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Constraint Management Overview
Chris ZephroDirector, Finance - Seagate TechnologyTOC-ICO Certified PractitionerSix Sigma Principal Master Black BeltLean Master
System Complexity
System 1 System 2
Which system is more complex?
What is the Systems Approach?
• Originally proposed by Dr. W. Edwards Deming
• Holistic thinking
• The whole is not the sum of its parts.• Interaction-interdependencies-among components are as important, or
more important, than the performance of the components themselves• The whole system can’t be managed effectively by suboptimizing.
• Avoid Suboptimization.• Not all components are created equal.• Some may accept inefficiencies so that more critical components can
succeed.
The “Archimedes Point”
“Give me a lever long enough and a place to stand, and I can move the world.”
Constraint Management
What is Constraint Management?
• Constraint Management is a system-level management philosophy developed by Dr. Eliyahu Goldratt that can be viewed as three separate but interrelated areas:
1. Performance Measurements: Throughput Decision Support and the Five Focusing Steps
2. Logistics: Drum-Buffer-Rope Production Scheduling and Buffer Management.
3. Logical Thinking: Logical Thinking Process (Current Reality Tree, Future Reality Tree, Conflict Resolution Diagram, Prerequisite Tree and Transition Tree)
4. Project Management: Critical Chain Project Management
Assumptions Underlying Constraint Management
• Every system has a goal and a set of necessary conditions that must be satisfied in order to maximize achievement of the goal.
• All systems are subject to logical cause-and-effect.
• Organizations live or die as integrated systems, NOT as a collection of discrete, independent processes.
• Systems are analogous to chains.• The performance of a system is limited by very few links at any given time, usually
only one.
• The global organization is greater than the sum of its parts.• The way to improve company performance (global optimum) is NOT through
achieving local improvements (local optimum) everywhere.
• Constraints can never really be eliminated – they just move to a different place.
How do you strengthen a chain?
The Manufacturing Chain
Which is likely to be the weakest link (system limitation)?
#1(2)
57%
#2(1)
19%
#3(1)
71%
#4(1)
32%
#5(1)
36%
#6(1)
41%
#7(2)
42%
MachineCapacityUtilization
(Monthly)
Marketing & Sales
Supplier #2
Supplier #1
Production
ExternalService
Distribution#1 #2 #3 #4 #5 #6 #7
The chain really extends from the market demand, through the entire organization chain, to the external customer who pays for our products
CUSTOMER
The Manufacturing Chain(Expanded)
Constraint Management
Fundamentals
The Five Focusing Steps
The Five Focusing Steps of Constraint Management
1. Identify the System’s Constraints.
2. Decide how to Exploit the System’s Constraints.
3. Subordinate everything else to the above decision.
4. Elevate the System’s Constraints.
5. If in the previous steps a Constraint has been broken, go back to Step 1.
Step 1 - Identify the System’s Constraints
• What limits the system performance now?• Is it inside the system (a resource or policy) or is it outside
the system (the market, material supply, a vendor . . . or another policy)?
• When looking at a process, where is the one point people always have to go to expedite?
What is a Constraint?
Anything that limits a system in reaching its goal.
Types of Constraints:1. Market – Not enough demand for a product or service.2. Resource – Not enough people, equipment, or facilities.3. Material – Inability to obtain required material.4. Supplier/Vendor – Unreliability of a supplier or vendor, or excessive
lead time in responding to orders.5. Financial – Insufficient cash flow to sustain an operation.6. Knowledge/Competence – Information or knowledge to improve
business performance is not resident within the system or organization.
7. Policy – Any law, regulation, rule, or business practice that inhibits progress toward the system’s goal.
Examples of Policy Constraints• “We will not approve new projects if the projected IRR is less than 20%
in three years.”• Reason given for not pursuing new technology development.
• “If we can’t manufacture a component for less than we can buy it, we will outsource that component.”
• International Harvester policy in the 3 years before bankruptcy.
