How to Practically Implement the Theory of Constraints
Talking about something can be easy. But when it comes to taking action, the task can be daunting.
This may be due to a lack of understanding of what is to be done. It can also be caused by a lack of experience in taking the kind of action required.
Yet you should not give up and wait to see what follows your inaction.
Whether you are a startup or a large corporation, you definitely want to make your operations more efficient.
Having learned about the Theory of Constraints in a previous article, today we want to focus primarily on implementation.
We will use a company example to see how every step of the theory can be implemented.
6 STEPS TO FOLLOW IN IMPLEMENTING THE THEORY OF CONSTRAINTS
We will go straight into defining our environment. For this article, we will assume that you run a car manufacturing plant.
The name of the car you manufacture is Future and the company name is the same.
Your goal is to have Future outdo the competition by providing an affordable high quality electric car. It has all the technology to go with it including a wireless connection.
This is to enable it get software updates from you while picking calendar events from the owner to plan for trips.
With such a great product, you have already made some sales.
From your marketing campaigns, people are excited and you have received pre-orders for the improved version. Though initially not sure about pre-orders, you decided to give your customers the opportunity.
You met with your finance, production and logistics managers and set the pre-order price. Money came in and now have your hands full.
It’s time to work.
From making an annual sale of 300 units, you now have orders for 700 units. You have promised to deliver within 10 months. From your estimation, this is possible.
Unfortunately, the possibility proves impossible.
Since you need to produce 70 units per month, you hire more staff to fill the gap. The work seems to continue well, only that at the end of the first month, you have only produced 45 cars.
From a quick analysis, you realize that the staff have not been working as fast as you need them to. But some managers inform you that the work cannot be done faster otherwise the quality will be compromised.
You still push them and the second month sees 5 more produced.
At this point, you are 45 units behind schedule. The first month was 25 cars less (70 – 45) while the second month was 20 less (70 – 50).
At this rate, you will need 4 more months to fulfill the order of 700 cars.
You need to do something fast. You need to communicate to the customers as soon as possible and prepare them for a delay.
What exactly went wrong?
Let’s find out.
1. Identify a Measurable Goal
In using the theory of constraints, there is a step which is often overlooked. Perhaps the step is seen to be too obvious to be mentioned. But that assumption can be very costly.
This is the step where you identify a measurable goal. With a measurable goal, you are then able to find out what is causing you not to achieve your goal.
Skipping this step leaves you with no clear way of knowing whether you are performing well or not.
Let’s look at how this works in the company Future.
There were pre-orders for 700 cars. From your estimation, these would have been produced within 10 months.
What is it that would have happened if you never checked how much you were manufacturing every month? What if you just waited for 10 months to lapse then sought to deliver?
You would have been shocked to find that you only had 450 cars.
From your follow-up, you managed to push the production to 50 cars on the second month. With everything remaining constant, you would then have 495 cars by the end of month ten.
Because you had identified the need for 70 units per month, you were able to easily recognize when a problem occurred.
This is your measurable goal.
If you didn’t have it, you would be taken by surprise come delivery day. Or you would notice the shortfall when it was too late.
This would have resulted in negative press once angry customers took you to task.
2. Identify the Constraint
For a successful utilization of the theory of constraints, first realize that there is a problem. The presence of a problem is however not all you need to realize.
The bigger task is to identify the problem itself.
More specifically, identify the cause of the problem.
This problem is what the theory refers to as a constraint. Another word used for it is the bottleneck. It is where the flow of work is most limited, hindering optimized operations.
Identifying the constraint can take some time. In some cases, it may not be very clear. For that reason, a hurried inquiry may lead to a wrong conclusion.
This is as bad as treating a non-existent disease. When a misdiagnosis is given at the hospital, the problem worsens.
The current disease remains unnoticed while another one is indirectly introduced.
So, let’s identify the constraint.
In Future, where you manufacture a similarly-named car, you have five main processes in production.
1. Production of the engine – this is one of the time-consuming parts of your manufacturing. Considering the number of your staff, you can do a maximum of four engines on a good day. You need around 2 hours to finish one.
2. Production of the chassis – this takes the second-longest to complete. A total of 1.5 hours is needed for the chassis.
