111

Study Questions for The Goal

Book by Eliyahu Goldratt and Jeff Cox, North River Press, Revised Edition (1986).

Why does Alex think the robots are so successful when he first talks to Jonah?

How does Jonah indicate that the robots were not successful?

Why should one not adopt the goal to increase efficiency?

What is the "goal" for publicly owned manufacturing organizations?

What about such goals as: improve quality, supplying jobs, producing products, low cost production,
produce efficiently, stay on leading edge of technology, high market share?

What three common financial measures express the goal to "make money"?

What three measures are useful at the operational level to express the goal?

Define throughput, inventory, and operational expense.

Express the "goal" in terms of throughput, inventory, and operational expense.

What is the result of high efficiencies on a non-constraint machine?

Do high efficiencies necessarily imply higher profit?

Why is it important that throughput be defined in terms of sales rather than production?

What does it mean to balance a plant?

Is it a good idea to balance a plant?

What causes a balanced plant to fail?

Why does the spread of the line of boy scouts discussed on page 100 always become longer as time goes
on?

What characteristics of the hiking troop relate to the production characteristics of throughput, inventory,
and operational expense?

Using the hike analogy on page 113, what happens in a plant if the fastest operations are put at the
beginning of the production process, the slowest operations are put at the end, and all workers produce at
a high efficiency?

What is Herbie in terms of TOC?

In terms of TOC what has been done when Herbie goes to the front of the line?

In terms of TOC what has been done when items are removed from Herbie's pack?

Why was Pete so happy even through the order was not delivered on time?

Define a bottleneck.

What does Jonah say “balance flow not capacities”?

11/4/99 The Goal
112 The Goal

What Herbies do Alex and the staff discover?

List the improvement projects suggested by Jonah.

What does lost time at a bottleneck cost?

What two things can be done to optimize a bottleneck?

What three steps will reduce the lost time on bottlenecks?

What priority system does Alex suggest for processing parts at the bottleneck (pg. 163).

What is the purpose of the tag system introduced on page 176?

What step is taken to off-load work from the NCX-10?

Why do the heat-treat and NCX-10 still have idle time after the priority procedures are implemented?

What additional steps are taken regarding the bottlenecks?

How will most of the changes look to division management who have a "cost mentality"?

What is the effect of the "efficient" operation of non-bottleneck machines?

What determines the level of utilization of a non-bottleneck machine?

What is the function of the drum and rope if used on a hike?

What is the drum for the production facility?

What is the rope for the production facility?

Why is a rope needed for assembly operations?

What is the next logical step after establishing the drum and rope for the production process?

What does cutting batch sizes in half for non-bottleneck operations accomplish?

How can the time material spends in plant be classified into four types?

What is time saved on a non-bottleneck machine.

After Alex Rogo succeeds in reviving the plant in Bearington, what is the next step that he must implement
for his plant and division?
 The Goal 113
Theory of ConstraintsLecture

The Theory of Constraints Step 1: Identify the system’s

constraint(s).

• What is the Goal?

Now that we know the Goal, • What is Throughput?
• What is Inventory?
how do we use it to improve our
• What is Operating Expense?
system?

Step 2: Decide how to exploit the Step 3: Subordinate everything

system’s constraint(s). else to the decisions of Step 2.

• What is the constraint?

• How do we get as much throughput as possible? • Throughput?
• Inventory?
• Operating Expense?
114 The Goal

Step 4: Elevate the system’s Step 5: If a constraint is broken

constraint(s). in Step 4, go back to Step 1.

• What might happen if the constraint is elevated?

• Throughput?
• Inventory?
• Operating Expense?

Summary: The Theory of

Constraints

• Step 1: Identify the system’s constraint(s).

