Constraint Management
PowerPoint Slides
by Jeff Heyl
71
Managing Constraints
Constraints are factors that limit
performance
Capacity is the maximum rate of output
Three types of constraints
A bottleneck is any resource whose
capacity limits the organizations ability to
meet volume, mix, or fluctuating demand
requirements
72
Theory of Constraints
TOC is a systematic management approach
that focuses on actively managing those
constraints that impede a firms progress
toward its goal of maximizing profits and
effectively using its resources
It outlines a deliberate process for
identifying and overcoming constraints
TOC methods increase the firms profits by
focusing on materials flow through the
entire system
73
Theory of Constraints
TABLE 7.1


Operational
Measures
TOC View
Relationship to Financial
Measures
Inventory (I)
A decrease in I leads to an
increase in net profit, ROI,
and cash flow.
Throughput (T)
An increase in T leads to an
increase in net profit, ROI,
and cash flows.
Operating
Expense (OE)
A decrease in OE leads to an
increase in net profit, ROI,
and cash flows.
Utilization (U)
An increase in U at the
bottleneck leads to an
increase in net profit, ROI,
and cash flows.
74
Theory of Constraints
TABLE 7.2
Theory of Constraints
TOC involves the implementation of these
five steps
1.
2.
3.
4.
5.
76
Theory of Constraints
Bottlenecks can both be internal or external to the
firm and are typically a process or step with the
lowest capacity
Throughput time is the total elapsed time from the
start to the finish of a job or a customer being
processed at one or more workcenters
A bottleneck can be identified in several different
ways
1.
2.
3.
78
Categorize loans
(20 min)
Complete paperwork
for new loan
(10 min)
7 11
Application 7.1
Two types of customers enter Barbaras Boutique shop for
customized dress alterations. After T1, Type A customers
proceed to step T2 and then to any of the three workstations at
T3, followed by steps T4 and T7. After step T1,Type B
customers proceed to step T5 and then steps T6 and T7. The
numbers in the parentheses are the minutes it takes that
activity to process a customer.
a. What is the capacity per hour of Type A customers?
b. If 30 percent of the customers are Type A customers and 70
percent are Type B customers, what is the average capacity?
c. When would Type A customers experience waiting lines,
assuming there are no Type B customers in the shop? Where
would Type B customers have to wait, assuming no Type A
customers?
7 12
Application 7.1
T3a
(14)
Type A
T1
(12)
T2
(13)
T3b
(10)
T3c
(11)
Type
A or B?
Type B
T4
(18)
T5
(15)
T7
(10)
T6
(22)
Application 7.1
T3a
(14)
Type A
T1
(12)
T2
(13)
T3b
(10)
T3c
(11)
Type
A or B?
Type B
T4
(18)
T5
(15)
T7
(10)
T6
(22)
Application 7.1
T3a
(14)
Type A
T1
(12)
T2
(13)
T3b
(10)
T3c
(11)
Type
A or B?
