Theory of Constraints A look at the Drum-Buffer-Rope and Critical

Document Sample
Theory of Constraints A look at the Drum-Buffer-Rope and Critical Powered By Docstoc
					 Theory of Constraints:

A look at the Drum-Buffer-Rope and
Critical Chain Project Management

       EMGT 364 Term Paper
 Jesse Crispino and Ryan Saulsbury
     Theory of Constraints

Developed by Eliyahu M. Goldratt
A systems management philosophy
 developed in the 1980s
Boost process performance by looking at
 the entire process
Identifying and reducing “bottlenecks”
Often applied in conjunction with TQM,
 JIT and ABM
     Theory of Constraints

Project managers have always analyzed
 individual components of a process
Maximizing components may not improve the
Goldratt views the entire process and finds the
 weakest link--Capacity Constrained Resource
All projects contain one, but not many CCRs
    Theory of Constraints:

If a system is performing as well as it can,
 only one of its component parts will be.
If all parts are performing as well as they
 can, the system as a whole will not be.
Inertial is the worst enemy of a process of
 ongoing improvement. Solutions develop
 weight that resists change.
Ideas are not solution.
     Theory of Constraints:

Goldratt’s Five Steps
  Identify the systems constraints
  Decide how to exploit the constraints
  Subordinate everything else to the exploitation
   of constraints
  Elevate the systems constraint
  If any constraints have been violated, repeat
   the process
    Theory of Constraints:

Constraint: Anything that limits a system’s
 performance relative to its goal
Inventory: All the money used to purchase
 things the system intends to sell
Operating expense: The money a system
 spends to turn inventory into throughput
Throughput accounting: An accounting
 system used to measure TOC operations
    Theory of Constraints:

Throughput: the difference between net
 revenues and direct material cost
  limited by internal constraints (plant capacity)
  limited by external constraints (market
Two critical assumptions:
  The goal of product or customer mix and
   volume should be to maximize throughput
  Assumes that once a certain capacity exists,
   operating expenses are fixed
    Theory of Constraints:

Soldier analogy:
Gaps appear due to
  Dependent events
  Statistical fluctuation
Drum-Buffer-Rope (DBR) system links first
 “soldier” with the slowest one
  Drum-Buffer-Rope (DBR)

Logistical tool that balances flow of a
Drum: A schedule for capacity of the
Buffer: Built in time for parts to reach the
 constraint early (in process inventory)
Rope: A schedule, or information
 connection, for releasing raw materials

Identify CCRs-Pareto’s Rule may help
Schedule CCRs to capacity (drum)
Protect from statistical fluctuations with
 time buffers (buffer)
Monitor CCRs to ensure the timely release
 of materials “upstream” (rope)
Monitor Buffer--Buffer Management (BM)
  Drum-Buffer-Rope: Case
        Study #1

Oregon Freeze Dry: Four step process
  wash/prepare food
  freeze food in cold room
  dry food to remove ice crystals (sublimation)
Difficulty finding space in cold room--
 wash/preparation was very quick
Considered buying new cold room
  Drum-Buffer-Rope: Case
        Study #1

Reduced the amount of raw food going into
 wash phase
Cold room scheduled by using a BTU
 calculation for max efficiency
Less product in cold room created faster
 freezing rates.
Oregon Freeze uses only 30% of cold room
 capacity and produces a higher quality
  Drum-Buffer-Rope: Case
        Study #2

Wendell August Forge: Hand-hammered
 aluminum commemorative items
Six production cells
Expected hammering to be drum
Walk on shop floor showed buffing backup
 to be CCR
Union mandated breaks
  Drum-Buffer-Rope: Case
        Study #2

Break schedule staggered--exploitation
Capacity immediately increased 12%
Implemented a Rope to limit raw materials
Work in progress inventories decreased
Managers educated on TOC attitudes
Capacity up 27% by years
   Critical Chain Project
Traditional project management, Critical
 Path Method (CPM) used for over 40 years
DoD projects: 100-200% more expensive,
 and exceeded duration 40-50% of the time
Commercial projects: 70% more expensive,
 and exceeded duration 40% of the time
Goldratt’s 1997 book Critical Chain--new
 paradigm for PMs
People plan and execute projects
   Critical Chain Project

Accounts for human nature factors
  Individuals always desire a safety buffer
  Goldratt’s “student syndrome”
  Parkinson’s law--Work expands to fill the time
  PM multi-tasking reduces efficiency and
   penalizes the highest priority
  No early finishes
    Critical Chain Project