• Step 2: Decide how to exploit the system’s constraint(s).
• Step 3: Subordinate everything else to the decisions of Step 2.
• Step 4: Elevate the system’s constraint(s).
• Step 5: If a constraint is broken in Step 4, go back to Step 1.
 The Goal 115
Application in Manufacturing

P Q
A,B,C,D: 1 each
Available Time: $90/U $100/U
2400 Min/Wk 100 U/Wk 50 U/Wk
OE not including
RM: $6000 per wk
D D
10 min./U 5 min./U

Purchase
Part
$5/U C C B
10 min./U 5 min./U 15 min./U

A B A
15 min./U 15 min./U 10 min./U

RM1 RM2 RM3

$20/U $20/U $20/U
116 The Goal

Step 1: Identify the system’s To Identify the Resource

constraint(s). Constraint
P Q
A,B,C,D: 1 each
$90/U $100/U
Available Time:
2400 Min/Wk 100 U/Wk 50 U/Wk • Compute the load on each production resource assuming
OE not including
RM: $6000 per wk market demands.
D D
10 min./U 5 min./U • Compare the resource loads with the resource capacities.
Purchase
Part
• Those resources for which the loads exceed the capacities
$5/U C C B
10 min./U 5 min./U 15 min./U are constraints (bottlenecks).
• If no production resource load exceeds its capacity,
A B A
15 min./U 15 min./U 10 min./U • the market demands are the constraints.
• What is the Goal?
RM1 RM2 RM3 • the constraints are external to the manufacturing
• What is Throughput? $20/U $20/U $20/U
system.
• What is Inventory? • What is a constraint?
• What is Operating Expense?

Compute the loads and compare

with capacities.
• Production P=100, Production Q=50
• A: Load =2000, Capacity = 2400 Minutes
• B: Load =3000, Capacity = 2400 Minutes
• C: Load =1750, Capacity = 2400 Minutes
• D: Load =1250, Capacity = 2400 Minutes
• What is the constraint?

Step 2: Decide how to exploit the Exploiting the constraint

system’s constraint(s).
P Q
• Assume a single constraint is identified.
A,B,C,D: 1 each
Available Time:
2400 Min/Wk
$90/U
100 U/Wk
$100/U
50 U/Wk
• Rank the products in order of the ratio:
OE not including
RM: $6000 per wk Throughput dollars per minute of constraint use.
D
10 min./U
D
5 min./U • Select the product mix so that the products with greater
Purchase ratios are produced in preference to the products with
Part
$5/U C
10 min./U
C
5 min./U
B
15 min./U
smaller ratios.
• What goal is this method trying to achieve?
A B A
15 min./U 15 min./U 10 min./U • How does this method achieve the goal?
RM1 RM2 RM3
$20/U $20/U $20/U

What and how much to produce.

• P: TP/Unit = 45, B Min/Unit=15, TP/Min =
• Q: TP/Unit = 60, B Min/Unit=30, TP/Min =
• Produce as much P as possible.
• Use the remainder of the constraint resource for Q.

• Why do we use this rule?

• What is the profit for this product mix?
 The Goal 117

Step 3: Subordinate everything Subordinating Production

else to the decisions of Step 2.
P Q • Production P=100, Production Q=30
A,B,C,D: 1 each
Available Time: $90/U $100/U
2400 Min/Wk
OE not including
100 U/Wk 50 U/Wk • A: Load =1800, Capacity = 2400 Minutes
RM: $6000 per wk
D D • B: Load =2400, Capacity = 2400 Minutes
10 min./U 5 min./U

Purchase • C: Load =1650, Capacity = 2400 Minutes

Part
C C B
$5/U
10 min./U 5 min./U 15 min./U • D: Load =1150, Capacity = 2400 Minutes
A B A
• What determines the load on the non-constraints?
15 min./U 15 min./U 10 min./U

RM1 RM2 RM3

$20/U $20/U $20/U

Step 4: Elevate the system’s Step 5: If a constraint is broken

constraint(s). in Step 4, go back to Step 1.
P Q
P Q A,B,C,D: 1 each
A,B,C,D: 1 each Available Time: $90/U $100/U
Available Time: $90/U $100/U 2400 Min/Wk 100 U/Wk 50 U/Wk
2400 Min/Wk 100 U/Wk 50 U/Wk OE not including
OE not including RM: $6000 per wk
RM: $6000 per wk D D
10 min./U 5 min./U
D D
10 min./U 5 min./U
Purchase
Part
Purchase $5/U C C B
Part 10 min./U 5 min./U 15 min./U
$5/U C C B
10 min./U 5 min./U 15 min./U
A B A
15 min./U 15 min./U 10 min./U
A B A
15 min./U 15 min./U 10 min./U
RM1 RM2 RM3
$20/U $20/U $20/U
RM1 RM2 RM3
$20/U $20/U $20/U

• What might happen if the constraint is elevated?