Type B
T4
(18)
T5
(15)
T7
(10)
T6
(22)
7 16
Step 1 at
workstation V
(30 min)
Step 2 at
workstation Y
(10 min)
Raw materials
$5
Product: A
Price:
$75/unit
Demand: 60 units/wk
Purchased parts
Product B
$3
Step 1 at
workstation Y
(10 min)
Raw materials
$2
Product: B
Price:
$72/unit
Demand: 80 units/wk
Purchased parts
Product C
Step 1 at
workstation W
(5 min)
$2
Step 2 at
workstation Z
(5 min)
Step 3 at
workstation X
(5 min)
Raw materials
$3
Product: C
Price:
$45/unit
Demand: 80 units/wk
Purchased parts
Product D
$4
Step 1 at
workstation W
(15 min)
Step 2 at
workstation Z
(10 min)
Raw materials
$6
Product: D
Price:
$38/unit
Demand: 100 units/wk
Purchased parts
7 18
Load from
Product A
Load from
Product B
Load from
Product C
Load from
Product D
Total Load
(min)
V
W
X
Y
Z
7 19
Load from
Product A
Load from
Product B
Load from
Product C
Load from
Product D
Total Load
(min)
60 30 = 1800
1,800
80 5 = 400
100 15 = 1,500
1,900
60 10 = 600
80 20 = 1,600
80 5 = 400
2,600
60 10 = 600
80 10 = 800
80 5 = 400
100 5 = 500
2,300
80 5 = 400
100 10 = 1,000
1,400
7 20
Application 7.2
ONeill Enterprises manufactures three unique products (A, B,
C) that are fabricated and assembled in four different
workstations (W, X, Y, Z) using a small batch process. Each of
the products visits every one of the four workstations, though
not necessarily in the same order. Batch setup times are
negligible. A flowchart of the manufacturing process is shown
below. ONeill can make and sell up to the limit of its demand
per week, and there are no penalties for not being able to meet
all the demand. Each workstation is staffed by a worker
dedicated to work on that workstation alone, and is paid $12
per hour. Variable overhead costs are $8000/week. The plant
operates one 8hour shift per day, or 40 hours/week.
Which of the four workstations W, X, Y, or Z has the highest
total workload, and thus serves as the bottleneck for ONeill
Enterprises?
7 21
Application 7.2
Flowchart for Products A, B, and C
Product A
$7
Step 1 at
workstation W
(10 min)
Step 2 at
workstation Y
(15 min)
Step 3 at
workstation X
(9 min)
Raw materials
$6
Product: A
Price:
$90/unit
Demand: 65 units/wk
Purchased part
Product B
$9
Step 1 at
workstation X
(12 min)
Step 2 at
workstation W
(10 min)
Step 3 at
workstation Y
(10 min)
Raw materials
$5
Product: B
Price:
$85/unit
Demand: 70 units/wk
Purchased part
Product C
$10
Raw materials
Step 1 at
workstation Y
(5 min)
Step 2 at
workstation X
(10 min)
Step 3 at
workstation W
(12 min)
$5
Product: C
Price:
$80/unit
Demand: 80 units/wk
Purchased part
7 22
Application 7.2
SOLUTION
Identify the bottleneck by computing total workload at each
workstation. The firm wants to satisfy as much of the product
demand in a week as it can. Each week consists of 2400
minutes of available production time. Multiplying the
processing time at each station for a given product with the
number of units demanded per week yields the capacity load.
These loads are summed across all products going through
that workstation and then compared with the existing capacity
of 2400 minutes.
7 23
Application 7.2
Work
Station
Load from
Product A
Load from
Product B
Load from
Product C
Total Load
(minutes)
W
X
Y
Z
7 24
Application 7.2
Work
Station
Load from
Product A
Load from
Product B
Load from
Product C
Total Load
(minutes)
(65x10)= 650
(7010)= 700
(8012)= 960
2310
(659)= 585
(7012)= 840
(8010)= 800
2225
(6515)= 975
(70x10)= 700
(80x5)= 400
2075
(6516)= 1040
(7013)= 910
(8010)= 800
2750
7 25
7 26
7 27
Price
Raw material and purchased parts
= Contribution margin
7 28
Price
$75.00
$72.00
$45.00
$38.00
10.00
5.00
5.00
10.00
= Contribution margin
$65.00
$67.00
$40.00
$28.00
7 29
Minutes at
the Start
Can Only
Make 40 C
Can Only
Make 100 D
V
W
X
Y
Z
7 30
Minutes at
the Start
Can Only
Make 40 C
Can Only
Make 100 D
2,400
2,400
600
600
600
2,400
2,400
2,400
2,200
700
2,400
800
200
2,400
1,600
1,000
800
300
2,400
2,400
2,400
2,200
1,200
7 32
$15,860
Materials
$2,200
Labor
$3,600
Overhead
$8,500
Profit
$1,560
7 33
7 34
Product B
Product C
Product D
Contribution margin
Time at bottleneck
Contribution margin per minute
7 35
Product B
Product C
Product D
Contribution margin
$65.00
$67.00
$40.00
$28.00
Time at bottleneck
10 minutes
20 minutes
5 minutes
0 minutes
$6.50
$3.35
$8.00
Not defined
7 36
Minutes at
the Start
Can Only
Make 40 C
Can Only
Make 100 D
V
W
X
Y
Z
7 37
Minutes at
the Start
Can Only
Make 40 C
Can Only
Make 100 D
2,400
2,400
2,400
600
600
2,400
900
500
500
500
2,400
2,400
2,000
1,400
2,400
1,900
1,500
900
200
2,400
1,400
1,000
1,000
1,000
7 38
7 39
$16,940
Materials
$2,350
Labor
$3,600
Overhead
$8,500
Profit
$2,490
7 40
Application 7.3
The senior management at ONeill Enterprises wants to
improve the profitability of the firm by accepting the right set of
orders. Currently, decisions are made to accept as much of the
highest contribution margin product as possible (up to the limit
of its demand), followed by the next highest contribution
margin product, and so on until no more capacity is available.