• “We are a metal-stamping company.”• Reason given for not investing in laser-cutting technology.
• “We can not add components that will increase BOM cost or negatively impact gross margins.”
• Policy that makes decisions blind to impact at the system constraint.
And the most common one of all . . .
• “We strive for efficiency everywhere.”
Other Constraints
• Material• Unavailable• Slow
• Vendor / Supplier• Unreliable• Slow
• Financial• Cash Flow
• Knowledge / Competence• Lack of expertise, knowledge• Lack of competent skills
Step 2 - Decide how to Exploit the System’s Constraints
Exploit means to get the most out of the constraining element without additional investment.
• Change the way you operate so that the maximum financial benefit is achieved from the constraining element.
• Understand the sales mix that maximizes the Capacity Constrained Resource (CCR) or identified Capacity Point.• Throughput Decision Support using Throughput per CCR Hour.
Exploit: Use; develop; make use of; take advantage of; make the most of.
Step 3 - Subordinate everything else to the above decision
• All parts of the system that are NOT constraints are required to do whatever they can to SUPPORT the plan to EXPLOIT decided on in step 2.
• All non-constraints must NOT DO ANYTHING that would HURT the exploitation plan for the constraint.
• Non-constraints (most of the system) recognize that THEIR OWN EFFICIENCY is not as important as supporting the system constraint.
Step 4 - Elevate the System’s Constraints
• Evaluate alternative ways to ELEVATE one or more constraints.
• Predict where the future constraint will be (after elevation) and its impact on the global performance.
• Mentally apply the first three steps to each alternative• Where will the constraint go NEXT, and how difficult will it be to manage
it THERE?
• Select the best alternative to elevate the constraint.
Elevate: To physically raise or increase the capacity to flow work through a resource or system component; acquisition of, or investment in, more resources.
The Five Focusing StepsStrategic & Tactical Implications
ELEVATE
SUBORDINATE
IDENTIFY
EXPLOIT
TA
CT
ICA
L D
EC
ISIO
NS
ST
RA
TE
GIC
D
EC
ISIO
NS
TR
AT
EG
IC
DE
CIS
ION
Step 5 - The Five Focusing Steps
• Go back to step one. Beware of inertia in identifying constraints.
• The actual new constraint may be different from what was expected.
Red Curve & Green Curve
• Repeated application of the Five Focusing Steps
• Successive constraints broken
• Cost reductions (efficiency target)
• Single iteration of the Five Focusing Steps (inertia)
Time
$$$
Improvement
Constraint Management
Evaluating Operating Decisions
Evaluating Operating DecisionsThe Traditional Approach
• The financial standard for most decisions is profit• A decision that produces higher profit is GOOD.• A decision that produces lower profit is BAD.
• Three key financial measures to evaluate the correctness of a decision . . . .
• Net Profit (NP)• Cash Flow (CF)• Return on Investment (ROI)
Evaluating Operating DecisionsThe Traditional Approach
• NP and ROI are very difficult concepts to apply to day-to-day decisions.
• Effects of a decision on NP and ROI not easily quantifiable in financial terms.
• How to determine the global (company-wide) financial impact of local (departmental) decisions?
• Constraint theory provides a bridge between local operating decisions and global financial well-being . . .
Evaluating Operating DecisionsThe Constraint Management Approach
• Throughput (T)
• Investment (I)
• Operating Expense (OE)
These measures are predicated on the assumption that the organization's goal is to make more money, now and in the
future.
Throughput (T)
• The rate at which the organization generates “goal units.”
• In a for profit organization, “goal units” equals money (i.e. incremental cash flows) through sales. New money coming into (and retained by) the system.– Sales minus Truly Variable Costs (TVC), where TVC is the costs
that vary directly with the number of units sold, usually just materials.
• Measured and assessed at the unit, product and organizational level.
Throughput Hierarchy
• Company Level• Marginal contribution to profit of ALL sales in ALL product lines.
• Sales revenue – Variable Cost of all Sales
• Product Level• Marginal contribution to profit of ALL sales in ONE product lines.
