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Constraint Management Notes

1. The document discusses constraint management and the theory of constraints, which helps identify bottlenecks in processes where inventory backs up. Bottlenecks can be caused by capacity issues, training problems, equipment reliability issues, or employee attendance problems. 2. As an operations manager, you should identify bottlenecks, test and exploit them to confirm they are true bottlenecks, focus all resources and decisions on improving the bottleneck, elevate the bottleneck as the top priority, and continue enhancing processes to solve bottlenecks and improve flow. 3. The goal is to continually improve throughput, decrease inventory and operating expenses, increase equipment utilization, and make decisions that balance flow at bottlenecks rather than capacity elsewhere.

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Nathan
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94 views

Constraint Management Notes

1. The document discusses constraint management and the theory of constraints, which helps identify bottlenecks in processes where inventory backs up. Bottlenecks can be caused by capacity issues, training problems, equipment reliability issues, or employee attendance problems. 2. As an operations manager, you should identify bottlenecks, test and exploit them to confirm they are true bottlenecks, focus all resources and decisions on improving the bottleneck, elevate the bottleneck as the top priority, and continue enhancing processes to solve bottlenecks and improve flow. 3. The goal is to continually improve throughput, decrease inventory and operating expenses, increase equipment utilization, and make decisions that balance flow at bottlenecks rather than capacity elsewhere.

Uploaded by

Nathan
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Constraint Management

This week we discuss constraints in process flows, and how to manage those. We will study the
theory of constraints, which will help us identify “bottlenecks” in the process. Bottlenecks are
areas in your flows where inventory “backs-up” due to constraints in the process.

Constraints could include capacity issues, training/skill level issues, equipment reliability
problems, employee attendance problems, etc. So, as an operations manager, how do we
manage our organization through bottlenecks? Follow these steps:

1. Identify the bottleneck(s): This is typically easy to accomplish through visual means.
Simply look for the back-up of inventory.
2. Exploit the bottleneck: test it, put pressure on it, ensure it is a true bottleneck. See how
it reacts to the pressure (pump additional inventory its way to see what happens). After
this step, you’ll be sure if you have a bottleneck.
3. Subordinate all decisions to step 2: focus all of your resources and decisions on this
bottleneck.
4. Elevate the bottleneck: put your resources on studying the bottleneck. Make improving
the bottleneck the number one priority for your resources. Solve the problem.
5. Do not let inertia set in: do not let complacency set in. Do not let up on your
organization’s focus on solving problems at the bottleneck. Once you solve one,
another will be discovered.

The idea behind the theory of constraints is that your organization should be continually
enhancing process flow to improve the bottom line – as measured by net profit, return on
investment, and cash flow. Here are some details:

Inventory: A decrease in inventory will result in an increase in net profit, return on investment,
and cash flow.

Throughput: An increase in throughput will result in an increase in net profit, return on


investment, and cash flow.

Operating Expense: A decrease in operating expense will result in an increase in net profit,
return on investment, and cash flow.
Equipment Utilization: An increase in equipment utilization at the bottleneck will result in an
increase in net profit, return on investment, and cash flow.

Next we’ll discuss the seven key principles of the theory of constraints.

1. The focus should be on balancing flow, not balancing capacity.


a. As long as you can balance the flow of materials and information in your
organization, you should not have to be too concerned with capacity. Balance
the flow first, then work on capacity constraints, only if they appear.
2. Maximizing the output and efficiency of every resource may not maximize the
throughput of the entire system.
a. This principle is basically telling you, as an operations manager, it’s fruitless to
increase capacity on non-bottleneck machines. That capacity is unneeded (it’s
needed at the bottleneck), therefore you would be wasting resources in time
and money.
3. An hour lost at a bottleneck or at a constrained resource is an hour lost for the whole
system. In contrast, an hour saved at a non-bottleneck resource is a mirage because it
does not make the whole system more productive.
a. This principle is saying that you can never gain back an hour lost at a bottleneck,
and since it is the constrained resource in the process, you lose that hour for the
entire process. Also, if an hour is gained at a non-bottleneck resource, it does
not affect the process at all, as the bottleneck is still the constraint.
4. Inventory is needed only in front of the bottlenecks in order to prevent them from
sitting idle, and in front of assembly and shipping points in order to protect customer
schedules. Building inventory elsewhere should be avoided.
a. A bottleneck needs to remain fed, not starved. As an operations manager, do
your best to ensure the bottleneck runs as much as possible, even if the
upstream operations stop.
5. Work, which can be materials, information to be processed, documents, or customers
should be released into the system only as frequently as the bottlenecks need it.
Bottleneck flows should be equal to the market demand. Pacing everything to the
slowest resource minimizes inventory and operating expense.
a. If you release work at a pace faster than the bottleneck can handle it, then
obviously inventory will continue to build just before the bottleneck. This
inventory is excess inventory, and therefore wasteful.
6. Activating a non-bottleneck resource (using it for improved efficiency that does not
increase throughput) is not the same as utilizing a bottleneck resource (that does lead to
increased throughput). Activation of a non-bottleneck resource cannot increase
throughput, nor promote better performance on financial measures.
a. The key is to continually monitor your process and be sure the bottlenecks are
active and running.
7. Every capital investment must be viewed from the perspective of its global impact on
overall throughput, inventory, and operating expense.
a. As an operations manager, be sure to always justify your capital investments in
terms of the above measures.

So, once a bottleneck is discovered, and I’ve determined it is hurting my throughput, now
what?
There are many ways to improve performance of a bottleneck. Perhaps machine set-ups could
be improved, and time could be reduced. Maybe you can flex additional people into the
bottleneck area, or perhaps you need to upgrade the skills of your bottleneck employees, or
provide them with additional tools to improve their efficiency.
It all depends on the problems you and your team find when investigating why a bottleneck is a
bottleneck. The important thing to remember as an operations manager is to know how to
identify a bottleneck, and spring into action to fix it.

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