Since the firm cannot satisfy all the demand, the product mix
must be chosen carefully. Jane Hathaway, the newly hired
production supervisor, is knowledgeable about the theory of
constraints and bottleneck based scheduling. She believes that
profitability can indeed be approved if bottleneck resources
were exploited to determine the product mix. What is the
change in profits if instead of the traditional method that ONeill
has used thus far; a bottleneck based approach advocated by
Jane is used instead for selecting the product mix?
7 41
Application 7.3
SOLUTION
Decision rule 1: Traditional method  Select the best product
mix according to the highest overall profit margin of each
product.
Step 1: Calculate the profit margin per unit of each product as
shown below
A
Price
Raw Material & Purchased Parts
Labor
= Contribution Profit Margin
7 42
Application 7.3
SOLUTION
Decision rule 1: Traditional method  Select the best product
mix according to the highest overall profit margin of each
product.
Step 1: Calculate the profit margin per unit of each product as
shown below
A
Price
$90.00
$85.00
$80.00
13.00
14.00
15.00
Labor
10.00
9.00
7.40
$67.00
$62.00
$57.60
Application 7.3
Step 2: Allocate resources W, X, Y, and Z to the products in the
order decided in step 1. Satisfy each demand until the
bottleneck resource (workstation Z) is encountered.
Subtract minutes away from 2400 minutes available for
each week at each stage.
Work Center
Starting
After 65 A
After 70 B
W
X
Y
Z
7 44
Application 7.3
Step 2: Allocate resources W, X, Y, and Z to the products in the
order decided in step 1. Satisfy each demand until the
bottleneck resource (workstation Z) is encountered.
Subtract minutes away from 2400 minutes available for
each week at each stage.
Work Center
Starting
After 65 A
After 70 B
2400
1750
1050
510
2400
1815
975
525
2400
1425
725
500
2400
1360
450
7 45
Application 7.3
Step 3: Compute profitability for the selected product mix.
Profits
Revenue
Materials
Overhead
Labor
Profit
7 46
Application 7.3
Step 3: Compute profitability for the selected product mix.
Profits
Revenue
$15400
Materials
$2500
Overhead
$8000
Labor
$1920
Profit
$2980
7 47
Application 7.3
Decision rule 2: Bottleneckbased approach  Select the best
product mix according to the dollar contribution per minute of
processing time at the bottleneck workstation Z. This rule
would take advantage of the principles outlined in the theory of
constraints and get the most dollar benefit from the bottleneck.
Step 1: Calculate the contribution/minute of processing time at
bottleneck workstation Z:
Product A
Product B
Product C
Contribution Margin
Time at Bottleneck
Contribution Margin per minute
7 48
Application 7.3
Decision rule 2: Bottleneckbased approach  Select the best
product mix according to the dollar contribution per minute of
processing time at the bottleneck workstation Z. This rule
would take advantage of the principles outlined in the theory of
constraints and get the most dollar benefit from the bottleneck.