• Where should process improvements be focused? • What happens if there are no more internal constraints?
• What is the benefit of elevating the constraint?
• What is the benefit of elevating a non-constraint?

Say we add another machine of

type B.
• Production P=100, Production Q=50
• A: Load =2000, Capacity = 2400 Minutes
• B: Load =3000, Capacity = 4800 Minutes
• C: Load =1750, Capacity = 2400 Minutes
• D: Load =1250, Capacity = 2400 Minutes
• How much should we produce?
• What is the new constraint?
• How do we elevate the new constraint?
118 The Goal

Summary: The Theory of

Constraints
• Step 1: Identify the system’s constraint(s).
• Step 2: Decide how to exploit the system’s constraint(s).
• Step 3: Subordinate everything else to the decisions of Step 2.
• Step 4: Elevate the system’s constraint(s).
• Step 5: If a constraint is broken in Step 4, go back to Step 1.

Next Question: What are the effects of

Dependent Events and Statistical
Fluctuations?
 The Goal 119
Dependent Events and Statistical Fluctuations
Lecture

Jonah: What is the combined effect

of dependent events and statistical
fluctuations? Dependent Events

Dependent Events
Statistical Fluctuations
Drum, Buffer, Rope Scheduling

What happens if we ask everyone

What are dependent events? to be efficient?

8 4 12 6 9 8 4 12 6 9
Finished Raw Finished Raw
D B2 C B1 A D B2 C B1 A
Goods Materials Goods Materials

3 4
120 The Goal

How can we control a system with How can we improve a system

dependent events? with dependent events?

• Step 1: Identify the system's bottleneck • Step 4: Elevate the system's constraint.
• Step 2: Exploit the system's bottleneck
• Step 3: Subordinate everything else to the bottleneck

5 6

What are the benefits of this

Focus on the bottleneck process

• What is time worth on the bottleneck?

• What is time worth on the non-bottlenecks?
• Better process control
• Reduced inventories
• Reduced operating expenses
• Increased throughput

7 8
 The Goal 121

Concepts:
Dependent Events

• Can we have bottlenecks in systems with independent

Statistical Fluctuations
events?
• What is a bottleneck?
• How do we control with a bottleneck?
• What are the benefits of this control?
• Where should we focus improvement efforts?
• Should we have a bottleneck?

Should we balance the capacities What is the effect of statistical

in the line? fluctuation?

8 4 8 4 8
Finished D Raw
B2 C B1 A
8 4 8 Goods Materials
4 8
Finished Raw
D B2 C B1 A
Goods Materials • Where is the bottleneck?
• How do we improve?
11 12
122 The Goal

Concepts
Jonah: Balance flow not capacity (Statistical Fluctuations)

• It is good to have a bottleneck? • What is the effect of statistical fluctuation?

• Control production through the bottleneck. • Is it good to balance the capacities in the line?
• Subordinate the production in nonbottlenecks to assure • Why is it helpful to have a bottleneck in the line?
that the bottleneck is never delayed.

13 14

What happens if Herbie cannot be

Drum, Buffer, Rope put at the front of the line?
Scheduling

8 4 12 6 9
Finished D Raw
B2 C B1 A
Goods Materials

16
 The Goal 123

We need some way to control What is the equivalent in the

those who are in front of Herbie. manufacturing system?

8 4 12 6 9
Finished D Raw
Goods B2 C B1 A
Materials

Lot Size = 25

• How about a drum?

• How about a rope?
• Where is the buffer? Time

17 18

Drum, Buffer, Rope Scheduling

System A Cycle in the Production System

• Drum: A schedule for the Constraint resource 8 4 12 6 9

Finished D Raw
B2 C B1 A
• Rope: The time interval between when material is required Goods Materials
at the constraint and the release of the raw material to the
first station
• Buffer: The difference between the rope and the minimum
time required in the stages preceding the constraint
Rope
Buffer Rope = 800
A Buffer = 425
B B1

C 25
D
19 20
0 400 800 1200
124 The Goal

How does the rope affect the How does the cycle time affect
cycle time? work in process (inventory)?

