Maximizing Profitability Part 10

In my last posting, we discussed the development of a Constraint Improvement Plan and I gave you an example of such a plan. In Steps 2a and 3a of the UIC, you are reducing waste and variation primarily in the constraint by executing your plan. Our focus thus far has been on the constraint, but now it’s time to turn our attention to non-constraints. You will recall that the third of Goldratt’s five focusing steps is, subordinate everything else to the constraint. Just exactly what is a non-constraint? In TOC jargon, a constraint is any resource whose capacity is less than the demand placed on it and a non-constraint is any operation whose capacity is greater than the demand that is placed on it. So theoretically, constraints limit throughput while non-constraints do not, but as you will see, the reality is that this is not always true. So why did Goldratt believe that it was so important to subordinate everything else to the constraint? To quote [1] Debra Smith, “The ability to subordinate will define a company’s ability to succeed with the Theory of Constraints. Exploitation of the constraint is dependent upon effective subordination.”

The key role of non-constraints is to guarantee that the constraint always has work exactly when it is needed so as never to allow starvation of the constraint. Constraint starvation translates directly into lost throughput which negatively impacts profitability. The most effective method I have found to assure that constraint starvation does not occur is by using a TOC based scheduling system called Drum-Buffer-Rope (DBR). DBR is designed to regulate the flow of product through a production line based upon the processing rate of the most constrained resource, the capacity constrained resource (CCR). In a DBR system, the production rate of the CCR is equated to the rhythm of a drum. To protect the drum (CCR) from starvation, a time buffer is placed in front of it which is the average amount of time required for raw materials to be released into the process and processed by the up-stream non-constraints in time to reach the CCR. In order to guarantee that product reaches the drum on time, a signaling mechanism, referred to as a rope, connects the drum (CCR) to the raw material release for the first operation. Therefore, the first purpose of the rope is to ensure that the CCR is never starved. By the same token, we want to guard against excess WIP entering the system and the rope prevents this as well. Incidentally, the derivation of the term DBR is found in Goldratt’s book, The Goal, so if you haven’t ever read it, I strongly encourage you to do so. Because of the importance of DBR, the next couple of postings will focus on the implementation of DBR.

The first step in any kind of TOC based implementation is to correctly identify the constraint, or more specifically, the Capacity Constrained Resource (CCR). The slowest resource in any production operation is the CCR which sets the pace for every other part of the process. Any other resource that out-paces the rate of the CCR only serves to increase Operating Expense (OE) and Inventory (I) if it is permitted to run at maximum efficiency. In fact, maximizing production at non-constraints will always result in large levels of Work In Process (WIP) inventory, long cycle times, more labor than is required, increased demands for storage, and a larger than required investment in raw materials which ties up cash. The objective here is to provide exceptional due-date performance while minimizing inventory and DBR offers the solution to this conundrum.

The basic premise for scheduling and production management is that different resources have different capacities and because statistical fluctuations and unplanned disruptions exist and can never be truly eliminated, any solution must take this fact into account. The reality is that the CCR must be protected from “Murphy” who enters all processes in the form of random statistical fluctuations and interdependencies. Interdependencies means that a resource must wait for another resource to finish before it can start to work. DBR uses three strategically placed buffers to guard against these two forms of Murphy as follows:

1. A buffer in front of the CCR to prevent starvation of the CCR if Murphy strike any resource in front of the CCR.
2. A buffer in front of assembly if a CCR part is required to complete the assembly.
3. A buffer in fron of shipping to assure on-time delivery in the event that Murphy strikes upstream of shipping.

It is important to understand that these three buffers are in the form of time rather than products, and that the management of these buffers is critical to your success using DBR. So the question becomes, if time is the buffer, then how do you know how much time is required? Before I answer that question, I want you to form a visual image of what buffer management might look like in a typical production environment.

The figure above is meant to depict any of the three buffers just presented. Remember, these buffers are time based rather than physical product. Monitoring the buffer is intended to send a signal to all concerned as to when to expedite and when not to expedite. When the part does not enter the buffer on schedule, it creates what is known as a “hole” in the buffer. The figure indicates that there are three zones, a safe zone (green), a caution zone (yellow) and an expedite zone (red) for each of the three buffer types. Each of these three zones represents 1/3 of the total calculated time in which the product must be available at that buffer location. If a hole is formed in the green zone, there is no cause for concern, while holes in the yellow zone translate into a need to locate the missing part and begin to expedite it if necessary. Parts that do not arrive in the red zone on time typically means that if extreme actions aren’t taken (i.e. expediting the part), the part will be late arriving at shipping and late to the customer.

Using these three buffer zones is imperative to the success of DBR, but there is also improvement data available that can be used as well. If your parts are always arriving in the green and yellow zones, then it probably means that your calculated buffer time is too large and can be reduced. Conversely, if your parts are always arriving in the red zone, then your buffer is too small and should be increased or that you have incorrectly identified your CCR and that the true CCR is somewhere else.

In my next blog I will get more into the details of how DBR works, how to calculate buffer times, and the positive implications of a successful DBR will mean to your company. I look forward to your questions and comments.