Step 1: Calculate the contribution/minute of processing time at
bottleneck workstation Z:
Product A
Product B
Product C
Contribution Margin
$67.00
$62.00
$57.60
Time at Bottleneck
16 minutes
13 minutes
10 minutes
4.19
4.77
5.76
Application 7.3
Step 2: Allocate resources W, X, Y, and Z to the products in the
order decided in step 1. Satisfy each demand until the
bottleneck resource (workstation Z) is encountered.
Subtract minutes away from 2400 minutes available for
each week at each stage.
Work Center
Starting
After 80 C
After 70 B
W
X
Y
Z
7 50
Application 7.3
Step 2: Allocate resources W, X, Y, and Z to the products in the
order decided in step 1. Satisfy each demand until the
bottleneck resource (workstation Z) is encountered.
Subtract minutes away from 2400 minutes available for
each week at each stage.
Work Center
Starting
After 80 C
After 70 B
2400
1440
740
310
2400
1600
760
373
2400
2000
1300
655
2400
1600
690
7 51
Application 7.3
Step 3: Compute profitability for the selected product mix. The
new profitability figures are shown below based on the
new production quantities of 43A, 70B, and 80C.
Profits
Revenue
Materials
Overhead
Labor
Profit
7 52
Application 7.3
Step 3: Compute profitability for the selected product mix. The
new profitability figures are shown below based on the
new production quantities of 43A, 70B, and 80C.
Profits
Revenue
$16220
Materials
$2739
Overhead
$8000
Labor
$1920
Profit
$3561
7 53
DrumBufferRope Systems
The bottleneck schedule is the drum
because it sets the beat or the production
rate for the entire plant and is linked to
market demand
The buffer is the time buffer that plans
early flows into the bottleneck and thus
protects it from disruption
The rope represents the tying of material
release to the drum beat, which is the rate
at which the bottleneck controls the
throughput of the entire plant
7 54
DrumBufferRope Systems
Constraint
Buffer
CCR
(Bottleneck)
PROCESS A
Capacity
800 units/wk
Time Buffer
Inventory
PROCESS B
Capacity
800 units/wk
Rope
Buffer
Drum
Nonconstraint
Material
Release
Schedule
Shipping
Buffer
Nonconstraint
PROCESS C
Capacity
700 units/wk
Finished Goods
Inventory
Shipping
Schedule
Market
Demand
650 units/wk
7 55
A Line Process
Line Balancing
7 56
Precedence Diagram
EXAMPLE 7.4
Green Grass, Inc., a manufacturer of lawn and garden
equipment, is designing an assembly line to produce a new
fertilizer spreader, the Big Broadcaster. Using the following
information on the production process, construct a precedence
diagram for the
Big Broadcaster.
Work
Time
Immediate
Description
Element
(sec)
Predecessor(s)
40
None
30
Attach axle
50
Attach agitator
40
25
15
Attach controls
20
D, E
Mount nameplate
18
F, G
Total 244
7 57
Precedence Diagram
SOLUTION
Figure 7.4 shows the complete diagram. We begin with work
element A, which has no immediate predecessors. Next, we add
elements B and C, for which element A is the only immediate
predecessor. After entering time standards and arrows showing
precedence, we add elements D and E,
and so on. The diagram simplifies
D
H
interpretation. Work element F,
40
B
for example, can be done
20
E
30
anywhere on the line after
element C is completed.
6
A
However, element I must
F
40
C
await completion of
25
elements F and G.
50
I
18
15
7 58
A Line Process
The desired output rate is matched to the
staffing or production plan
Cycle time is the maximum time allowed for
work at each station is
1
c= r
where
c = cycle time in hours
r = desired output rate
7 59
A Line Process
The theoretical minimum number of
stations is
t
TM = c
where
t =
total time required to
assemble each unit
7 60
A Line Process
Idle time, efficiency, and balance delay
Idle time = nc t
where
n=
number of stations
t
Efficiency (%) = nc (100)
Balance delay (%) = 100 Efficiency
7 61
7 62
7 63
7 64
Finding a Solution
The goal is to cluster the work elements into
workstations so that
1.