• What happens when we increase the rope? • Work in Process = (cycle time)*(Flow Rate)
• Do we want the rope large or small? • Time in machine C = 12 minutes.
• Flow rate = (1/12) units per minute.
• Cycle time = 1500 minutes.
• Work in Process = (1/12) units per minute*1500 minutes
= 125 Units.

8 4 12 6 9
Finished Raw
D B2 C B1 A
Goods Materials

21 22

How do we select the length

(time) of the rope? Concepts (D, B, R)

• Why would we like to keep the rope relatively long? • What is the drum?
• Why would we like to keep the rope relatively short? • What is the rope?
• Which is the most important effect? • What is the buffer?
• How do we select the length (time) of the rope?

23 24
 The Goal 125
Cut the Lot SizeLecture
What encourages us to use large
lot sizes?
Jonah: Cut the lot size • The lot size is the amount produced for each machine
setup
• A setup uses time on the constraint
• Larger lots cause fewer setups
What encourages us to use large lot sizes?
• To maximize throughput select the lot size as large as
What encourages us to use small lot sizes? possible
Under what circumstances can we cut the lot size without • One Remedy: Reduce the setup time
reducing throughput?

What encourages us to use small When can we reduce lot size

lot sizes? without reducing throughput?

• Small lots reduce cycle time • When the setup time is small
• WIP is proportional to cycle time • When the constraint is outside the manufacturing process
• Reducing cycle time reduces inventory (when there are no internal constraints)
• Set the lot size as small as possible while not allowing a
non-bottleneck to become a bottleneck

3 4
126 The Goal

1000 units
Operation Inventory
1000 • Lot size=1000
A • Cycle Time=3.4 mo.
A (0.5 hr.)
800 • Time to complete
B =3.4 mo.
B (0.1 hr.)
600 • @720 hrs/mo.
C
• WIP=1000 units
C (1 hr. )
400
B
B (0.1 hr) 200
D
D (0.75
hr./unit) 0 1000 2000 Hours

Large Lot, High Inventory Manufacture

1000 units
Operation Inventory
1000
A (0.5 hr.) A • Lot size=200
800 • Cycle Time=0.7 mo.
B (0.1 hr.) B • Time to complete
=1.8 mo.
600
C (1 hr. ) C • @720 hrs/mo.

400 • WIP=400 units

B (0.1 hr) B
200
D (0.75 D
hr./unit)

0 1000 Hours
Small Lot, Low Inventory Manufacture
 The Goal 127
Benefits of small lot, low inventory manufacture
Faster Smaller
Better Shorter Smaller
Better quality response to finished
delivery delivery manufacturing
control engineering goods
performance quotes investment
changes inventory

Answers to the lot size problem

• Move constraint outside the manufacturing system
• Reduce the setup times on the internal constraints
• Set the lot size as small as possible while not allowing a
non-bottleneck to become a bottleneck

Advantages of Low-Inventory over High Inventory Manufacturing

Low Inventory leads to Low Cycle Time

Effect Low Throughput Time High Throughput Time

Quality Control Since the operation was per-
Since a long time has passed
An operation near the be- formed not long ago, the when the defect is finally
ginning of the process is in- source of the defect can be
discovered, it is difficult to
troducing some defect. The discovered and corrected identify the cause. The
defect is not discovered until more easily. Not many problem may have changed
the final inspection. items will have passed in the meantime. Many
through the defective opera-
products have been pro-
tion in the meantime. duced and all may have the
defect.
Engineering Changes The change is incorporated The improvement won't ap-
Engineering has made a in the finished product ear- pear in the product for a
modification to correct a lier. The better product be- long time. This is a com-
mistake of make a better comes available earlier. Not petitive disadvantage. Many
product. many products have been units are already in produc-
made without the change. tion and must be modified to
incorporate the change.
Delivery Performance Short throughput time al- Long throughput time re-
Salespersons must promise lows production starts to quires production to start
delivery dates for products. await firm orders. with projections that are less
Operations are more easily certain. Poor guesses result
controlled to meet delivery in unsold product or missed
dates. delivery dates.
Finished Goods Sudden changes in demand Sudden changes in demand
Finished goods safety stock can be accommodated more cannot easily be accommo-
should be proportional to rapidly by increased or de- dated by adjusted production
throughput time so that creased production. Safety rates. Safety stocks are
variations in demand can be stocks are low. high.
accommodated.
Delivery Quotes The throughput time is the Salespersons must promise
A short time to delivery is a delivery time that salesper- long delivery times or make
major marketing advantage. sons can promise. unrealistic promises.
Manufacturing Production operations are Uncertain demand projec-
Investment more easily controlled. The tions and missed delivery
The unit cost of a product is work load is more even. dates cause variability.
in part determined by the Variability is reduced and Variability requires greater
capital investment in ma- fewer machines are re- investment in capacity.
chines. quired.
128 The Goal
Summary of The Goal

