3. 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.
6. 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
7. 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.
9. 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%
Machine
Capacity
Utilization
(Monthly)
10. Marketing & Sales
Supplier #2
Supplier #1
Production
External
Service
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)
12. 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.
13. 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?
14. 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.
15. 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.”
16. Other Constraints
• Material
• Unavailable
• Slow
• Vendor / Supplier
• Unreliable
• Slow
• Financial
• Cash Flow
• Knowledge / Competence
• Lack of expertise, knowledge
• Lack of competent skills
17. 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.
18. 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.
19. 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.
20. The Five Focusing Steps
Strategic & Tactical Implications
ELEVATE
SUBORDINATE
IDENTIFY
EXPLOIT
TACTICALDECISIONS
STRATEGIC
DECISION
STRATEGIC
DECISION
21. 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.
22. 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
24. Evaluating Operating Decisions
The 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)
25. Evaluating Operating Decisions
The 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 . . .
26. Evaluating Operating Decisions
The 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.
27. 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.
28. 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
29. 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
30. 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
31. T, I & OE Flow
$$$
Investment
Money Tied Up
Inside the System
(System)
$$$
Throughput
Money Coming In
$$$
Operating Expense
Money Going Out
32. 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.
34. Thinking Bridge Example
Demand = 3,500 Drives
Price = $400 each
Raw Material = $80/Drive
Employee Wage = $18/hr
Number 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
35. 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
36. 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
37. 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
38. 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
39. 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?
40. 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?
41. 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
42. 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
43. 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.
44. 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?
45. 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.
46. 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
47. 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
48. 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
49. 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.
50. 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
51. 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
52. 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.
53. 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
54. 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
55. 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) $133,880
56. Constraint Management Strategy
Lessons from the T, I, OE Example
• Primary focus on increasing “T”
• Allow “I” to seek its natural level (usually less than before)
• Capitalize on opportunities to reduce “OE”
• But ENSURE that capacity to generate “T” is not compromised.
• Don’t waste time or endanger future “T” by actively searching for
reductions in “OE” today.
57. Why Gross Margin is Problematic
• Assumes cost per product is a reality.
• Assumes that all operations are equal.
Fixed Cost + Variable Cost
Volume
Product Cost =
59. How Can We Increase TU/Hr?
1. Raise prices
2. Reduce the time a product spends on the Capacity
Constrained Resource/Primary Control Point.
3. Reduce Truly Variable Cost.
4. Increase the yields at the CCR.
5. Ensure that only high quality material goes through the
CCR.
60. Throughput Decision Support
Transition Timing
• Takes into consideration Yield at the constraint and Truly Variable Cost.
• The primary takeaway from this is example is not to kill a Cash Cow in
the middle of it’s cycle, the time to transition a product is when you can
get the TU/Hour to meet or exceed the product to be replaced.
Fam Mod Cap Cust Yield TestTime Yield_TestTime AUC AUP Margin TVC TU Tu/Hour Revenue/qtr TVC/qtr Throughput/qtr
CHEETAH 10K.6-36 FAMILY ST336607LC 36 Dell 85.00% 15.3 13 114$ 62$ $52 $3.40 $859,541,760 $467,470,080 $392,071,680
CHEETAH 10K.6-36 FAMILY ST336607LC 36 HP 85.00% 15.3 13 137$ 62$ $75 $4.90 $1,032,958,080 $467,470,080 $565,488,000
CHEETAH 10K.6-73 FAMILY ST373307LC 73 Dell 80.00% 23.8 19 100$ 143$ 30% 67$ $76 $3.20 $694,318,888 $325,310,248 $369,008,640
CHEETAH 10K.6-73 FAMILY ST373307LC 73 HP 80.00% 23.8 19 100$ 158$ 37% 67$ $91 $3.83 $767,149,541 $325,310,248 $441,839,293
CHEETAH 10K.7-73 FAMILY ST373207LC 73 Dell 66.00% 31.8 21 85$ 143$ 40% 65$ $79 $2.47 $518,259,456 $233,760,384 $284,499,072
CHEETAH 10K.7-73 FAMILY ST373207LC 73 HP 66.00% 31.8 21 85$ 158$ 46% 65$ $94 $2.94 $572,622,336 $233,760,384 $338,861,952
CHEETAH 10K.6-146 FAMILY ST3146807LC 146 Dell 73.00% 56.8 41.5 234$ 77$ $157 $2.76 $474,654,035 $156,189,576 $318,464,460
CHEETAH 10K.6-146 FAMILY ST3146807LC 146 HP 73.00% 56.8 41.5 239$ 77$ $162 $2.85 $484,796,216 $156,189,576 $328,606,640
CHEETAH 10K.7-146 FAMILY ST3146707LC 146 Dell 65.00% 56.3 36.6 234$ 81$ $153 $2.72 $479,219,725 $165,883,751 $313,335,974
CHEETAH 10K.7-146 FAMILY ST3146707LC 146 HP 65.00% 56.3 36.6 239$ 81$ $158 $2.81 $489,459,462 $165,883,751 $323,575,711
CHEETAH 10K.7-300 FAMILY 300 49.00% 215.1 105.4 418$ 82$ $336 $1.56 $224,087,849 $43,959,817 $180,128,032
61. 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.