2.
7 65
Finding a Solution
TABLE 7.3


Create one station at a time. For the station now being created, identify the unassigned work elements that
qualify for assignment: They are candidates if
1. All of their predecessors have been assigned to this station or stations already created.
2. Adding them to the workstation being created will not create a workload that exceeds the cycle time.
Decision Rule
Logic
Picking the candidate with the longest time to complete is an effort to fit in the
most difficult elements first, leaving the ones with short times to fill out the
station.
This rule is the opposite of the longest work element rule because it gives
preference in workstation assignments to those work elements that are quicker. It
can be tried because no single rule guarantees the best solution. It might provide
another solution for the planner to consider.
Most followers
When picking the next work element to assign to a station being created, choose
the element that has the most followers (due to precedence requirements). In
Figure 7.4, item C has three followers (F, G, and I) whereas item D has only one
follower (H). This rule seeks to maintain flexibility so that good choices remain for
creating the last few workstations at the end of the line.
Fewest followers
Picking the candidate with the fewest followers is the opposite of the most
followers rule.
7 66
Finding a Solution
The theoretical minimum number of workstations
is 5 and the cycle time is 60 seconds, so Figure
7.5 represents an optimal solution to the problem
D
B
30
20
A
40
40
F
C
25
50
I
G
18
15
Figure 7.5 Big Broadcaster Precedence Diagram Solution
7 67
Application 7.3
A plant manager needs a design for an assembly line to assembly
a new product that is being introduced. The time requirements and
immediate
predecessors for the
work elements are
as follows:
Work Element
Time (sec)
Immediate
Predecessor
12
60
36
24
38
C, D
72
B, E
14
72
35
G, H
60
12
F, J
Total =
435
7 68
Application 7.3
Draw a precedence diagram, complete I, F, J, and K
Work
Element
Time (sec)
Immediate
Predecessor
12
60
36
24
38
C, D
72
B, E
14
72
35
G, H
60
12
F, J
Total =
43
5
B
F
E
J
7 69
Application 7.3
If the desired output rate is 30 units per hour, what are the cycle
time and theoretical minimum?
1
c= r =
1
(3600) = 120 sec/unit
30
t
435
TM = c =
= 3.6
120
or 4 stations
7 70
Application 7.3
Suppose that we are fortunate enough to find a solution with
just four stations. What is the idle time per unit, efficiency, and
the balance delay for this solution?
Idle time = nc t = 4(120) 435 = 45 seconds
Efficiency (%) =
435
t
nc (100) = 480 (100) = 90.6%
7 71
Application 7.3
Using trial and error, one possible solution is shown below.
Station
Work
Elements
Assigned
Cumulative Time
Idle Time
(c = 120)
1
2
3
4
5
7 72
Application 7.3
Using trial and error, one possible solution is shown below.
Station
Work
Elements
Assigned
Cumulative Time
H, C, A
120
B, D, G
98
22
E, F
110
10
I, J, K
107
13
Idle Time
(c = 120)
7 73
Managerial Considerations
Pacing is the movement of product from
one station to the next
Behavioral factors such as absenteeism,
turnover, and grievances can increase after
installing production lines
The number of models produced
complicates scheduling and necessitates
good communication
Cycle times are dependent on the desired
output rate
7 74
Solved Problem 1
Bills Car Wash offers two types of washes: Standard and
Deluxe. The process flow for both types of customers is shown
in the following chart. Both wash types are first processed
through steps A1 and A2. The Standard wash then goes
through steps A3 and A4 while the Deluxe is processed through
steps A5, A6, and A7. Both offerings finish at the drying station
(A8). The numbers in parentheses indicate the minutes it takes
for that activity to process a customer.