3. Production of the body – this also uses 1.5 hours to produce. The design of Future makes it time consuming. For the aerodynamics conditions to be met, more time is needed.
4. Production of the tires – the production part which needs the least time to manufacture is the tires. The modern machines used and the highly-automated process make a huge difference. Four tires are produced in a record 30 minutes.
This means that when one body is complete, there are enough tires for 3 cars. In the two hours needed to finish working on the engine, there are tires for 4 cars.
5. Assembly of the car – assembling the car takes 3 hours. Although the initial stages of this process are carried out by machines, there are final touches which need a human hand.
All in all, to produce one car, it takes a total of 5 hours. This is because the engine, chassis, body and tires are all produced concurrently.
These processes run separately but at the same time. The item taking the most time to produce is what determines the total production time.
That item is the engine. Since it takes 2 hours to produce the engine, and 3 hours to assemble everything, the whole car takes 5 hours.
6. Storage – after the successful manufacturing of every car, it is moved to the storage area. This is done in less than 5 minutes. It is safe not to consider this as part of production.
So what is the constraint?
The constraint lies in the assembly. This is the part of the production where things slow down. It is the most time-consuming part of the process and it hinders faster production.
3. Exploit the Constraint
The next step is to look for ways of exploiting the constraint. This is where you seek to make the most out of the constraint.
In most cases, most managers will seek to do an upgrade of the system so as to increase the capacity. Obviously this is a viable option but with the theory of constraints, that is not the best option.
At least not at this point.
This theory dictates that before undertaking major system changes, first make minor ones.
These small changes will increase your productivity at a lower cost and help you understand the shortcomings of your system.
In a way, this is what initially happened at Future. Due to increased pressure, the staff were able to produce 5 more vehicles without any increase in operational costs.
At this point however, the area of focus is the assembly line.
How do you exploit it for maximum production?
You will need to do two things:
1. Identify the cause of the problem – since you can never fix a problem you are not aware of, first identify the problem. What exactly happens at the assembly point? How is the work carried out? What do the employees do before receiving the parts to be assembled? What happens to the assembly machine?
With work beginning every morning, the staff in this section are mainly idle. The machines which do the primary assembly are also off.
They get switched on once the parts are available from the other processes. The machines themselves take around 15 minutes to be ready.
Looking at the assembly process, you notice that between the machine shift and human shift, some time is lost.
From your estimation, this is around 20 minutes. More than that, the human part of the work takes more time as your staff counter-check each other’s work three times.
With each employee taking around 10 minutes to finish the assembly, it eventually takes 30 minutes for three employees.
2. Fix the cause of the problem – with so much time getting wasted, what do you do?
The solution is to cut off the “extra” time being used to do what has already been done i.e. counter-checking. This is the solution for the last part of the process.
For the time taken before the machines are ready to start assembly, the machines can be switched on 30 minutes before receiving the parts.
This will eliminate the 15 minutes wasted during powering. The additional 15 minutes can be used to check the machines for any problems.
Then there are the 20 minutes getting lost as the final product moves from the machines to the human workers.
If your staff stand ready to receive the work from the machine, they will save this 20 minutes. If they switch the machines on before the production processes are completed, they will save a further 15 minutes.
Lastly, doing away with two of the counter-checking staff avails 20 more minutes. In total, you will save 55 minutes if you implement these changes.
This can easily be rounded off to 1 hour if the workers simply concentrate on the work being done.
This solution will increase the efficiency of the constraint. There will be no time wasted. The machines will be ready for work as soon as the production phase is complete.
If 1 hour is saved at the assembly line, then it will take 4 hours to complete one car. If the work is being done in 8-hour day shifts, then one day can see 2 vehicles completed.
This is as opposed to the need for a 10-hour day shift if finishing one car in 5 hours.
If manufacturing takes place every day of the week, then you will be able to produce at least 60 cars in a month. This is 10 more from the 50 you are getting after piling pressure on your staff.
This stage focuses on maximizing the constraint. When you do this, overall productivity is improved.
4. Subordinate to the Constraint
This is the stage where you make changes to the other stages of production.
This is to align them with the constraint.
