Theory of constraints game

In traditional accounting, there is also a very strong emphasis on cutting expenses. The Theory of Constraints, on the other hand, considers cutting expenses to be of much less importance than increasing throughput. Cutting expenses is limited by reaching zero expenses, whereas increasing throughput has no such limitations. These and other conflicts result in the Theory of Constraints emphasizing Throughput Accounting, which uses as its core measures: Throughput, Investment, and Operating Expense.

In general, management decisions are guided by their effect on achieving the following improvements in order of priority :. The strongest emphasis by far is on increasing Throughput. In essence, TOC is saying to focus less on cutting expenses Investment and Operating Expenses and focus more on building sales Throughput. Drum-Buffer-Rope DBR is a method of synchronizing production to the constraint while minimizing inventory and work-in-process.

It ensures that brief interruptions and fluctuations in non-constraints do not affect the constraint. Buffers represent time; the amount of time usually measured in hours that work-in-process should arrive in advance of being used to ensure steady operation of the protected resource. The more variation there is in the process the larger the buffers need to be. An alternative to large buffer inventories is sprint capacity intentional overcapacity at non-constraints. Typically, there are two buffers:.

This in turn triggers an identically sized release of inventory into the process. The role of the rope is to maintain throughput without creating an accumulation of excess inventory.

Constraints are anything that prevents the organization from making progress towards its goal. In manufacturing processes, constraints are often referred to as bottlenecks. Interestingly, constraints can take many forms other than equipment.

There are differing opinions on how to best categorize constraints; a common approach is shown in the following table. There are also differing opinions on whether a system can have more than one constraint. The conventional wisdom is that most systems have one constraint, and occasionally a system may have two or three constraints.

This environment can be modeled as multiple systems — one for each unique manufacturing path. Policy constraints deserve special mention. It may come as a surprise that the most common form of constraint by far is the policy constraint. Since policy constraints often stem from long-established and widely accepted policies, they can be particularly difficult to identify and even harder to overcome.

It is typically much easier for an external party to identify policy constraints, since an external party is less likely to take existing policies for granted. When a policy constraint is associated with a firmly entrenched paradigm e. Policy constraints are not addressed through application of the Five Focusing Steps. Instead, the three questions discussed earlier in the Thinking Processes section are applied:. The Thinking Processes are designed to effectively work through these questions and resolve conflicts that may arise from changing existing policies.

An excellent way to deepen your understanding of the Theory of Constraints is to walk through a simple implementation example. In this example, the Five Focusing Steps are used to identify and eliminate an equipment constraint i. In this step, the manufacturing process is reviewed to identify the constraint.

A simple but often effective technique is to literally walk through the manufacturing process looking for indications of the constraint. The deliverable for this step is the identification of the single piece of equipment that is constraining process throughput.

In this step, the objective is to make the most of what you have — maximize throughput of the constraint using currently available resources.

The line between exploiting the constraint this step and elevating the constraint the fourth step is not always clear. This step focuses on quick wins and rapid relief; leaving more complex and substantive changes for later.

The deliverable for this step is improved utilization of the constraint, which in turn will result in improved throughput for the process. Otherwise, continue to Step Three. In this step, the focus is on non-constraint equipment. The primary objective is to support the needs of the constraint i. Efficiency of non-constraint equipment is a secondary concern as long as constraint operation is not adversely impacted.

By definition, all non-constraint equipment has some degree of excess capacity. This excess capacity is a virtue, as it enables smoother operation of the constraint. The manufacturing process is purposely unbalanced:. The deliverable for this step is fewer instances of constraint operation being stopped by upstream or downstream equipment, which in turn results in improved throughput for the process.

Otherwise, continue to Step Four. The key is to ensure that all such investments are evaluated for effectiveness preferably using Throughput Accounting metrics. The deliverable for this step is a significant enough performance improvement to break the constraint i. In this step, the objective is to ensure that the Five Focusing Steps are not implemented as a one-off improvement project.

Instead, they should be implemented as a continuous improvement process. This step also includes a caution…beware of inertia. Remain vigilant and ensure that improvement is ongoing and continuous. The Theory of Constraints and Lean Manufacturing are both systematic methods for improving manufacturing effectiveness.

However, they have very different approaches:. Both methodologies have a strong customer focus and are capable of transforming companies to be faster, stronger, and more agile.

Nonetheless, there are significant differences, as highlighted in the following table. From the perspective of the Theory of Constraints, it is more practical and less expensive to maintain a degree of excess capacity for non-constraints i.

Eliminating variation is still desirable in TOC; it is simply given less attention than improving throughput. One of the most powerful aspects of the Theory of Constraints is its laser-like focus on improving the constraint. While Lean Manufacturing can be focused, more typically it is implemented as a broad-spectrum tool. In the real world, there is always a need to compromise, since all companies have finite resources. Not every aspect of every process is truly worth optimizing, and not all waste is truly worth eliminating.

In this light, the Theory of Constraints can serve as a highly effective mechanism for prioritizing improvement projects, while Lean Manufacturing can provide a rich toolbox of improvement techniques. The result — manufacturing effectiveness is significantly increased by eliminating waste from the parts of the system that are the largest constraints on opportunity and profitability.

While Lean Manufacturing tools and techniques are primarily applied to the constraint, they can also be applied to equipment that is subordinated to the constraint e. The remainder of this section describes how to apply a range of Lean Manufacturing tools and techniques to the Five Focusing Steps.

Lean Manufacturing provides an excellent tool for visually mapping the flow of production Value Stream Mapping as well as a philosophy that promotes spending time on the plant floor Gemba. Lean Manufacturing strongly supports the idea of making the most of what you have, which is also the underlying theme for exploiting the constraint.

Lean Manufacturing techniques for regulating flow Kanban and synchronizing automated lines Line Control can be applied towards subordinating and synchronizing to the constraint. Lean Manufacturing techniques for proactively maintaining equipment TPM , dramatically reducing changeover times SMED , building defect detection and prevention into production processes Poka-Yoke , and partially automating equipment Jidoka all have direct application when elevating the constraint.

TPM and SMED can also be viewed as exploitation techniques maximizing throughput using currently available resources ; however, they are fairly complex and are likely to benefit from working with outside experts.

Theory of Constraints TOC. Learn About Vorne XL. Step Objective Identify Identify the current constraint the single part of the process that limits the rate at which the goal is achieved. Exploit Make quick improvements to the throughput of the constraint using existing resources i. Subordinate Review all other activities in the process to ensure that they are aligned with and truly support the needs of the constraint.

Elevate If the constraint still exists i. In some cases, capital investment may be required. Repeat The Five Focusing Steps are a continuous improvement cycle. Therefore, once a constraint is resolved the next constraint should immediately be addressed. This step is a reminder to never become complacent — aggressively improve the current constraint…and then immediately move on to the next constraint. Diagram that shows the current state, which is unsatisfactory and needs improvement.

When creating the diagram, UDEs symptoms of the problem are identified and traced back to their root cause the underlying problem. Evaporating Cloud Tree Evaluates potential improvements. Diagram that helps to identify specific changes called injections that eliminate UDEs.

It is particularly useful for resolving conflicts between different approaches to solving a problem. Future Reality Tree Documents the future state. Diagram that shows the future state, which reflects the results of injecting changes into the system that are designed to eliminate UDEs.

Strategy and Tactics Tree Provides an action plan for improvement. Diagram that shows an implementation plan for achieving the future state. Creates a logical structure that organizes knowledge and derives tactics from strategy. Note: this tool is intended to replace the formerly used Prerequisite Tree in the Thinking Processes. Core Measures Definition Throughput The rate at which customer sales are generated less truly variable costs typically raw materials, sales commissions, and freight.