CPM: Tasks scheduled as soon as possible
CCPM: Tasks scheduled as late as possible
  Reduce work in progress
  Reduce up-front costs
  PMs focus on first tasks
  Increased knowledge as project progresses
    Critical Chain Project

ALAP drawback: As the project progresses,
 all tasks become critical to project
Goldratt’s solution: Drum-Buffer-Rope
 logistical scheduling and consolidated safety
   CCPM: Re-define Your

CCPM requires individual and organizational
 behavior changes
Locate and remove hidden safety buffers
Embrace uncertainty vs attempting better
A 50% change of completing a task on-time
 is acceptable--Do not measure against
“Tell me how you will measure me and I will
 tell you how I will behave”

Assume all material and information for
 tasks are on-hand
Resolve resource conflicts
Locate the Critical Chain--longest chain of
 tasks that consider both task and resource
Critical Path--longest chain of tasks based
 upon task dependencies

Individual projects no longer have safety
Two types of safety buffers are inserted into
 the project as a whole
  Project Buffer: protects against overruns
   on the critical chain
  Feeding Buffer: protects against
   overruns on tasks that feed the critical
         CPM vs CCPM

 Tasks have scheduled start and finish dates
 Early finishes on critical path do not accumulate
 Project is on time or late
 Relay race analogy
 Tasks are scheduled by preceding tasks
          CPM vs CCPM

CCPM will finish tasks faster
Project team’s moral and effectiveness will
Project teams/project managers can
 produce early finishes
Overall costs will decline

Start                               Finish

        - Indicates critical path
Rope                    Resource

Start                                                Finish

        - Indicates critical chain
         Critical Chain:
         Case Study #1

Harris Semi-conductor: $250M new wafer
 fabrication plant
Typical construction time 54 months
CPM analysis yielded 6000 tasks
Critical chain analysis reduced to 150 tasks
40 day delay for weather
15 day delay for equipment problems
         Critical Chain:
         Case Study #1

Buffers allowed for project delays
Project completed 3 days ahead of schedule
Plant constructed in 13 months
Overall cost only 4% above estimate
Wafer Fabrication plant able to produce
 products 40 months faster than the industry
         Critical Chain:
         Case Study #2

Habitat for Humanity: World Record
 attempt for building a house
Old record: 4hrs 39min, Nashville--1998
Critical Chain method predicted 4 hours
Bathroom finished 1 hour longer than
Overall finishing time: 3hrs 44min
       In Class Example:

You are a new plant manager for LETZ GETZ
You need to re-work the production line soon
 because your boss, CEO Always Hammered is
 getting thirsty for the profits so to speak.
Your Suppliers Bottle Cap Billy, and Hops McGee
 are consistently late. Your line supervisor Mr.
 Schmidt explains that those producers are from
 Denmark and the delays are due to rotten
          In Class Example:
 Current Situation:
   The Hops & Malt used in the brewing process is suppose to arrive
    on the 1st of each month but it can arrive 1 day late.
   Yeast is purchased in bulk and is delivered on the 4th of the month.
    The line supervisor claims yeast requires 4 days of preparation
    before being added to the WORT.
   Packaging is delivered on the 11th of the month and requires
    imprinting and then fix/assembly (2days total)
   Your bottles are delivered on the 15th. You can fix the labels and
    assemble the packaging after your bottles arrive.
   Bottle caps are suppose to arrive on the 16th but lately they have
    been a day late.
   You are unable to obtain new suppliers because of existing
    contracts signed by the CEO.
         In Class Example:

The following is a general concept of how to make
 the beer in your factory:
  Step 1: You can start by creating the WORT. A process
   that includes adding water, hops, malt and then a
   boiling/cooling process. ( 1 day)
  Step 2: Transfer to the fermenter where the yeast is
  Step 3: Fermentation (10 days-Cannot be reduced)
  Step 4: Final Preparation includes: Siphon beer to
   remove yeast sediment, Add Sugar-Bitters added to
   product to produce, and carbonation (4 days)
  Step 5: Bottling/Packaging (2 days)
In Class Example CPM:
    In Class Example CCPM:

Develop a CCPM for the Beer Making Process
Remember: Reduce the Critical Path by 50%,
           Project Buffer(5 days)
           Feeder Buffer(2 total)
 Critical Chain vs Critical
   Path for Army/UMR?

 Must teach both techniques
   CCPM
   CPM
 Army constrained by resources
   Operations difficult to apply
   Maintenance has potential
Key differences
   ASAP vs. ASLP
   Buffer Management
 Drum-Buffer-Rope &
Critical Chain Method

      QUESTIONS ??

Shared By: