The Optimized Production Technology is simple logic programs and its structure is based on the separation of bottleneck and non-bottleneck operations.
Introduction
Synchronous Manufacturing
"Theory of constraints"
- Problematic of the managers. At the end of the 1970s, resources and inventories were not programmed and controlled. “La Meta”, by Eli Goldrat, appears.
The goal and Eli Goldratt.
- Born in Israel in 1948, in 1982 he was the president and largest shareholder of a company that produces production scheduling software, ranked in that year by Inc. Magazine as the sixth fastest growing in the United States.., and despite these results I was very frustrated.
Because getting more customers was a tremendously slow process, so he decided to try an unconventional way and that's when he got the idea to communicate his method through a manufacturing novel. At that time he started working at LA META.
Eli Goldratt.
Development of software that scheduled tasks through manufacturing processes, taking into account the restrictions in:
- The facilities The machinery The staff The tools The materials
Restrictions that could affect capacity.
FROM THE POINT OF VIEW OF ELIYAUT GOLDRAT'S GOAL.
OPT (Optimized Production Technology)
THEORY OF CONSTRAINTS.
Optimized production technology
This was called Optimized Production Technology, the programs were simple logic, and their structure was based on the separation of bottleneck and no-bottleneck operations.
As an application Goldratt developed his "theory of constraints" (TOC), which is applied in many areas of the company.
- Synchronous Manufacturing: it is the entire production process working together in a synchronous way to achieve proposed objectives. There is a logical coordination of all the resources of the company, then, we locate ourselves in the total performance and not in the form of localized performance.
Synchronous manufacturing must be especially careful in inventories
- According to Goldratt, the company's goal is to make money, and the other purposes (providing jobs, increasing sales, developing technology, etc.) are only means to achieve the primary objective.
Performance measurements
Two series of measurements are used:
Financial Measurements
It is subdivided into three:
- Net profit
Eg Net profit: US $ 10 million, it does not tell me anything, I must know how much will be invested to obtain those 10 million dollars. For example, on 50 million investment, 10 million represents 20% of return.
Cash flow is important to sustain daily operations
Operational Measurements:
Financial measurements cannot be used at the operational level, other measurements are needed:
- Demand attended: rate at which money is generated by the system, by the inventory of sales. Inventory: money that has been invested in buying things that is intended to be sold. Operating expenses: money that the system spends to change the inventory on demand.
Productivity:
- It is measured in production by hours of work. This does not generate money, for example when the extra production is not sold or accumulates as inventory. Productivity is all the measures that bring the company closer to its objectives.
The goal
- The main goal of a business is to make money. All other goals are secondary. If we do not make money, we will not keep the business for long. The main goal is to make money today, but to continue making money tomorrow and if possible more.
Measurements
- We need measurements to know how well we are doing to reach the main goal. An old maxim of process control says: "You cannot control what you cannot measure." If the goal is to make money, the measurement must be done based on the money.
Traditional measures.
- EARNINGS: The amount of money generated subtracting the expense, in the same period of time RETURN ON INVESTMENT (ROI): The relation of the PROFIT over the amount invested in the Company, in relation to generating that PROFIT in a period of time. New measures based on the goal NET INCOME (Throughput)) - All the money that enters the Company through sales according to this equation:
T = Sales - Raw Material - Third Party Services.
- Inventory (I) - All money invested, in inputs, capital equipment, etc. Operating Expenses (GO) - All money spent in labor, services, fixed, etc.
Limitations.
- Of the three measurement parameters (T, I and GO), only NET INCOME can be raised in such a way that an increase in PROFIT and ROI will result.When a Company is not making money or is losing, what is the measure that is it typically taken to change the trend?
Current reality
- It is easy in a short time to lower Operating Expenses than to increase NET INCOME (T). NET INCOME (T) is the result of the company working together to deliver the orders sold with quality in time and form. It is easier to cut expenses than get everyone to work together efficiently.
Thinking in the long term.
- Cutting expenses is only a short-term tactic, a long-term strategy is to visualize on NET INCOME (T) because it is the best way to increase profits and improve the health of the company.
Theory of Constraints or Bottlenecks
- The Theory of Constraints or Bottlenecks is based on the simple fact that the processes of any field only move at the speed of the slowest step. The way to balance the process is to use an accelerator in this step and achieve working to the limit of its ability to accelerate the entire process, these limiting factors are called constraints, funnels, or bottlenecks.
Of course the restrictions can be an individual, a piece of equipment, a piece of apparatus, a local policy, or the absence of some tool or piece of apparatus.
- As a general rule, in every company there is, at least, one restriction because if it were not, it would generate unlimited profits. Since the restrictions are factors that block the company from obtaining higher profits, any managerial management that aims at this objective must focus on the restrictions.
What is a Bottleneck?
When bottlenecks are mentioned, it refers to different activities that slow down processes, increase waiting times and reduce productivity, resulting in increased costs as a final consequence.
Bottlenecks produce a considerable drop in efficiency in a given area of the system, and occur both in personnel and in machinery, due to different factors such as lack of preparation, training or training in the case of personnel, or lack of proper maintenance in the case of machines and equipment.
To see it graphically, we are going to suppose that the production of a certain company is based on a production process in which only two resources A and B are involved, and a unique product is produced there. In addition, the demand is such that everything that the company is able to produce is purchased by customers.
As can be seen in the previous figure, the raw material that can be delivered by our suppliers instantaneously, is processed by resource "A" at a speed of 40 units / hour, later the production process is finished in resource " B ”at a production rate of 20 units / hour.