What Operational
Measures Describe the
Goal?
How do these measures
relate to the goal?
What Financial
Measures How do the
measures What is the combined
Describe the Goal
relate to effect of dependent
of Making Money?
decisions events and statistical
made in the fluctuations?

What is the Goal? plant?

What is a bottleneck, and
What do you think should be how do you find it?
the goal? How can you increase the
What do we capacity of a bottleneck?
do when What does it cost to
management have a bottleneck idle?
measures tell the How can we keep
What do we do
wrong story? from having the
when bottleneck
has moved out of bottleneck idle?
the plant?
What are the advantages
of smaller lot sizes?
 The Goal 129
Questions Left by Jonah

What is the Goal?

What Financial Measures Describe the Goal?

What Operational Measures Describe the Goal?

How do these measures relate to the goal?

How do the measures relate to decisions made in the plant?

What is the combined effect in your plantd eofp e n d e n t e v e n t s and statistical fluctuations?

What is a bottleneck?

What are the Five Steps of the Theory of Constraints

Step 1: Identify the system's constraint(s).

Step 2: Decide how to exploit the system's constraint(s).

Step 3: Subordinate everything else to the decisions made in Step 2.

Step 4: Elevate the system's constraint(s).

Step 5: If a constraint is broken in Step 4, go back to Step 1.

Don't allow inertia to become the system's primary constraint.

What is a bottleneck, and how do you find it?

How can you increase the capacity of a bottleneck?

130 The Goal
What does it cost to have a bottleneck idle?

How can we keep from having the bottleneck idle?

Solution: Use Drum, Buffer, Rope to Schedule the system.

Drum, Buffer,Rope

Step 1: Identify the system's constraint(s).

Step 2: Decide how to exploit the system's constraint(s).

• Rank the products the products that use the constraint by
Throughput dollars per unit
constraint minutes used per unit
Throughput dollars = unit selling price – unit raw material cost.

• Find the optimum product mix by deciding to manufacture the products with
the greatest throughput per minute.

• Define the constraint drum. Propose a predetermined schedule for the

constraint parts on the constraint.

• Identify the "free products" as those having no constraint parts.

• Define the free product drum. Schedule lot sizes and delivery times for the free
products.

• Define the rope for the constraint. The rope is specified by the constraint
buffer (bc hours). Release raw materials feeding the constraint bc hours hours
before they are needed by the internal constraint.

• Define the rope for the free products. The rope is specified by the delivery
buffer (bd hours). Release raw materials feeding the constraint bd hours hours
before they are needed by the market constraint.

• Define the rope for the assembly of constraint parts to nonconstraint parts.
The rope is specified by the assembly buffer (ba hours). Release raw materials
feeding the constraint ba hours hours before they are needed by assembly.

• Watch the production process and take care of unexpected scheduling

problems.
 The Goal 131
Theory of Constraints Simulation
Market
Demand
FG 45 60 55 90 65 60 60 30
Cash = $2500
Weekly Unit
Expense=$4500 9 3 Revenue 1 7 8
Time per
Week = 2400 min.
8 7

7 5 5

10
B 6

60
G 5 12 6 6 8 10

0
C 4 50

30 Unit Operation
Time
R 3 6 6 9

60 Work in
M 2 Process
40
120
W 1 3 8 6 6 5
Raw Material
Setup Cost
Time RM 10 15 10 15 10

A B C D E F G
Run simulation 30 for one week. Buy raw materials and control all machines in an attempt to satisfy
market demand. At the end of the week, fill in the table below.

