Goldratt's Theory of Constraints

In 1984, Dr. Eliyahu M. Goldratt published The Goal, a seminal management-based novel focused on his innovative management idea, the Theory of Constraints (TOC). Fundamentally, TOC is a management method that looks to reduce the amount of constraints and their effects on a particular operation. The theory is that there is always going to be one distinct constraint that limits the total manufacturing throughput.The ongoing challenge of this theory is that once a constraint is resolved, another one always appears. Soon after publishing his book, Goldratt founded the Avraham Y. Goldratt Institute (AGI) as an additional resource for people who wanted to dive deeper into TOC and its applications. The business management guru regularly expounded TOC and other TOC-derived tools so that factories could accurately determine the constraints in their production chains.

The Theory of Constraints

The overall goal of most manufacturing businesses is to make money. In order to achieve this goal, the overall throughput of the organization must be maximized. Here, throughput can be defined by the rate at which the production system generates money through sales. Therefore, the more goods produced, the higher the revenue.

However, constraints in the system limit the overall throughput. The Theory of Constraints works to increase the flow of goods through the constraint to increase the overall throughput of the organization.

Many operations managers work to remove such constraints to increase profits. TOC begins by analyzing the production output of multiple production lines to identify the operation or resource that is limiting the total throughput of the production line. When the constraint has been identified, it must be eliminated by making quick improvements using existing resources. This can include performing maintenance work to increase the throughput of the machine, offloading extra work onto other machines, or re-distributing your labor resources.

To further prevent constraints, all other activities should be coordinated around it. It is possible that the initial changes made are not sufficient to remove the constraint. In this case, it may be necessary to invest in additional machines or labor resources to alleviate the constraint. These steps should be repeated until there are no more constraints and the throughput of the overall production line is increased. 

Goldratt and TOC

Today, AGI focuses on consulting, implementation, training, workshops, and multiple programs that help organizations optimize their business' bottom-line. For example, their Jonah Program helps students of TOC think in the same way Jonah, one of The Goal's protagonists, did when improving a struggling company's operations.

I say an hour lost at a bottleneck is an hour lost out of the entire system. I say an hour saved at a non-bottleneck is worthless. Bottlenecks govern both throughput and inventory.

ELIYAHU M. GOLDRATT

 

Other programs like the AGI Active Learning Program use a combination of guided self-study, production simulations, and questions to develop a better understanding of the way constraints can be limited. Primarily, organizations must analyze their current-state operations before developing actionable answers that can optimize their production processes.

Modern TOC and Advanced Planning and Scheduling

While Goldratt helped develop a predecessor to Advanced Planning and Scheduling (APS) software before writing The Goal, it was wildly unsuccessful. Companies simply did not understand the core concepts behind the software. Additionally, companies did not have enough objective data to make detailed reports on the efficiency of their resources.

In order to implement TOC to its maximum potential, companies need to keep track of multiple variables to determine which ones limit productivity. This is where modern Advanced Planning and Scheduling (APS) software such as PlanetTogether's APS helps manufacturers overcome their constraints. Resource performance tracking helps operation managers identify resources that are performing below their expected rates. 

Not only does APS software show where the constraints are, but it can also automatically create schedules that buffer the constraint resources against variability. Schedules can be automatically created to maximize key performance indicators of interest. 

Advanced Planning and Scheduling software can produce a material usage and waste report that indicates the amount and the type of parts used in production. Additionally, maintenance logs keep track of production downtime to ensure that each product reaches the customer on time.

Implementing TOC is now easier than ever. Goldratt introduced the theory about 25 years ago to help faltering organizations reconsider their entire operation processes and find a better way. Similarly, APS software's many functions help and organization keep a close eye on process variables and determine which ones hamper productivity the most.

With PlanetTogether, we implement solutions to problems with confidence, and before constraints become a manufacturing issue.

GREGORY VAN LEIRSBURG, PRODUCTION SCHEDULER, STANDARD PROCESS SUPPLEMENTS

 

Advanced Planning and Scheduling (APS) Software

Advanced Planning and Scheduling Softwares have become a must for modern-day manufacturing operations as customer demand for increased product assortment, fast delivery, and downward cost pressures become prevalent. These systems help planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans. APS Systems can be quickly integrated with an ERP/MRP software to fill the gaps where these systems lack planning and scheduling flexibility, accuracy, and efficiency.

With PlanetTogether APS you can:

• Create optimized schedules that balance production efficiency and delivery performance
• Maximize throughput on bottleneck resources to increase revenue
• Synchronize supply with demand to reduce inventories
• Provide company-wide visibility to resource capacity
• Enable scenario data-driven decision making

The implementation of an Advanced Planning and Scheduling (APS) Software will take your manufacturing operations to the next level of production efficiency by taking advantage of the operational data you already possess in your ERP system. APS is a step in the right direction of efficiency and lean manufacturing production enhancement. Try out a free trial or demo!