Understand the differences and similarities between techniques of Lean Manufacturing and Theory of Constraint (TOC) as applied to field of manufacturing management

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TOC Insights - OperationsSep 18, 2012

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Basics 01 - Part 01

Only 20% of the Japanese Companies have implemented Lean/Six Sigma/TQM/TPM

Its not that the remaining 80% didn't try.These firms tried, but failed repeatedly.

Did they fail because of lack of seriousness?Did they fail because lack of efforts?Did they fail because lack of Knowledge? Not really!!


Basics 01 - Part 02

The firms tried and failed repeatedly because:

Their Production Environment were fundamental different from Toyota.

TPS was developed for Toyota. You cannot “Copy Paste” solution of one environment to the other environment!


Reality of implementation ofLean / Six Sigma / TQM / TPM


An Insight

Application is specific, do not force them on your production environments.

01

Concepts are general, learn them and design application for your environment.

02


Basics 02

The assembly line developed for the Ford Model T began operation on December 1, 1913. It had immense influence on the world.

Assembly Lines (FORD)Features• Flow line concept introduced for Mass Production.• Flow means inventories in the operation are moving.• Inventories are controlled by limiting space

between work-stations.

What happens when space is full?Production stops i.e. in essence local efficiencies are abolished (Against conventional wisdom of 100% efficiency).

LimitationsSingle Product lines where facilities are dedicated for each component.

Output is lost when production stops?Focusing mechanism now available to eliminate shortages.


Basics 02 Assem

bly Lines(FO

RD)

Part02

Generic Concepts

Improving flow (or equivalently lead time) is the primary objective of operations.

This primary objective should be translated into a practical mechanism that guides operation when not to produce (i.e. prevent over-production).

Local efficiencies must be abolished.

A focusing process to balance flow must be in place.


Basics 02

LEAN / TPS (TOYOTA)

Challenges to introduce FORD system to TOYOTA

Demand for small quantities of a variety of cars, hence dedicated lines could not be justified.

Space cannot be used to limit inventories because:

If components are unavailable, then Assembly would stop.

If space is full, feeder lines would stop.

Solution was realized when Taichi Ohno heard about Super-Markets


Basics 02

Part02

LEAN / TPS

(TOYO

TA)Features• Flow is the most important element of TPS• In place of Space, Kanban System introduced to limit

the inventory• Only when an allocated container is used, production of

that container is triggered (No Card ..... No Production)

Frequent switching for small lots means more set-ups and hence loss of production• Just-in-time Evolved i.e. produce only those items which are

required in the very short-term.• Set-up reduction techniques were developed (called Lean).• Kanban was further used to guide process improvement efforts.• Gradual reduction in Containers (FIVE WHYs introduced to guide

improvement efforts).


Basics 02

Part03

LEAN / TPS

(TOYO

TA)Almost everyone has implemented TPS, but still no one has achieved the same Productivity numbers as Toyota ...

Why?

Answer lies in the process of choosing local improvements

Conventional companies use cost savings as the parameter to decide local improvements whereas Toyota uses “Flow Improvement”.

E.g. Setup Reduction was never done to gain cost savings, rather it was done to create better availability at a faster rate.

E.g. Quality was not improved to save trivial costs, rather it was improved to remove disruptions caused by defective part.

No focus on squeezing better prices from supplier or cut payroll cost (manpower reduction), rather full energy is spent on improving the flow.


Basics 02

Part04

LEAN / TPS

(TOYO

TA)End ResultsFocusing on Flow instead of local cost considerations resulted in a much better lower cost per unit.

Abolishing local efficiencies resulted in much higher efficiency of the workforce.

Important InsightAll cost reductions have a ceiling (can cost be made ZERO?).

Improvement efforts have diminishing returns.


Basics 02

Part05

LEAN / TPS

(TOYO

TA)Generic Concepts

Improving flow (or equivalently lead time) is a primary objective of operations.

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.

Local efficiencies must be abolished. Ford used dedicated lines; Ohno introduced JIT & Lean techniques.

A focusing process to balance flow must be in place. Ford used direct observation.Ohno used gradual reduction of the number of containers and then gradual reduction of parts per container.


Basics 02

Part06

LEAN / TPS (TO

YOTA

Production System)

Boundaries of TPS

Works in Stable environments i.e. the processes and the products do not change significantly for a considerable length of time.

Demand over time per product should be relatively stable.

E.g. Toyota has only 1 time change yearly per model.

Combine specific techniques of Lean with cost saving programs.

Total load placed by orders on the various types of resources must be relatively stable.

Imagine holding containers for items which have sporadic demand.

When load changes frequently, promising firm due dates is challenging.

Typical way of implementing Lean in most companies

Is this really a true implementa-tion of Lean?


Theory of Constraint Way of Production


Basics 03 - TOC way of Production - Part01

Core Principles

Flow is the most important objective of Operations.

Practical Mechanism to avoid Over-Production.

Achieved by ensuring synchronization from everywhere achieved by reducing lead times cross the chain.

Local Efficiencies are abolished.

Restrict release of material ahead of time (suitable for unstable environments as it is less sensitive to disruptions in flow.

Buffer Management (BM) and Load control are put in place.

Focusing process to balance flow must be in place.

Analysis of Blacks & Reds guide the improvement efforts.


Bottleneck


Abolishment of Local Efficiencies

If C is to be used 100%• There has to be Continuous bank of work in front of “C”.• Whenever, there are disruptions in “A” or “B”; not only they have to ensure

that “C” is fed but also the Bank is rebuilt. Which means “A” / “B” should have excess capacity than “C”.

• Similarly, incase of disruptions in “D”; not only it has to produce what “C” is producing, “D” also has to clear the backlog created by “C”. Which again means “D” has excess capacity than “C”.

A B C D

By this very definition, “A” / “B” / “D” should have much more capacity than “C” just to keep “C” 100% busy. If so then local efficiencies at places other than “C” have to be abolished otherwise inventory will hit the roofs.



Time Based Mechanism to control WIP

Problem of using Space to control WIP between Workstations

• E.g. Conveyers, Trolleys, etc.

• When space is full, production stops which may not mean 100% utilization of Bottleneck (“C”) resource.

• WIP in front of Bottleneck and Space after the Bottleneck is a function of the “Normal Disruptions” at upstream & downstream resources.

o Typically the WIP is designed to be kept to bare minimum which can result in production loss.

A B C D



Time Based Mechanism to control WIP

In TOC,

• WIP in the system is not artificially restrained between every 2 work centers; rather it is controlled for the entire system allowing the effects of Murphy to be absorbed throughout the system and yet protect the due dates.

• Unlike Kanban, WIP is not maintained everywhere in the system. Rather it is maintained only where needed i.e. to ensure 100% utilization of bottleneck.

A B C D



Concept of Lead Time

• Most of the time, order is waiting in queues in front of the resources.

• Generally the time actually spent working on an order is less than 10% of the total lead time.

• Therefore at times of Urgency, material can moved very fast through the system.

Total Lead Time

Waiting TimeTouch Time



Choke The Release

• Small lead times cause too much expediting (termed as “Hand-2-mouth”)

• Large lead times cause Jams, missed priorities

• Stables zone is in the middle and hence “Choke the Release” is done by cutting WIP by half

Man

agem

ent A

tten

tion

Time Buffer Size

Insufficient Reaction time

Jams,Missed priorities



Priority System

• Just “Choking the Release” i.e. reducing WIP by half will not result in more than 90% due date performance.

• Therefore a simple yet robust priority system is needed to guide operations.

• Buffer Management gives clear priority to all the work-centers to effectively plan and execute orders.

Reduced Lead Time



Focusing Mechanism (POOGI)

• Analysis of RED orders every week.

• Identifying the top reason for REDs and eliminating it.

Material availability Manpower availability Machine availability Utilities availability

40%

30%

20%

10%

Red Reasons

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