• Sales revenue – Variable Cost of all Sales
• Unit Level• Marginal contribution to profit of ONE UNIT of product.
• Unit Selling price – Unit Variable Cost
Investment (I)
• All the money the system invests in assets and materials that are used to produce the products or services the system intends to sell.
• Capital Assets• Facilities• Equipment
• Stock of finished goods• Receivables
Operating Expense (OE)
• All the money the organization spends in generating “goal units / Throughput.” The money flowing out of the system.
• Normally, most categories of overhead (fixed expenses)• The money the organization constantly pays, even if production were to
stop for a while.• Salaries• Rent• Insurance• Depreciation
T, I & OE Flow
$$$
Investment
Money Tied Up Inside the System
(System)
$$$
Throughput
Money Coming In
$$$
Operating Expense
Money Going Out
Relation of T, I and OE to Traditional Business Measures of Merit
• Net Profit = T-OE• Return on Investment = (ΔT-ΔOE)/ΔI• Productivity = T/OE• Investment Turns = T/I
The profit from any decision is ΔT NOT ΔOE
• The system constraint limits the level of Throughput that can be achieved.
• Operating Expense is generated primarily by non-constraints.
Using T, I, & OE for Decision Making
Thinking Bridge Example
Demand = 3,500 DrivesPrice = $400 eachRaw Material = $80/DriveEmployee Wage = $18/hrNumber of Employees = 4 (1/workstation)Each Employee Works 2,080 hrs/year (40 hrs/week, 52 weeks/year)Other Expenses = $900,000
Drive Manufacturing Process:Workstation Processing Time
101 15 minutes
102 25 minutes
103 10 minutes
104 5 minutes
Total Time 55 minutes
Labor & Overhead Allocation
Cost Elements
Calculation Rate per Direct Labor Minute
Direct Labor $18/hr / 60 minutes / hour =
$ 0.30
Overhead (4 direct labor employees) * (2,080 hrs/yr)
= 8,320 direct labor hours per year
(8,320 direct labor hours per year) * (60 min/hr) =
= 499,200 direct labor minutes per year
$900,000 / (499,200 direct labor minutes)
$ 1.8029
Combined $ 2.1029
Standard Cost of One Drive
Cost Element Cost
Raw Materials $ 80.00
Direct Labor (55 minutes @ $ 0.30) $ 16.50
Overhead (55 minutes @ $ 1.8029) $ 99.16
Standard Unit Cost $ 195.66
Scenario 1
• An Engineer proposes buying a new fixture to reduce total processing time by 3 minutes.
• The new fixture would allow some work to be transferred from workstation 101 to 102.
Proposed Change:
Workstation Original Processing Time
Proposed Processing Time
101 15 minutes 10 minutes
102 25 minutes 27 minutes
103 10 minutes 10 minutes
104 5 minutes 5 minutes
Total Time 55 minutes 52 minutes
Scenario 1 – New Drive Cost
Cost Element Cost
Raw Materials $ 80.00
Direct Labor (52 minutes @ $ 0.30) $ 15.60
Overhead (52 minutes @ $ 1.8029) $ 93.75
Standard Unit Cost $ 189.35
Scenario 1 – Cost Savings per Drive
Original standard unit cost $195.66
New standard unit cost $189.35
Cost savings per unit $ 6.31
Cost savings per unit $ 6.31
Annual volume X 3,500 units
Total annual cost saving $ 22,085
Less: Cost of fixture 5,000
First year cost savings $ 17,085
IRR = 400%, Payback Period < 3 Months
Is this proposal an improvement?
Scenario 1 – Global Measurements Thinking Bridge Analysis
• When using the global measurements (T, I, & OE) technique for the financial analysis of a proposed expenditure, we need to ask 5 questions:
1. What prevents the firm from increasing throughput?2. Will the total amount of throughput change?3. Will the operating expenses of the firm change?4. Will the amount of investment of the firm change?5. What is the real economic effect of the proposal?