Once the product is finished it is sent directly to the customer. The key question then arises:
How fast should each of the resources work to obtain optimal performance from this company?
The answer is very simple, for this plant to obtain maximum performance it must operate at a rate of 20 units / hour, since it would make no sense for work center “A” to operate at maximum capacity (40 units / hour) if With this, it generates a problem of accumulation of inventories between the centers; simply "B" cannot process all that and "A" produces in one hour.
The above is what is proposed as not balancing capacities but synchronizing the flow, which in turn presents as a competitive advantage.
- A constant flow that handles small batches Improves product quality because problems are discovered on time Wait times are reduced Partial deliveries are increased by reducing inventory levels Reduced and invoicing times are reduced. Lower product costs.
Types of Constraints
- When planning the production, take into account those bottlenecks that exist in the process so that the resources that are not bottlenecksand do not operate at 100 percent of their capacity are programmed with respect to those that do, so that only what the bottlenecks can absorb will be produced by reallocating the workload of the machines that are overloaded to those that have available capacity.Restriction is any element that limits the system in its goal of generating profit. Every system or company has restrictions, these are of two types, physical restrictions that are normally due to the market, the manufacturing system and the availability of raw materials and the policy restrictions that are normally found behind the physical ones, for example rules, procedures and evaluation systems.
Examples of restrictions:
- Market Restriction: The maximum demand for a product is limited by the market; Satisfying it depends on the ability to cover the established success factors such as price, delivery timing, etc. Material Restriction: Limited by the availability of materials in adequate quantity and quality. The lack of material in the short term is the result of poor programming, allocation or quality Capacity Restriction: It is the result of having a team with a capacity that does not satisfy the required demand or that satisfies it well above what is installed. Administrative: Strategies and policies established by the company that limit income generation and promote local optimization. Behavior Restriction:Unfavorable staff attitudes and behaviors such as the “busy all the time” attitude and the tendency to work easy.
How to solve them?
The most important rule to solve the constraints of a system is.
SOLVE ONLY ONE BOTTLE NECK! Once solved, continue with the next one.
The steps to develop bottleneck solutions are:
a) Identify the System Constraints:
Once those resources are located that, due to their scarce availability, limit the overall performance of the system, they must be exploited to the maximum, taking advantage of their full capacity.
b) Decide how to Exploit the System Constraints:
It involves looking for a way to get the highest possible output from the restriction. An example of a restriction on a machine: The most skilled operators should be assigned to it, quality control should be done before it processes parts, lunch stops should be avoided (rotating people), it should be avoided that is left without work due to lack of materials (incorporation of time regulators), it should be provided with an optimal program with which, every minute is used to fulfill commitments with customers, etc.
c) Subordinate everything to the Previous Constraint:
This step consists of forcing the rest of the resources to function at the rate set by the system restrictions, as defined in the previous step. As the company is a system, there is interdependence between the resources that compose it, for this reason it does not make sense to require each resource to act obtaining the maximum performance with respect to its capacity, but rather it must be required to act in such a way that the restrictions can be exploited as stated in step b. It is essential, then, to take into account the interdependencies that exist if subordination is to be carried out successfully.
d) Raise the System Restrictions:
Examples of raising the system constraints are the purchase of a new machine similar to the constraint, hiring more people with the right skills, adding a new supplier of the currently constrained materials, changing location to meet a growing demand.
In general, the tendency of companies is to perform this step without having completed steps b and c. Proceeding in this way we are increasing the capacity of the system without having yet obtained the maximum benefit from it, as it was originally defined.
Since step d typically involves actions that require a lot of effort, time, and money, it is recommended that you do not carry it out until you are sure that the previous steps have been implemented successfully.
e) If in the previous stages a restriction is eliminated, return to step a).
As soon as a restriction has been raised, we must ask ourselves if it is still such or if there are now other resources with less capacity. go back to step a), starting the process again. It is important to make a warning here:
BEWARE OF INERTIA!
Between steps a) and c) we have defined the operating rules of the company considering the existing restrictions at that time.
If the restrictions have changed, all those rules must be modified.
Continuous improvement IS NOT CHEAP. The targeting process proposed by the theory of constraints is designed to ORIENT the improvement efforts towards achieving the maximum impact at each moment of the process.
Goldratt develops a new approach in the Management of the Productive Operations of the company (hence the name of Optimized Production Technology, OPT).
Its basic principles can be summarized in the nine rules.
- Don't balance capacity, balance flow. The level of utilization of a non-bottleneck resource is determined not by its own potential but by some other constraint in the system. Utilization and activation of a resource are not the same thing. hour lost in a bottleneck is an hour lost for the entire system An hour saved in a non-bottleneck is a mirage Bottlenecks govern both the throughput or demand served and the inventory in the system Transfer lot does not it may, and many times, not equal the process batch. A process batch must be variable both along its path and over time. Priorities can only be set by examining system constraints. The term is derived from the program.
Results
- The projects will be completed more quickly. Morale and effectiveness in the team will improve because they will be working in an environment without uncertainties and that avoids micromanagement. Managers will have a simple macro-level method, very effective to evaluate project performance and Make resource decisions using simple tools Executives will have an effective tool to make project decisions based on project priority and organizational capacity using project timing capabilities. To achieve the above results, it is necessary to establish an environment that integrates both the elements of human resources and operating methods. The human side requires that everyone from Management to the operating group understand and "feel" these concepts.