1. 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.
1. 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.
62. 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
63. 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?
64. Logical Thinking Process
The means to IDENTIFY the system
constraint and plan EXPLOITATION,
SUBORDINATION, and ELEVATION.
70. “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
71. “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
72. References
1. 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.
Notas do Editor
Let’s see how this thinking might apply to a simple manufacturing process
Here’s a manufacturing “chain” composed of seven “links.” The first and last links have two machines each and the people to operate them. The rest have only one each. These represent the CAPCITY of the chain
As you look at the monthly utilization percentages of these machines, can you tell where the SYSTEM CONSTRAINT lies? [WAIT FOR GUESSES]
If you said “Machine #3,” you’re CLOSE, but not quite right. At the MOMENT, the system constraint is market demand--not enough sales to fill up available capacity. Even though Machine #3 is the most heavily loaded, it doesn’t limit the whole system. The entire manufacturing process CAN DO MORE than it is doing now
But if we were to increase sales to the point that the system were overloaded, which resource would be overloaded FIRST? [ANS: Machine #3]
So we’ve identified an important fact: We can’t determine whether a system in INTERNALLY constrained without knowing BOTH what its capacity is AND the demand placed on that capacity
With so many different kinds of constraints, and with policy constraints underlying most of them, how can we identify what specific changes we should be working on?
Many of these constraints aren’t easy to identify
Often, they’re not PHYSICAL
Or they’re not easy to MEASURE
They sometimes extend BEYOND the boundaries of production processes alone, although they STILL affect manufacturing
And sometimes--especially if they’re POLICIES-- they pervade the whole organization
To help us zero in on the real constraint, it’s useful to look at constraint theory as a hierarchical structure… [NEXT SLIDE]
The Current Reality Tree is the first of the five logical tools
It enables management to start with observable Undesirable Effects in the system’s performance and work backward through an unbroken chain of cause-and-effect to the ROOT CAUSE of these visible problems
Once the root cause is identified, the Conflict Resolution Diagram helps define possible conflicts that might arise in CHANGING the root cause
The conflict diagram helps express the nature of that conflict and develop creative ways to resolve it to the satisfaction of all parties
The solutions generated with the Conflict Resolution Diagram are TESTED with a FUTURE REALITY TREE for their effectiveness at relieving the Undesirable Effects identified earlier
If the solution proves to be valid, the Prerequisite Tree can help identify and overcome implementation obstacles in the order that they must be addressed for quick, effective execution
Once the obstacles are identified and ways around them determined, the structure of the Prerequisite Tree--which looks a LOT like a flow chart or PERT diagram-- can be converted into a series of step-by-step actions for achieving the objective
The value of the Thinking Process lies in its capability to start with an ill-defined problem and work methodically through to a clearly defined series of prescriptive steps for overcoming the problem
The “Drum-Buffer-Rope” method of production scheduling does three important things for the manufacturer or service provider:
It synchronizes, or optimizes the entire production process around the least-capable resource (the capacity-constrained resource, or “CCR”)
It speeds flow of work through the production process, sometimes by an order of magnitude
Sometimes, as in the cases of some of the example companies mentioned earlier, this reduction in processing time is so great that companies that once built to finished sConstraint Managementk can almost eliminate finished inventory and build directly to order and delivery
It reduces the amount of physical inventory needed in the system to produce the product or service
It provides “insurance” against disruptions of the production process caused by special cause variation (“Murphy”) or external uncertainty in demand
The “Drum” is the pace of the capacity-constrained resource
The “Buffer” is a protective mechanism (time and work-in-process) that keeps the CCR from being “starved” for work
The “Rope” is basically a communication or regulating device that equalizes the acceptance of new work to the pace of the CCR
At the risk of oversimplifying the explanation, critical chain project scheduling is essentially “Drum-Buffer-Rope” thinking applied to a project environment (repetitive production principles applied to one-of-a-kind deliveries)
Multitasking (responsibility for more than one task at a time) is discouraged
Project activities that share resources are deconflicted in the schedule and sequenced to be completed in the shortest possible time
Critical activities (assembly, final delivery) are protected with time buffers
The net result is that scheduled overruns are virtually eliminated, along with their associated costs
In many cases, expected project duration can actually be shortened--- in other words, early deliveries are more likely