The elements that are not weakest must support what you do to with the weakest link. You must subordinate everything else to ensure the decisions made to exploit the constraint can be followed.

It is worth noting that step one and two only involve a few people — step three requires everyone else in the system to behave differently — this is a major step and is often the most difficult to implement. Step 4: Elevate the Systems constraint. Once the first three steps are implemented — the system will perform much better and as such the market will be much more satisfied with the organisations performance. It is highly likely that demand will increase.

If demand increases it is unavoidable that the constraint must be elevated. In practical terms you need to prepare for this event. Step 5: Warning Do Not let Inertia become the constraint of the system! What would happen I a chain if you made the weakest link stronger — there might be another weakest link. Therefore, if in any of the previous steps the constraint is elevated or broken you must assume that there might be a different constraint — you must check to ensure that you have still identified the correct system constraint.

In The Goal the constraint moved from the plant to the market. The warning in Step 5 is there because it is all too easy if you have made a big improvement to sit back and relax. After all your lead time is down your inventory is down profits are up customers are satisfied more than ever.

Why look for trouble! But words are never enough try to use these few introductory lesson in TOC in the simulator. Undertake the seven challenges using the TOC measures and the TOC five-step process, try to think about how to turn the process into concrete steps for you own organisation. If you are ready it is time to take on challenge 1. The challenge 1 model is shown in Figure iii: The Challenge Board. Each model is a simple yet accurate representation of what occurs when a product is made in a manufacturing plant.

The model is made up of a series of dependent tasks needed to make a product. The model has all the components of a production business. There is customer demand, in challenge 1 the demand is for brief cases, and executive cases. There are resources to undertake work.

There is limited time to achieve the output needed. The time limitation is 40 hours and this is the same in all seven challenges. Each challenge is run over 5 days that are 8 hours long. There are limits to how much cash is available and the financial performance of the business is monitored throughout. The goal in each challenge is to make the maximum amount of money possible.

The big difference between the real world and this model is that you have a much better overview in the model than in a real business. In addition the area to the left of. In this are you can see the material which is purchased at the left had side of the challenge board, progressing across the board left to right as the various tasks are assigned to resources arriving in the box immediately to the left of a product image, when it has completed all its production stages.

The boxes in the flow area represent the task that need to be undertaken by the resources in the factory floor. The colour of the task matches the colour of the resource that undertakes the task. How to identify a task in the flow diagram area of the challenge board 2. How to assign tasks to resources 3.

How to buy the materials needed The three control areas that you need to operate, these are: 1. The run controls in the Clock area of the challenge board. The resources set up and stop functions in the Factory Floor area 3. The purchase area functions. To operate any other control than the run controls the challenge must have started. You will be guided through the things you need to know once you have opened the Challenge Program.

When you are ready to begin, the challenge program can be opened via a link on the Goldratt-TOC Ltd program group which was created during the install process.

The set up process creates a program group and a program link on the all Programs link on the windows Start menu. Figure iv Challenge Control The program will open a 2splash form which displays whilst the main program loads. After a short time you will see the Challenge Control which provides links to the various Challenges.

Use the information in Appendix 1 for more challenge operating instructions. Each time a Challenge is started the Challenge control form is hidden. To open or unhide the Challenge control form use the File menu on the Challenge board.

The Challenge you want to run is selected from the Challenge bar at the top of the form or click the next button which will automatically take you to the next Challenge in the sequence. To get to known the challenge controls please select challenge 1 now. The challenge as shown in Figure iii above should open when you click the number 1 in the challenge bar on the Challenge control form shown in Figure iv above. Please follow the instructions below to learn how to start the challenge run, to set up a machine and to learn how to buy material.

Start the challenge by clicking the run start button in the clock area highlighted on the challenge board to the right of this paragraph. You will see the clock begins to run.

