AN INTRODUCTION TO THE

THEORY OF CONSTRAINTS

• Hankamer School of Business

• Baylor University

Van D. Gray, Ph.D.

1
 CONSTRAINT THEORY

A Very Brief Introduction TOC Fundamentals and

to the Drum-Buffer-Rope Scheduling Approach

2
 Agenda Items
• Introduction to Operations • Introduction to Constraint Theory
Management (TOC)
• How Trafalgar Was Won – Definitions
• A Clear Statement of “The Problem” – Key Concepts
– Flow
• Your Project
• V-A-T
• Start with a series (try not more than
– TOC Vocabulary and the Focusing
5) of “Negative Statement”
Flywheel
• Channeling Albert Einstein
– A small TOC Problem
• Factors for Success – Simulations
– A good strategy – Bad Day
• Cost
– Good Day
• Differentiation
– TOC Fundamental Assumption
• Focus (flexibility, speed)
– Constraint Vocabulary
– A good operating model
• Lean, JIT, Quality (Six – Using Constraint Theory to Develop
Sigma),Constraint Theory Good Rules of Thumb
– People
– Demand
3
 Objectives
• Develop an Increased Understanding of:
– Drum-Buffer-Rope (DBR)
• DBR Logistical System vs JIT and MRP
• Buffer Management
– Static Buffers
– Dynamic Buffers
• Advanced DBR concepts (tentative)
– The Uniform Time Front
– Rework
– Multiple Constraints - The Rods Concept
• Planning using DBR concepts
• HOW to implement DBR
• Answer questions about DBR
4
 What is Strategy?

“Our thinking about being competitively successful” – Jay Barney

5
 What is Operations Strategy?
• Operations strategy is the total pattern of decisions
which shape the long-term capabilities of any kind of
operation and their contribution to overall strategy,
through the ongoing reconciliation of market
requirements and operations resources.
• All businesses have markets, all businesses own or
deploy resources; therefore, all businesses are
concerned with the reconciliation of markets and
resources.

6
 The Management Educator’s Challenge

• To make abstract principles and concepts

meaningful to practitioners
• Consider the following:
– A cannon is mounted lengthwise inside a railroad boxcar on a set of
frictionless rails. The cannon is fired inside the boxcar. The cannonball weighs
150 pounds and leaves the cannon with a muzzle velocity of 300 feet per
second and hits the opposite end of the boxcar. Assuming that the boxcar
weighs 40,000 pounds with the cannon inside it and the transfer of energy is
complete,

– HOW FAR WILL THE BOXCAR MOVE ALONG THE TRACK? (from Management Dilemmas: The Theory
of Constraints Approach to Problem Identification and Solutions, Eli Schrageheim, CRC Press, 1999. In the Foreward by H. William Dettmer, page XV)

7
What’s the first thing that pops into your mind?

• “What fool would fire off a cannon inside a boxcar?”

• “Why would I care about the answer to this?”
• “Of what practical use is it to me?”

• So, although learning for its own sake might be a worthy

pastime, it is TRANSFERABILITY that determines its ultimate
value. “What can we do with what we know?”

8
 V-A-T-I Analysis
V-Plant A-Plant
Outputs

Inputs

T-Plant I-Plant

9
The Common Sense Vocabulary

The Measurements The Focusing Steps

Constraint Throughput Identify Chupchik
Nonconstraint Investment - Inventory Exploit
Bottleneck Operating Expense Subordinate
Elevate
Inertia

10
 The Focusing Flywheel

Identify
Inertia

Elevate Constraint Exploit

Subordinate

Diagram Copyright 2011, Van D. Gray , Ph.D.

All Rights Reserved. 11
 Fundamental Constraint Theory
Definitions
• A CONSTRAINT is anything that limits the
performance of the system relative to its goal

• A NON-CONSTRAINT is anything that does not limit

the performance of the system relative to its goal

• A BOTTLENECK is anything that has less capacity than

that demanded

12
 Common Constraint Categories
• Policy – A paradigm shift
– Knowledge
– Competence
• Processes (Physical) – Demand/Supply interaction
– Market
– Resource
– Material
– Financial
– Vendor
• People – Matching talent/skills and task
13
 The Measurements
• Throughput (T)
– the rate at which the system generates revenue
(through sales)
• Investment (I)
– the money the system spends on items it intends
to resell
• Operating Expense (OE)
– the money the system spends on converting its
investment into throughput
14
 The Focusing Flywheel

T: Identify T:
I: Inertia I:
OE: OE:
Elevate Constraint Exploit

Subordinate
T: I: OE:

Diagram Copyright 2012, Van D. Gray , Ph.D.

All Rights Reserved. 15
 The Focusing Flywheel

T: Identify T:
I: Inertia I:
OE: OE:
Elevate Constraint Exploit

Subordinate
T: I: OE:

Diagram Copyright 2012, Van D. Gray , Ph.D.