Scenario 1 – The Five Questions
1. What prevents the firm from increasing Throughput?• Note: This question does not arise in least product cost thinking
bridge.• Strategic Control Point is 102, however the company could produce
4,622 drives/yr. (124,800 min. / 27 min. of 102) & demand is 3,500 drives.
2. Will the total amount of Throughput change?• No, the engineer’s proposal has no effect on volume of sales, neither
sales revenue or variable cost (raw materials).
3. Will the Operating Expenses of the firm change?• Do we have the same number of employees?• Has our overhead changed?• No, these all remain the same
Scenario 1 – The Five Questions
5. Will the amount of Investment of the firm change?• Investment increases by $5,000
6. What is the real economic effect of the proposal?
Global Measurements
First Year Subsequent Years
T no change no change
I + $5,000 no change
OE no change no change
Cash Flow - $5,000 no change
Scenario 2
• Everything is the same as in scenario 1, except the firm is currently producing and selling at its capacity of 4,992 units.
• The engineer makes the same proposal.
Scenario 2 – Cost Savings per Unit
Original standard unit cost $195.66
New standard unit cost $189.35
Cost savings per unit $ 6.31
Cost savings per unit $ 6.31
Annual volume X 4,992 units
Total annual cost saving $ 31,500
Less: Cost of fixture 5,000
First year cost savings $ 26,500
IRR = 630%, Payback Period about 2 Months
Is this proposal an improvement?
Scenario 2 – The Five Questions
1. What prevents the firm from increasing throughput?• Strategic Control Point (Capacity Constrained Resource) is 102.• The proposal increases the time required at workstation 102 from
25 minutes to 27 minutes.• The company can only produce 4,622 drives/yr. (124,800 mins. /
27 min of 102) & demand is 4,992 drives.
Scenario 2 – The Five Questions
2. Will the total amount of throughput change?
Lost Sales Volume:
Original capacity 4,992 units/yr
Capacity if proposal is implemented
- 4,622 units/yr
Reduction in productive capacity
370 units/year
Throughput/Unit:
Price $400 /unit
Variable Expenses - 80 / unit
Throughput $320/ unit
$320 / unit
x 370 units/yr
Throughput lost - $118,400/yr
Scenario 2 – The Five Questions
3. Will the operating expenses of the firm change?• No, these all remain the same
4. Will the amount of investment of the firm change?• Investment increases by $5,000
Scenario 2 – The Five Questions
5. What is the real economic effect of the proposal?
Global Measurements
First Year Subsequent Years
T - $118,400 - $118,400
I + $5,000 no change
OE no change no change
Cash Flow (= T-I-OE) - $123,400 - $118,400
Scenario 3
• Let’s start with the original case.• Demand is 6,000 drives.• The firm is currently operating at a level of 4,992 drives.
• The plant engineer makes a similar suggestion, but this time the effect is to increase the time required to produce the product by 3 minutes.
• 5 minutes is added to workstation 101’s processing time.• The processing time of 102 is decreased by 2 minutes.
Scenario 3 – Proposed Change
Workstation Original Processing Time
Proposed Processing Time
101 15 minutes 20 minutes
102 25 minutes 23 minutes
103 10 minutes 10 minutes
104 5 minutes 5 minutes
Total Time 55 minutes 58 minutes
Scenario 3 – Least Product Cost Thinking Bridge
Cost Element Cost
Raw Materials $ 80.00
Direct Labor (58 minutes @ $ 0.30) $ 17.40
Overhead (58 minutes @ $ 1.8029) $ 104.57
Standard Unit Cost $ 201.97
Original standard unit cost $195.66
New standard unit cost $201.97
Cost increase per unit $ 6.31
Scenario 3 – The Five Questions
1. What prevents the firm from increasing throughput?• Workstation 102 restricts our ability to serve all of potential
customers that would like to purchase our drives.