Now point to and click on the Blue machine number 3 in the Factory Floor. A 3set up form will open. Click on the drop down button at the right of the Select Task box and click on the r1: c4 item in the list. The r1: c4 is the coordinate of the task. If you look at the left hand side of the challenge board you will see the rows which are labelled r1, r2, r3, r4, r5, and r6. If you look just below the factory area you will see the columns of labelled c1, c2, c3, c4, c5, c6, and c7.

To locate the task at r1: c1 move along the row r1 until you are just below the column c1, the task referred to by this code is A resource setting for a the where the row and column in intersect. The machine A resource working will display a set up icon. After a simulated 15 on a task minutes of setting the resource will start working on the task. A person busy icon appears on the An idle resource, machine button. When the material runs out the waiting for work machine will display an idle person icon.

Now click on the white square to the right of the r1 row indicator in the purchasing area. A purchase form will open. This can be seen in the Finance area at the top and to the right of the challenge board. On now know how to buy materials, and set up machines. When you run the challenge you will want to assign task to resources to achieve the overall goal of the challenge, which will require you to have product manufactured and sold.

The task map is shown in the Flow Diagram Area below the Factory Floor explains how this is achieved. The flow diagram describes how the products are made. It shows what materials are needed for each product, it shows the tasks and the time that a tasks takes to be completed.

Point to and pause over the elements in the Flow area now and read the pop up comment to see what each part is. You will find tasks names, the time a task tasks, you will also see that the cursor changes to a hand when you pause over the task button.

The hand indicates that you can drag that task to and drop it on a resource. When the drag icon is dropped on a resource this tells the resource to set up for that task. The resource must be the same colour as the task for this process to work. You will also see that in challenge 1 you need to make and sell 45 brief cases and 45 executive cases.

If you look in the flow area just to the left of the product images you will see the market demand and the selling price for the product. Following the black lines along the tasks back from the product enables you to identify all the tasks that need to be completed in order to make that product. When you reach the extreme left hand side you will see the materials that are needed for that product.

For example the Brief case task line is: r1: c7, r1: c6, r1: c5, r1: c4, r2: c2 and r2: c2 requires one unit from r1: c1 and r3: c1 as it is an assembly operation. To make r1: c1 you need to buy one unit of raw material, which we have called r1 as it is. Similarly, to make one unit of r3: c1 you need to buy one unit of raw material r3. Whilst the challenge is open take this opportunity to play.

He looks to the front and sees the leader is not walking too fast. So why are the gaps appearing? First, he notices that some gaps ahead of the slowest kid. He moves that kid to the back, with him, and tells him to speed up a bit.

They set off again, and the slow kid, by putting in more effort, is keeping pace with the boy in front of him. But again, gaps start to appear in the line. Alex watches for a while, and sees the kid at the front adjust his backpack straps.

This means everyone behind him has to pause a step. The gaps close a bit. Then one of the kids a few from the front has to adjust his pack. This causes everyone behind him to pause a step, or catch up a step if there is a gap.

But in front of him, a one step gap has now appeared. Alex comes to the conclusion that every scout has to compensate for every pause in every scout in front of him. The boy at the front is fine, but the person at the back has to compensate for the pauses of every scout in the Troupe. There are 6 scouts. The first bowl has all the matches in it. To start the game, the first scout rolls a die. The number on the die is the number of matchsticks they can pass on to the next station, up to six.

The second scout takes his turn rolling. In the same way, they pass on as many matches as they roll, but capped to the number of matches at their station. So if they roll a 6 but only have 3 matches, they can only pass on 3 matches. Alex expects that after 10 rounds, they will have 35 matches in the finished bowl.

But he discovers that they end up with much less than this. We want the game-state to have the bowls and the number of the station whose turn it is. So it looks like under these conditions you get out 22 parts on average, NOT the 35 you might expect. One of the other things they do in the story is to keep score of how many matches each station passes on. The base score is 3.