Machine Total Utilization Product Sales

Blue A

Green C

Cyan E

Red F

Magenta Net Profit =

Yellow
132 The Goal
"The Goal" Problems

1 . The figure below describes the manufacturing process to produce two products P and Q. Each
rectangle describes an operation a product must pass through. The time required per unit of product is
shown in the rectangle. The machine on which the operation is performed is specified with a letter.
Using the information in the figure, answer the questions below.

P Q Revenue
per unit
One machine each
of types A,B,C. $95/U $80/U Demand
Available Time: 80 U/Wk 40 U/Wk per week
2600 Min./Week

C A
30 min./U 10 min./U

Purchase
Part
$5/U B B
20 min./U 30 min./U

A C
20 min./U 20 min./U

Raw Material Raw Material

cost cost
per unit RM1 RM2 per unit
$20/U $20/U

Operating Expense not including Raw Material cost is $6000

per week.

What is the optimum quantity of each product that should be produced for the week? What is the profit
for this product mix? Show the work that justifies your answer. An answer without the proper
justification does not receive full credit.
 The Goal 133
2 . The figure below shows the manufacturing processes, weekly market demands, unit revenues and raw
material requirements for two products. The products pass through a series of operations indicated by
the circles. The products are manufactured on five machines. The machine assignments are shown by
letters within the operation circles. The processing time for each operation is shown in minutes per
unit adjacent to the circle. All setup times are zero. Operation E is an assembly operation that
combines a unit from each of its two inputs to make the finished product 2.

There are 5000 minutes per week available on each machine type. There is one of each type of
machine.

a. Use the theory of constraints to identify the bottlenecks in the system. Show all work used to find the
bottleneck.

b. For the bottlenecks discovered find the best product mix. Show in your answer the rational for
selecting the product mix.

Product 1 Product 2
Market Demand: 1000 Market Demand: 1000
Revenue per unit: $100 Revenue per unit: $150

D (4) E (4)

C (3) B (3) D (3)

B (2) A (2 Min.) C (1)

A (1 Min.) RM Cost: $60 each RM Cost: $60 each

Machines A, B, C, D, E
Available time 5000 minutes.

Raw Material Cost: $50 each

134 The Goal
3 . You are a manager of a plant that is constrained by the market. That is, there are no internal machine
constraints limiting your production. You have a choice to produce an order in either one lot of 1000
units or ten lots of 100 units each.

a. Explain how and why the choice of lot size affects the level of inventory in the form of WIP (work in
process). Does this effect favor large lots or small lots?

b. The operations of the manufacturing process require a setup time for each new lot. How does this
consideration affect the choice of lot size? Does it favor small lots or large lots?

c. Explain how and why the lot size affects the cash flow for the plant. Does this effect favor large lots
or small lots?

4 . You are a consultant trying to convince potential customers of the value of the Theory of Constraints
for managing their company. Each case below is the comment of a production manager to your sales
pitch. Make up short statements to counter the arguments.

a. "My production facility has no constraints. The current production meets the demand and all the
manufacturing departments have slack time. The theory of constraints is irrelevant for my situation."

b. "We could sell more product if we had more capacity in the final inspection department. Each part
must pass through an automatic inspection machine. Because the machine is so expensive, we can't
afford another. We used to use human inspectors, but the cost of the machine per unit of product
inspected is much lower than the cost of human inspectors. The per unit cost of the parts increase if
we use human inspectors."

c. "Our problem is not bottlenecks. We don't have any. Our problem is the time it takes to get products
through the system. Although it only takes 2 hours to manufacture the product, a given order takes
three weeks to make it through the plant. By the time the product is ready for delivery, the customer
may not want it any more or may want to change the order."

d. "We don't need the Theory of Constraints any more. We used to be your customer when we went
through a period of hard times. Things are better now and we're making a decent profit. Top
management is putting us through a cost reduction campaign to improve profitability. Our problem
now is to keep our efficiency numbers up so we don't have to fire any more workers."

e. "We're into Quality now. Our goal is to produce quality products, whatever the cost. Our final
inspection is so good that we test for every possible defect. We throw away or rework 30% of the
units we produce. That's how dedicated we are. Our customers are responding too. We could sell a
lot more if we had more manufacturing capacity."