All Rights Reserved. 16
 The Focusing Flywheel

Identify
Inertia

Elevate Constraint Exploit

Synchronization

Subordinate

Diagram Copyright 2011, Van D. Gray , Ph.D.

All Rights Reserved. 17
 The Focusing Flywheel
Strategic Management:
Where do we locate the
Constraint?
Identify
Inertia

Elevate Constraint Exploit

Subordinate Tactical Management:

Day-to-Day Actions
To Utilize the
Existing Constraint

18
Developing Priorities

I
M
P
A
C
T

DECISION/ACTION

19
 A Small Problem
Each is available for 2400 min/wk
Fixed expenses are $6,000/wk
A B C D

Raw Materials Processes/Purchased Parts Products

Part
$5/unit

RM - 1
$20/unit
A C D P
15 min 10 min 10 min Price: $90
Demand: 100 u/wk

RM - 2 B C
$20/unit 15 min 5 min

RM - 3 A B D Q
$20/unit 10 min 15 min 5 min Price: $100
Demand: 50 u/wk
20
 Two Environments
• NON-SYNCHRONIZED Flow
– where products have long manufacturing lead times and
materials spend a large amount of time waiting in queues
as work-in-process (WIP)
• SYNCHRONIZED Flow
– where products have relatively short manufacturing lead
times and materials spend very little time waiting in
queues

• These two environments have precisely opposite

effects on the firm’s competitive edge
21
 What Is TOC, Really?
• TOC focuses on the system constraint(s)
– Constraints Control:
• Inventory
• Throughput
• Constraints are managed (tactics) by developing appropriate plans of action in
both:
– Exploitation, and
– Subordination
• The TOC Throughput metric (T/CU) makes two basic assumptions:
– There is only one internal constraint
– Decisions/Actions at the existing constraint will not cause another constraint
to emerge. (Not a Whack-A-Mole Game)
• Developing Future plans for the next constraint is called:
– Elevation

22
EXPERIENCE IN OTHER
ENVIRONMENTS

23
 Linking your Undesirable Effects (UDEs)
Profitability is down

Customers are not satisfied

Costs are higher than anticipated

Shipments ‘Surged.’

Overtime is required Due dates are missed

Production Lead-Times
It is difficult to respond to urgent customer demand Are too long

Inventory levels
There is too much expediting
Are too high
I’m confused
Priorities are constantly shuffled There are frequent
material/parts shortages
I don’t know where to look

Copyright 2014, Van Gray and The Moraine Group, Inc. All Rights Reserved. 24
 Problem Identification
• Where is the constraint of the system?
– Market
– Resource
– Vendor
– Material
– Financial
– Policy
– People

25
 Exploiting the Constraint
• Discovering our Best Products
– FG-A Sells for $45 and its RM cost is $25
– FG-C Sells for $55 and its RM cost is $25
– FG-E Sells for $60 and its RM cost is $25
– FG-F Sells for $60 and its RM cost is $25
• Developing a Schedule
– a sequence of actions (decisions)
• C4 - 54
• E4 - 40
• F6 - 30
• C4 - 96
• E4 - 110

26
 Subordinating other Decisions
• Developing the Raw Material
Requirements/Releases
– 60 pieces of RM-A
– 156 pieces of RM-B
– 110 pieces of RM-E
– 30 pieces of RM-F
– 30 pieces of RM-G

27
 A Warning about Scheduling
• A schedule provides
– Explicit actions for exploitation of a Resource
Constraint(s)
– Implicit actions for exploitation of a Market
Constraint(s)
– No actions for exploitation of a Policy Constraint(s)

28
 The DBR Philosophy
• Develop the MPS so that it is consistent with the constraints of the system
(Drum(s))
• Protect the throughput of the system from the inevitable minor
fluctuations through the use of time buffers at a relatively few critical
points in the system (Buffer(s))
• Tie the production at each resource, especially the material release at the
gating operations, to the activities at the Drum (Rope(s))

29
 The DBR Approach
• Start with an analysis of the requirements for achieving a
smooth and fast flow of material through the plant. Here, the
detailed techniques used to determine batch size, schedule
priorities, etc., should be in concert with, and in support of
the global objectives of the firm
• Conflicts with the infrastructure are explicitly recognized and
resolved
• Systematic procedures for managing complex sets of
manufacturing activities are developed

30
 Time versus Stock Buffers
• Time Buffer
– The authorized pre-release of material designed to protect the
throughput of the system from the internal disruptions that
continually occur in manufacturing environments (Safety Lead Time)
• Stock Buffer
– Physical inventory (either finished or semi-finished goods) that is held
to improve the responsiveness of the operation to market demand.
This allows for the shipment of orders in less than the normal
production lead time (Safety Stock)

31
 Types & Location(s) of Time Buffers
• Shipping Buffer
– additional time at the end of the process, prior to shipping the order,
(to avoid Blocking Throughput)
• Constraint Buffer
– additional time before the capacity constraint resource(s) (to avoid
STARVATION of the Constraint activity)
• Assembly Buffer
– additional time to ensure that constraint parts are not BLOCKED from
moving through the processes
– Located at all assemble points where non-constraint parts join
constraint parts

32
 Critical Release Points
• Gating operations - true material release points - purchase coordination;
pick lists
• Capacity Constrained Resources (CCR’s)
• Divergence points
• Convergence (Assembly) points

33
 Focusing Improvements
As Throughput Increases
Less excess capacity becomes Identify Constraint(s) that
available to cope with disruptions limit increased production

Tendency is to First, seek inexpensive

increase the Buffer alternatives to buying
more machines

To improve, continue
to reduce the Buffers Capacity Increases

Net Return on Cash

Profit Investment Flow

34
 Buffer Management
8 #129
#132 #136 #145
7
H 6 #128 #141 #144
o 5 #135
u 4 #127 #131 #143
r 3 #140
s 2
1 #134
#122 #130 #138 #142
0
Time
35
 Buffering
• Static Buffers
– fixed quantities for all Constraint, Assembly, and
Shipping Buffers
• Dynamic Buffers
– flexible quantities for the value of the Constraint,
Assembly and Shipping Buffers at a relevant
window of time (on an order-by-order basis)

36
 An Example
T0 + 3
Red Lane Peaks SB = 3 days
First Day Peaks AB = 5 days
CB = 2 days

Options:
Overtime
Offload
Ignore
Declare another Constraint

Time zero (T0)

T0 - 5 T0 - 2
37
 Improving Subordination
• Question: What contributes to the Buffer Duration?
• Answer: Murphy (unplanned mistakes, mechanical
failures, quality problems, etc.)
– and, the non-instant availability of the resources
• If we could identify the peak loads on the non-constraints, we could adjust the
buffers. If we have a mechanism to identify the peaks and then enlarge the
buffers, we can use reduced buffer durations. The actual length of the buffer for a
specific order will be determined by the peak loads on the participating resources
during the relevant window of time. The process is referred to as ‘DYNAMIC
BUFFERING.’

38
Throughput and Inventory Constraints

• Any ‘Drum’ identified may have an impact on

Throughput
• When there is a ‘red batch’ that has been created by
‘Drum Development’ (exploitation) - that resource is
referred to as a THROUGHPUT CONSTRAINT - (a ‘red
batch’ is a late batch)
• There may be CCR’s that don’t impact Throughput;
only Inventory which is always considered less
important. These CCR’s are referred to as
INVENTORY CONSTRAINTS
39
 Developing the Drum
• In a make-to-order environment, there is a real danger of
conflicts between constraints. One typical example arises
when one realizes that meeting the firm order due-dates is an
integral part of exploiting Market Constraints.
• This first step in resolving such conflicts is to look for a way to
resolve the conflict between capacity and the customer
requested due date.
• The CCR buffer will fix the release of material by taking into
account the starting time of the batch. However, the CCR
buffer doesn’t determine the required schedule for the
constraint, at least not immediately.

40
 Summary
• Constraint Theory is not an optimization approach
– Seek a ‘good’ solution; not a ‘perfect’ solution
• If you know the Constraint(s) of the system and you focus
your attention on improving it, then you will be improving the
entire system
• The TOC decision framework can be used to develop both
strategy and tactics – consistently
• TOC does not provide good rules-of-thumb (very limited
number of prescriptions)
– You must develop your own good rules of thumb for your
environment, using a consistent language and decision framework

41
 Load Profile for TMG A-Plant
LOAD PROFILE FOR TMG A-PLANT

R E S O U R C E S
Processing
BLUE GREEN CYAN RED MAGENTA BROWN Total CM
P Demand
A 0 3 5 6 18 11 $1,200
R
60 0 180 300 360 1080 660
O
C 14 1 5 6 6 8 $2,700
D
90 1260 90 450 540 540 720
U
E 14 7 5 6 6 8 $2,100
C
60 840 420 300 360 360 480
T
F 7 8 10 9 6 11 $1,050
S
30 210 240 300 270 180 330

SUM 2310 930 1350 1530 2160 2190

Units 1 1 1 1 2 2
Min. Available 2400 2400 2400 2400 4800 4800

Pure Load 96.25% 38.75% 56.25% 63.75% 45.00% 45.63%

A C E F

Selling Price 45 55 60 60
Less Raw Material -25 -25 -25 -25
Contribution 20 30 35 35
Constraint Time 0 14 14 7

Contribution per unlimited $2.14 $2.50 $5.00

Constraint Unit "free product" per min per min per min 42
Raw Material Releases for TMG A-Plant
TMG A-Plant Raw Material Schedule

Raw Hour Hour of

Material Needed Purchase Quantity Remarks
A 0 0 12 FG-A
B 0 0 12 FG-A
E 0 0 14
F 0 0 30
G 0 0 30
A 16 4 12 FG-A
B 16 4 12 FG-A
B 16 4 96
A 24 12 12 FG-A
B 24 12 12 FG-A
E 26 14 96
A 32 20 12 FG-A
B 32 20 12 FG-A
F 39 27 15 Next week
G 39 27 15 Next week
A 40 28 12 FG-A
B 40 28 12 FG-A
B 41 29 40 Next week
E 41 29 40 Next week 43
Load Profile for TMG V-Plant LOAD PROFILE FOR TMG V-PLANT

RESOURCES Total
Processing
BLUE MAGENTA RED BROWN Total CM Time (min)
Demand
A 30 5 10 15 $1,820 60

13 390 65 130 195

B 30 7 10 15 $1,500 62

10 300 70 100 150

P C 25 5 10 15 $1,950 55

R 15 375 75 150 225

O D 15 6 10 15 $400 46

D 5 75 30 50 75

U E 15 3 10 15 $750 43

C 15 225 45 150 225

T F 30 4 10 20 $1,500 64

S 10 300 40 100 200

G 45 5 10 20 $4,000 80

20 900 100 200 400

H 45 3 10 20 $720 78

4 180 12 40 80

SUM 2745 437 920 1550

Units 2 1 1 1
Min. Available 4800 2400 2400 2400

Pure Load 57.19% 18.21% 38.33% 64.58%

A B C D `

Selling Price 240 250 230 180

Less Raw Material -100 -100 -100 -100
Contribution 140 150 130 80
Constraint Time 0 0 0 0

Contribution per 140 150 130 80

Constraint Unit

E F G H 44
Load Profile for TMG T-Plant LOAD PROFILE FOR TMG T-PLANT

RESOURCES Total
Processing
MAGENTA GREEN BROWN RED BLUE Total CM Time (min)
Demand
A 6 5 9 10 3 $3,000 30

100 600 500 900 1000 300

B 16 13 24 20 35 $5,340 73

20 320 260 480 400 700

P C 5 5 7 3 4 $1,500 20

R 50 250 250 350 150 200

O D 14 11 21 14 30 $6,040 60

D 40 560 440 840 560 1200

U E 5 3 8 7 5 $1,470 23

C 35 175 105 280 245 175

T F 15 11 23 21 42 $2,976 70

S 16 240 176 368 336 672

G 4 3 6 4 2 $2,200 17

50 200 150 300 200 100

H 9 6 14 11 30 $4,520 40

20 180 120 280 220 600

SUM 2525 2001 3798 3111 3947

Units 3 2 3 3 3
Min. Available 7200 4800 7200 7200 7200

Pure Load 35.07% 41.69% 52.75% 43.21% 54.82%

A B C D `

Selling Price 80 420 75 300

Less Raw Material -50 -153 -45 -149
Contribution 30 267 30 151
Constraint Time 0 0 0 0

Contribution per 30 267 30 151

Constraint Unit

E F G H
45
T-Plant Additional Information
Finished Goods

Product Day 1 Day 2 Day 3 Day 4 Day 5 Totals

A 20 20 20 20 20 100
B 4 20 20 20 20 84
C 10 20 20 20 20 90
D 8 20 20 20 20 88
E 19 20 20 20 20 99
F 3 20 20 20 20 83
G 10 20 20 20 20 90
H 4 20 20 20 20 84

Red Resource

Totals Sequence Hour Totals Sequence Hour

A6 - 126 A6-17 1 B - 236 B - 39 0
C6 - 110 C6-22 C - 212 C - 15
E6 - 191 E6-38 D - 427 D - 77
G6 - 126 G6-25 E - 413 E - 50
G6-25 4 F - 317 F - 63
C6-22 G - 287 G - 33
E6-38 B - 49 4
A6-27 Cost C - 49
A6-27 12 B - $4248 D - 87
C6-22 C - $3180 E - 90
E6-38 D - $5124 F - 63
G6-25 E - $2065 G - 63
G6-25 20 F - $4755 B - 49 12
C6-22 G - $4592 C - 49
E6-38 D - 87
A6-27 Total RM E - 90
A6-28 28 Cost F - 63
C6-22 $23,964 G - 63
E6-39 B - 49 20
G6-26 C - 49
D - 87
E - 90
F - 63
G - 63
B - 50 28
C - 50
D - 89
E - 93
F - 65
G - 65 46