Theory of Constraints
Theory of Constraints
1.
Profit
an absolute measurement in dollars
2. Return on investment
a relative measure based on investment
3. Cash flow
a short-term survival measurement
Performance Measurement Operational
1. Throughput
the rate at which money is generated by the system through sales
2. Inventory
all the money that the system has invested in purchasing things it intends
to sell
3. Operating expenses
all the money that the system spends to turn inventory into throughput
Productivity does not guarantee profitability
Has throughput increased?
Has inventory decreased?
Have operational expenses decreased?
Earlier, we discussed balancing assembly lines in JIT.
The goal was constant cycle time across all stations
Synchronous manufacturing views constant workstation capacity as a bad decision
a waste.
Rather than balancing capacities, the flow of product through the system should
be balanced.
Also, it may not be necessary or advisable to re-layout the plant as in the JIT
solution.
Some Capacity Related Terminology
Capacity
Available time for production
Bottleneck Work Center (BNWC)
Capacity is less than demand placed on resource
Nonbottleneck
Capacity is greater than demand placed on resource
Capacity-constrained resource (CCR)
Capacity is close to demand placed on resource, almost a BNWC.