A3
(12)
Standard
A1
(5)
A2
(6)
A4
(15)
Standard
or Deluxe
Deluxe
A8
(10)
A5
(5)
A6
(20)
A7
(12)
7 75
Solved Problem 1
a. Which step is the bottleneck for the Standard car wash
process? For the Deluxe car wash process?
b. What is the capacity (measured as customers served per
hour) of Bills Car Wash to process Standard and Deluxe
customers? Assume that no customers are waiting at step
A1, A2, or A8.
c. If 60 percent of the customers are Standard and 40 percent
are Deluxe, what is the average capacity of the car wash in
customers per hour?
d. Where would you expect Standard wash customers to
experience waiting lines, assuming that new customers are
always entering the shop and that no Deluxe customers are
in the shop? Where would the Deluxe customers have to
wait, assuming no Standard customers?
7 76
Solved Problem 1
SOLUTION
a. Step A4 is the bottleneck for the Standard car wash process,
and Step A6 is the bottleneck for the Deluxe car wash
process, because these steps take the longest time in the
flow.
b. The capacity for Standard washes is 4 customers per hour
because the bottleneck step A4 can process 1 customer
every 15 minutes (60/15). The capacity for Deluxe car washes
is 3 customers per hour (60/20). These capacities are derived
by translating the minutes per customer of each
bottleneck activity to customers per hour.
c. The average capacity of the car wash is
(0.60 4) + (0.40 3) = 3.6 customers per hour.
7 77
Solved Problem 1
d. Standard wash customers would wait before steps A1, A2,
A3, and A4 because the activities that immediately precede
them have a higher rate of output (i.e., smaller processing
times). Deluxe wash customers would experience a wait in
front of steps A1, A2, and A6 for the same reasons. A1 is
included for both types of washes because the arrival rate of
customers could always exceed the capacity of A1.
7 78
Solved Problem 2
A company is setting up an assembly line to produce 192 units
per 8hour shift. The following table identifies the work
elements, times, and immediate predecessors:
Work Element
A
B
C
D
E
F
G
H
Time (sec)
40
80
30
25
20
15
120
145
Immediate Predecessor(s)
None
A
D, E, F
B
B
B
A
G
7 79
Solved Problem 2
a. What is the desired cycle time (in seconds)?
b. What is the theoretical minimum number of stations?
c. Use trial and error to work out a solution, and show your
solution on a precedence diagram.
d. What are the efficiency and balance delay of the solution
found?
SOLUTION
a. Substituting in the cycletime formula, we get
8 hours
1
c = r = 192 units (3,600 sec/hr) = 150 sec/unit
7 80
Solved Problem 2
b. The sum of the workelement times is 720 seconds, so
t
TM = c =
720 sec/unit
150 sec/unitstation
= 4.8
or 5 stations
7 81
Solved Problem 2
c. The precedence diagram is shown in Figure 7.6. Each row in
the following table shows work elements assigned to each
of the five workstations in the proposed solution.
D
25
Immediate
Predecessor(s)
None
D, E, F
80
20
30
C, I
A
40
Work
Element
15
115
120
H
145
130
Solved Problem 2
D
25
B
80
20
30
40
Candidate(s)
Choice
WorkElement
Time (sec)
15
G
120
Station
115
Cumulative
Time (sec)
I
130
145
Idle Time
(c= 150 sec)
S1
S2
S3
S4
S5
7 83
Solved Problem 2
D
25
B
80
20
30
40
15
G
H
120
Station
Candidate(s)
Choice
WorkElement
Time (sec)
115
I
130
145
Cumulative
Time (sec)
Idle Time
(c= 150 sec)
40
40
110
80
120
30
D, E, F
25
145
E, F, G
120
120
30
E, F
20
140
10
S3
F, H
145
145
S4
F, I
130
130
20
15
145
30
30
120
115
145
S1
S2
S5
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Solved Problem 2
d. Calculating the efficiency, we get
Efficiency (%) =
720 sec/unit
t
nc (100) = 5(150 sec/unit)
= 96%
Thus, the balance delay is only 4 percent (10096).
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