Scenario 3 – The Five Questions
2. Will the total amount of throughput change?
Additional Sales Volume:
Capacity if proposal is implemented 5,426 units/yr
Original capacity 4,992 units/yr
Increase in productive capability 434 units/yr
Throughput/Unit:
Price $400 /unit
Variable Expenses - 80 / unit
Throughput $320/ unit
$320 / unit
x 434 units/yr
Additional Throughput $138,880/yr
Scenario 3 – The Five Questions
3. Will the operating expenses of the firm change?• No, these all remain the same
4. Will the amount of investment of the firm change?• Investment increases by $5,000
5. What is the real economic effect of the proposal?
Global Measurements
First Year Subsequent Years
T + $138,880 + $138,880
I + $5,000 no change
OE no change no change
Cash Flow (= T-I-OE) + $133,880 + $138,880
Summary - Examples
Least Product Cost
Global Measurements (T, I, OE)
Scenario 1 $17,085 ($5,000)
Scenario 2 $26,500 ($123,400)
Scenario 3 ($36,500) $133,880
Constraint Management StrategyLessons from the T, I, OE Example
• Primary focus on increasing “T”
• Allow “I” to seek its natural level (usually less than before)
• Capitalize on opportunities to reduce “OE”
• But ENSURE that capacity to generate “T” is not compromised.
• Don’t waste time or endanger future “T” by actively searching for reductions in “OE” today.
Why Gross Margin is Problematic
• Assumes cost per product is a reality.
• Assumes that all operations are equal.
Fixed Cost + Variable Cost
VolumeProduct Cost =
Throughput Decision Support – Focusing on TU/Hr at the System Constraint?
• The Capacity Constrained Resource at the this example was developed was the Testers
Fam Model Cust TestYield TestTime YieldTestTime GM AUP TVC TU AUC Tu/Hour Revenue/qtr TVC/qtr Throughput/qtrAlpine ST340014A Disty 79% 8.70 11.01 3% 43$ 31$ $12 $41 $1.09 $2,014,818,624 $1,447,782,336 $567,036,288Alpine ST340014A OEM 79% 8.70 11.01 2% 42$ 31$ $11 $41 $1.03 $1,981,324,800 $1,447,782,336 $533,542,464Alpine ST340014A Dell 79% 15.70 19.87 2% 42$ 31$ $11 $41 $0.57 $1,108,633,255 $810,094,157 $298,539,098Alpine ST340014A HP 79% 18.70 23.67 2% 42$ 31$ $11 $41 $0.48 $930,777,653 $680,132,528 $250,645,125Alpine ST380011A Disty 78% 13.60 17.44 7% 49$ 33$ $16 $45 $0.92 $1,463,090,318 $979,304,747 $483,785,571Alpine ST380011A OEM 78% 13.60 17.44 6% 48$ 33$ $15 $45 $0.89 $1,444,136,032 $979,304,747 $464,831,285Alpine ST380011A Dell 78% 20.80 26.67 7% 49$ 33$ $16 $45 $0.62 $963,914,515 $640,314,642 $323,599,873Alpine ST380011A HP 78% 23.10 29.62 4% 47$ 33$ $14 $45 $0.49 $832,514,206 $576,560,371 $255,953,836Alpine ST3120022A Disty 71% 21.30 30.00 20% 65$ 36$ $30 $52 $0.99 $1,141,309,758 $621,451,644 $519,858,114Alpine ST3120022A OEM 71% 21.30 30.00 18% 64$ 36$ $28 $52 $0.95 $1,119,102,566 $621,451,644 $497,650,922Alpine ST3120022A Dell 71% 28.80 40.56 16% 62$ 36$ $26 $52 $0.65 $801,804,931 $459,615,278 $342,189,653Alpine ST3120022A HP 71% 31.30 44.08 16% 62$ 36$ $26 $52 $0.60 $737,763,004 $422,904,793 $314,858,211Alpine ST3160021A Disty 68% 27.00 39.71 18% 68$ 36$ $31 $55 $0.79 $894,427,183 $481,035,358 $413,391,825Alpine ST3160021A OEM 68% 27.00 39.71 17% 67$ 36$ $31 $55 $0.77 $885,179,044 $481,035,358 $404,143,686Alpine ST3160021A Dell 68% 34.75 51.10 13% 64$ 36$ $28 $55 $0.54 $656,969,564 $373,754,091 $283,215,473Alpine ST3160021A HP 68% 37.25 54.78 13% 64$ 36$ $28 $55 $0.50 $612,877,647 $348,669,924 $264,207,723Alpine+ ST3200021A Disty 50% 54.00 108.00 32% 87$ 39$ $48 $59 $0.44 $420,974,911 $187,731,398 $233,243,512Alpine+ ST3200021A OEM 50% 54.00 108.00 32% 86$ 39$ $47 $59 $0.44 $417,720,576 $187,731,398 $229,989,178Alpine+ ST3200021A Dell 50% 54.00 108.00 27% 80$ 39$ $41 $59 $0.38 $388,577,280 $187,731,398 $200,845,882Alpine+ ST3200021A HP 50% 54.00 108.00 27% 80$ 39$ $41 $59 $0.38 $388,577,280 $187,731,398 $200,845,882
How Can We Increase TU/Hr?
1. Raise prices
2. Reduce the time a product spends on the Capacity Constrained Resource/Primary Control Point.
3. Reduce Truly Variable Cost.
4. Increase the yields at the CCR.
5. Ensure that only high quality material goes through the CCR.
Throughput Decision SupportTransition Timing
• Takes into consideration Yield at the constraint and Truly Variable Cost.
• The primary takeaway from this is example is not to kill a Cash Cow in the middle of it’s cycle, the time to transition a product is when you can get the TU/Hour to meet or exceed the product to be replaced.
Fam Mod Cap Cust Yield TestTime Yield_TestTime AUC AUP Margin TVC TU Tu/Hour Revenue/qtr TVC/qtr Throughput/qtrCHEETAH 10K.6-36 FAMILY ST336607LC 36 Dell 85.00% 15.3 13 114$ 62$ $52 $3.40 $859,541,760 $467,470,080 $392,071,680CHEETAH 10K.6-36 FAMILY ST336607LC 36 HP 85.00% 15.3 13 137$ 62$ $75 $4.90 $1,032,958,080 $467,470,080 $565,488,000CHEETAH 10K.6-73 FAMILY ST373307LC 73 Dell 80.00% 23.8 19 100$ 143$ 30% 67$ $76 $3.20 $694,318,888 $325,310,248 $369,008,640CHEETAH 10K.6-73 FAMILY ST373307LC 73 HP 80.00% 23.8 19 100$ 158$ 37% 67$ $91 $3.83 $767,149,541 $325,310,248 $441,839,293CHEETAH 10K.7-73 FAMILY ST373207LC 73 Dell 66.00% 31.8 21 85$ 143$ 40% 65$ $79 $2.47 $518,259,456 $233,760,384 $284,499,072CHEETAH 10K.7-73 FAMILY ST373207LC 73 HP 66.00% 31.8 21 85$ 158$ 46% 65$ $94 $2.94 $572,622,336 $233,760,384 $338,861,952CHEETAH 10K.6-146 FAMILY ST3146807LC 146 Dell 73.00% 56.8 41.5 234$ 77$ $157 $2.76 $474,654,035 $156,189,576 $318,464,460CHEETAH 10K.6-146 FAMILY ST3146807LC 146 HP 73.00% 56.8 41.5 239$ 77$ $162 $2.85 $484,796,216 $156,189,576 $328,606,640CHEETAH 10K.7-146 FAMILY ST3146707LC 146 Dell 65.00% 56.3 36.6 234$ 81$ $153 $2.72 $479,219,725 $165,883,751 $313,335,974CHEETAH 10K.7-146 FAMILY ST3146707LC 146 HP 65.00% 56.3 36.6 239$ 81$ $158 $2.81 $489,459,462 $165,883,751 $323,575,711CHEETAH 10K.7-300 FAMILY 300 49.00% 215.1 105.4 418$ 82$ $336 $1.56 $224,087,849 $43,959,817 $180,128,032
Impact of Yield & Test Time Improvements
• Based on Current Quarter Forecast – Impact on improvements to Disty 200GB only.