At first, this may seem counter-intuitive, but there is a good reason for it.
When you align all operations to the constraint, you create some advantages. Some of these are:
- Easy monitoring of the system – it becomes easy to see what is going on in each area of operation. The point of focus is the constraint thus your attention will be on it. With a keener eye on the constraint, you are able to ensure the changes you made are implemented and working.
- Increased inventory safety – when individual parts of the whole system are working at maximum capacity, one danger lurks in the shadows. Inventory safety is compromised. If you are producing 4 tires in half an hour yet assembly takes 3 hours, where are the extra tires going?
Of course they can be stored awaiting assembly time.
But this arrangement opens the door to potential loss of inventory. If the tires are way more than the engine and chassis, it becomes easy to lose track.
- Improved collaboration – subordinating to the constraint makes every system work at the pace of the constraint. This means everyone works at the same pace. The flow of work will be improved since all your staff are on the same page. This is what teamwork should be like.
How do you subordinate to the constraint?
There are two simple steps. The second one is more of an “extra” step you can take to further improve productivity at the constraint.
STEP NO. 1: Reduce the number of tires being produced. For every 2 hours needed for assembly, have only one set of four tires produced. Since chassis and body production take 1.5 hours each, those can remain as they are.
At the beginning of every working day, the individual processes can begin. The aim is to produce only one product after 2 hours; an engine, body, chassis and four tires. These go into the assembly line.
While assembling the car is ongoing, those individual processes start over again. The aim? Produce only one item. This includes the tires where only one set is to be produced.
Although the engine guys will not experience any change, those working on the chassis and body will experience some idle time. The same applies to the tire producers.
This is all okay because your intention is to stop having a backlog at the constraint. Whenever there is a backlog, things often go wrong. For instance, your staff at the constraint will feel overwhelmed. Whenever there is a feeling of being overwhelmed, unproductivity is the end result.
There is nothing worse than going home knowing you did not finish today’s work. Even refreshing your mind becomes a challenge.
When your staff go home having finished the day’s work, they feel good about themselves. They have accomplished the day’s goal.
In the long run therefore, you will have invested in your system by investing in your staff.
STEP NO. 2: Take the idle staff to the assembly line. While focusing on the constraint, it might be great to make further improvements at the constraint. Since your tire guys have 1.5 hours of rest and your chassis and body producers have 30 minutes each of free time, they can help out with assembly.
This is a cheap way of utilizing your staff.
If you were not using the theory of constraints, you probably would have rushed to hire more staff for your assembly.
But following this theory, you have taken a different route. One that has saved you considerable amounts of money.
It is also important to realize that rushing to hire more staff doesn’t necessarily solve problems.
You will have to train the new employees and have them familiarize themselves with everything.
It becomes an additional cost yet you most likely never understood what the problem really was.
With this management theory, you tackle issues one by one, starting with the most urgent one. This gives you a thorough understanding of the root causes of the problem.
Furthermore, any improvements made in the system have a longer-lasting effect.
5. Increase the Constraint’s Capacity
Once you have done all the above and decide you still want more cars produced per day, it’s now time to make an expensive investment.
You have many options to choose from.
You may decide to buy or lease more machines which handle the initial part of the assembly.
You can also buy more advanced machines and have a fully-automated car assembly system.
Still, there is the option of outsourcing this part of the production process.
The options are as many as you can think of.
At the end of the day, what matters is that you have made tremendous savings.
These come in cash when you avoided an expensive upgrade too early.
And in reducing the amount of backlog for the constraint, you prevented potential inventory loss.
Better still, you have improved internal efficiency by dealing with the real problem.
This management methodology is helpful in training someone to eliminate noise and get to the root of the problem.
6. Repeat the Above Process with a New Constraint
Having done the good job of dealing with the constraint, you need to check the system again for another constraint.
There will most likely be another one which you didn’t see at first since it wasn’t the biggest bottleneck.
You should follow the above steps in dealing with that new constraint.
Repeating this process severally will help you make systematic changes in a manageable manner.
This was a realistic example of how the theory of constraints can be implemented.
You can visualize the practical steps and apply them in your company. You will definitely experience the benefits.
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