Theory of Constraints:

A look at the Drum-Buffer-Rope and Critical Chain Project Management approach

EMGT 364 Term PaperJesse Crispino and Ryan Saulsbury

Theory of Constraints

Developed by Eliyahu M. GoldrattA systems management philosophy

developed in the 1980sBoost process performance by looking

at the entire processIdentifying and reducing “bottlenecks”Often applied in conjunction with

TQM, JIT and ABM

Theory of Constraints

Project managers have always analyzed individual components of a process

Maximizing components may not improve the process

Goldratt views the entire process and finds the weakest link--Capacity Constrained Resource (CCR)

All projects contain one, but not many CCRs

Theory of Constraints: Principles

If a system is performing as well as it can, only one of its component parts will be.

If all parts are performing as well as they can, the system as a whole will not be.

Inertial is the worst enemy of a process of ongoing improvement. Solutions develop weight that resists change.

Ideas are not solution.

Theory of Constraints: Steps

Goldratt’s Five Steps Identify the systems constraints Decide how to exploit the constraints Subordinate everything else to the

exploitation of constraints Elevate the systems constraint If any constraints have been violated,

repeat the process

Theory of Constraints: Defined

Constraint: Anything that limits a system’s performance relative to its goal

Inventory: All the money used to purchase things the system intends to sell

Operating expense: The money a system spends to turn inventory into throughput

Throughput accounting: An accounting system used to measure TOC operations

Theory of Constraints: Defined

Throughput: the difference between net revenues and direct material cost limited by internal constraints (plant capacity) limited by external constraints (market demand)

Two critical assumptions: The goal of product or customer mix and

volume should be to maximize throughput Assumes that once a certain capacity exists,

operating expenses are fixed

Theory of Constraints: Applied

Soldier analogy:Gaps appear due to

Dependent events Statistical fluctuation

Drum-Buffer-Rope (DBR) system links first “soldier” with the slowest one

Drum-Buffer-Rope (DBR)

Logistical tool that balances flow of a system

Drum: A schedule for capacity of the constraint

Buffer: Built in time for parts to reach the constraint early (in process inventory)

Rope: A schedule, or information connection, for releasing raw materials

Drum-Buffer-Rope: Implementing

Identify CCRs-Pareto’s Rule may helpSchedule CCRs to capacity (drum)Protect from statistical fluctuations with

time buffers (buffer)Monitor CCRs to ensure the timely

release of materials “upstream” (rope)Monitor Buffer--Buffer Management

(BM)

Drum-Buffer-Rope: Case Study #1

Oregon Freeze Dry: Four step process wash/prepare food freeze food in cold room dry food to remove ice crystals (sublimation) packaging/shipping

Difficulty finding space in cold room--wash/preparation was very quick

Considered buying new cold room


Reduced the amount of raw food going into wash phase

Cold room scheduled by using a BTU calculation for max efficiency

Less product in cold room created faster freezing rates.

Oregon Freeze uses only 30% of cold room capacity and produces a higher quality product


Wendell August Forge: Hand-hammered aluminum commemorative items

Six production cellsExpected hammering to be drumWalk on shop floor showed buffing

backup to be CCRUnion mandated breaks


Break schedule staggered--exploitationCapacity immediately increased 12%Implemented a Rope to limit raw materialsWork in progress inventories decreasedManagers educated on TOC attitudesCapacity up 27% by years

Critical Chain Project Management

Traditional project management, Critical Path Method (CPM) used for over 40 years

DoD projects: 100-200% more expensive, and exceeded duration 40-50% of the time

Commercial projects: 70% more expensive, and exceeded duration 40% of the time

Goldratt’s 1997 book Critical Chain--new paradigm for PMs

People plan and execute projects


Accounts for human nature factors Individuals always desire a safety buffer Goldratt’s “student syndrome” Parkinson’s law--Work expands to fill the

time allotted PM multi-tasking reduces efficiency and

penalizes the highest priority No early finishes


CPM: Tasks scheduled as soon as possible (ASAP)

CCPM: Tasks scheduled as late as possible (ASLP) Reduce work in progress Reduce up-front costs PMs focus on first tasks Increased knowledge as project progresses


ALAP drawback: As the project progresses, all tasks become critical to project completion

Goldratt’s solution: Drum-Buffer-Rope logistical scheduling and consolidated safety buffers

CCPM: Re-define Your Paradigm

CCPM requires individual and organizational behavior changes

Locate and remove hidden safety buffersEmbrace uncertainty vs attempting better

estimatesA 50% change of completing a task on-time

is acceptable--Do not measure against baseline

“Tell me how you will measure me and I will tell you how I will behave”

CCPM: Implementing

Assume all material and information for tasks are on-hand

Resolve resource conflictsLocate the Critical Chain--longest

chain of tasks that consider both task and resource dependencies

Critical Path--longest chain of tasks based upon task dependencies

CCPM: Implementing

Individual projects no longer have safety buffer

Two types of safety buffers are inserted into the project as a whole Project Buffer: protects against overruns

on the critical chain Feeding Buffer: protects against

overruns on tasks that feed the critical chain

CPM vs CCPM

CPM: Tasks have scheduled start and finish dates Early finishes on critical path do not

accumulate Project is on time or late

CCPM: Relay race analogy Tasks are scheduled by preceding tasks

completion

CPM vs CCPM

CCPM will finish tasks fasterProject team’s moral and effectiveness

will improveProject teams/project managers can

produce early finishesOverall costs will decline

CPM

Start Finish

- Indicates critical path

CCPM

Start

FeedingBuffer

ProjectBuffer

Finish

ResourceBuffer

- Indicates critical chain

Rope

Critical Chain: Case Study #1

Harris Semi-conductor: $250M new wafer fabrication plant

Typical construction time 54 monthsCPM analysis yielded 6000 tasksCritical chain analysis reduced to 150

tasks40 day delay for weather15 day delay for equipment problems

Critical Chain: Case Study #1

Buffers allowed for project delaysProject completed 3 days ahead of

schedulePlant constructed in 13 monthsOverall cost only 4% above estimateWafer Fabrication plant able to produce

products 40 months faster than the industry standard

Critical Chain:Case Study #2

Habitat for Humanity: World Record attempt for building a house

Old record: 4hrs 39min, Nashville--1998Critical Chain method predicted 4 hoursBathroom finished 1 hour longer than

estimatedOverall finishing time: 3hrs 44min

In Class Example:

You are a new plant manager for LETZ GETZ BLITZED BREWING CO INC.

You need to re-work the production line soon because your boss, CEO Always Hammered is getting thirsty for the profits so to speak.

Your Suppliers Bottle Cap Billy, and Hops McGee are consistently late. Your line supervisor Mr. Schmidt explains that those producers are from Denmark and the delays are due to rotten shipping.

In Class Example: Current Situation:

The Hops & Malt used in the brewing process is suppose to arrive on the 1st of each month but it can arrive 1 day late.

Yeast is purchased in bulk and is delivered on the 4th of the month. The line supervisor claims yeast requires 4 days of preparation before being added to the WORT.

Packaging is delivered on the 11th of the month and requires imprinting and then fix/assembly (2days total)

Your bottles are delivered on the 15th. You can fix the labels and assemble the packaging after your bottles arrive.

Bottle caps are suppose to arrive on the 16th but lately they have been a day late.

You are unable to obtain new suppliers because of existing contracts signed by the CEO.

In Class Example:

The following is a general concept of how to make the beer in your factory: Step 1: You can start by creating the WORT. A process

that includes adding water, hops, malt and then a boiling/cooling process. ( 1 day)

Step 2: Transfer to the fermenter where the yeast is added

Step 3: Fermentation (10 days-Cannot be reduced) Step 4: Final Preparation includes: Siphon beer to

remove yeast sediment, Add Sugar-Bitters added to product to produce, and carbonation (4 days)

Step 5: Bottling/Packaging (2 days)

In Class Example CPM:

In Class Example CCPM:

Develop a CCPM for the Beer Making ProcessRemember: Reduce the Critical Path by 50%,

Project Buffer(5 days) Feeder Buffer(2 total)

Critical Chain vs Critical Path for Army/UMR?

Must teach both techniques CCPM CPM

Army constrained by resources Operations difficult to apply Maintenance has potential

Key differences ASAP vs. ASLP Buffer Management

Drum-Buffer-Rope & Critical Chain Method

QUESTIONS ??

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