


!alculation of demand ,achine : 0 ! 1;; , units at 5; minutes each K 5#;;; minutes 1;; , units at 1D min. each K 1#D;; minutes D; N units at <; min. each K 1#D;; minutes 1;; , units at 1D minutes each K 1#D;; minutes D; N at 1D minutes each K FD; minutes 6emand 5#;;; minutes <#;;; minutes 5#5D; minutes 3tili7ation )5#?;; minutes per wee$+ 4<L 15DL B?L

b. 6etermine the product mi*. &his can best be done by calculating the throughput per minute:
Selling price Raw material Gross profit .rocessing time1machine 0 Gross profit per minute .roduct , M1B; M1;; M B; 1D minutes ME per minute .roduct N M5;; M 4; M15; <; minutes M? per minute

&herefore# the best product mi* is to ma$e all 1;; of product , and as many of product N as possible. &o determine the number of N to produce# e*amine the remaining capacity on ,achine 0.
: ailable capacity )wee$+ 1;; units of , at 1D minutes per unit Remaining capacity Gach N re(uires <; minutes per unit of ,achine 0 5#?;; minutes 1#D;; minutes B;; minutes B;; J <; K <; units of N

c. /ee$ly profit of plant:


/ee$ly production Gross profit per unit Gross .rofit %perating e*penses Net .rofit .roduct , 1;; MB; MB#;;; .roduct N <; M15; M<#E;; &otal M15#E;; M15#;;; M E;;

Note: &his problem could also be sol ed using linear programming. 't will produce the same answer as abo e. &he formulation is as follows: 8et: , K wee$ly production of product , N K wee$ly production of product N ,a*imi7e: B;, N 15;N 5;, 1D, N <;N 1D, N 1DN , N ,#N P ; O O O O O 5?;; 5?;; 5?;; 1;; D; ,achine : capacity ,achine 0 capacity ,achine ! capacity , 6emand limitation N 6emand limitation Non1negati ity

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