1. Reduce test time by 5% (from 54 hrs to 51 hrs) without improvement to yields:• T/Hr on the CCR goes from $.44 to $.47• Gain an additional 2,838,869 hours of Gemini Capacity for other products.
2. Improve yields by 5% (from 50% to 55%) without improvement to test times:• T/Hr on the CCR goes from $.44 to $.49• Gain an additional 4,645,421 hours of Gemini Capacity for other products.
3. Reduce test time by 5% and improve to yields by 5%:• T/Hr on the CCR goes from $.44 to $.52• Gain an additional 7,226,211 hours of Gemini Capacity for other products.
Analysis with Throughput Decision Support
1. Product Emphasis
2. Product Transitions
3. Product Design
4. Product Pricing
5. Capital Investment & Process Improvement Expenditures
6. Capacity Constrained Resource Yield vs. Scrap
7. Outsourcing Decisions
8. Marketing Potential
9. Project Selection – Six Sigma & Lean
The Challenge
PROBLEM… Many of these constraints are not easy to identify
How do we identify and manage constraints that are: • Not physical (not visible)
• Not easily measurable
• Apply to more than just manufacturing systems
• Pervade the organization (complex interdependency)
In other words...How to analyze complex system interactions?
Logical Thinking Process
The means to IDENTIFY the system constraint and plan EXPLOITATION, SUBORDINATION, and ELEVATION.
Six Logical ToolsAn Integrated Thinking Process
Intermediate Objective Map
Six Logical ToolsAn Integrated Thinking Process
Six Logical ToolsAn Integrated Thinking Process
Six Logical ToolsAn Integrated Thinking Process
Other Constraint Management Tools
“Drum-Buffer-Rope”Production Scheduling
“DRUM” : The maximum PACE of the most restricted (capacity-constrained) resource“BUFFER” : A means to PROTECT the CCR and the Shipping Dock from “starvation”
•TIME, not inventory“ROPE” : A communication mechanism to guarantee material release does not exceed the PACE of the CCR
•Similar to kanban
“Critical Chain”Project Scheduling and Resource Allocation
• Similar to DBR• Avoids multi-tasking & student syndrome• Eliminates resource contentions• Improves reliability of delivery date
projections• Provides a project “delivery” buffer at
the end• Smaller “assembly” buffers• No “pad” for individual activities
CCPM track record: 85% of all projects completed on time or early
Feeder Buffer
Feeder Buffer
Project Buffer
Project Delivery
References1. Steven Bragg, Throughput Accounting, A Guide to Constraint Management.2. John A. Caspari, Management Dynamics: Merging Constraints Accounting to
Drive Improvement.3. Thomas Corbett, Throughput Accounting.4. Debra Smith, The Measurement Nightmare: How the Constraint
Management Can Resolve Conflicting Strategies, Policies, and Measures.5. William Dettmer, the Logical Thinking Process.6. William Dettmer, Breaking the Constraints to World-Class Performance.7. Eliyahu M. Goldratt & Jeff Cox, The Goal.8. Eliyahu M. Goldratt, Constraint Management Self Learning: Finance &
Measurements.9. Eliyahu M. Goldratt, Production the Constraint Management Way.10. Eliyahu M. Goldratt, It’s Not Luck.11. Eliyahu M. Goldratt, Constraint Management Self Learning: Project
Management & Engineering.12. Eliyahu M. Goldratt, Constraint Management Insights: Finance &
Measurements.13. Eliyahu M. Goldratt, Constraint Management Insights: Operations.14. Lawrence Leach, Critical Chain Project Management.15. William Dettmer, MBB 2004 Seagate Conference - Constraint Management
Overview.