Synchronous Manufacturing and Theory of Constraints

Synchronous Manufacturing and Theory of Constraints

According to Dr. Goldratt, synchronous manufacturing refers to the entire production process working together in harmony to achieve the goals of the firm. Synchronous manufacturing logic attempts to coordinate all resources so that they work together and are in harmony or are "synchronized." The goal is on total system performance, not on localized measures such as labor or machine utilization.

The “Five Focusing Steps of TOC”  are condensed below:

‡ 1. Identify the system constraint. (no improvements possible unless the constraint or the weakest link is found)

2. Decide how to exploit the system constraint. (Make the system as effective as possible).

3. Subordinate everything else to that decision. (Align every other part of the system to support the constraint even if this reduces the efficiency of the non-constraint resources).

‡    4. Elevate the system constraints. (If output is still inadequate, acquire more of this resource so itis no longer a constraint).

‡    5. If in the previous steps, the constraints have been broken, go back to step1; do not let inertia become the system constraint.

Production Scheduling Rules

His rules for production scheduling are listed as under:

-       Do not balance the capacity - balance the 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.

-       An hour lost at a bottleneck is an hour lost.

-       An hour saved at a non-bottleneck is a mirage.

-       Bottlenecks govern both throughput and inventory in the system.

-       The transfer batch may not and many times should not be equal to the process batch.

-       A process batch should be variable both along its route and in time.

-       Priorities can be set only by examining the system’s constraints. Lead time is a derivative of the schedule.

The above principles underlie the concept of synchronous manufacturing, which refers to the entire production process working in harmony to achieve the profit goal of the firm.

The primary goal of the firm is to make money. Firms have three measures of the firm's ability to make money: net profit, return on investment, and cash flow. Financial measurements work well at the higher level but need to be used with other measures of throughput, inventory and operating expenses. The goal of the firm from an operations standpoint is to increase throughput while simultaneously reducing inventory and reducing operating expenses. Productivity is all the actions that bring a company closer to its goals.

Performance Measurements

NetProfit - an absolute measurement in dollars
Return on Investment - a relative measure based on investment

Cash flow - a survival measurement.

Operational Metrics

Throughput - the rate at which money is generated by the system through sales. Throughput as specifically defined as goods sold. An inventory of finished goods is not throughput but inventory. Actual sales must occur. This definition prevents the system from continuing to produce under the illusion that goods might be sold. Such action simply increases cost, builds inventory and consumes cash.

Inventory - all the money that the system has invested in purchasing things it intends to sell. Inventory that is carried is (in any form - WIP or finished goods) is valued only at the cost of the materials it contains. Labor costs and machine hours are ignored.  Using just raw materials cost also avoids the problem of determining which costs are direct and which are indirect and their allocation.

Operating expenses - all the money that the system spends to turn inventory into throughput. Operating expenses include production costs (such as direct labor, indirect labor, inventory carrying costs, equipment depreciation and materials and supplies used in production) and administrative costs. The key difference is that there is no need to separate direct and indirect costs.

Unbalanced capacity is preferable to an attempt to match capacity with market demand. Capacity constrained resources can become bottlenecks if their utilization is not scheduled carefully. Because each step in a process sequence is a dependent event, the ability to do the next process is dependent on the preceding one. Statistical fluctuations are the normal variations about a mean or average. Rather than balancing capacities, the flow of product through the system should be balanced.
A bottleneck is any resource whose capacity is less than the demand placed upon it. It limits the throughput. Nonbottleneck resources have capacity greater than demand. A capacity-constrained resource (CCR) is one whose utilization must be scheduled carefully so it does not become a bottleneck operation.
Production cycle time is made up of setup time, process time, queue time, wait time, and idle time. Queue time is the greatest for parts waiting to go through a bottleneck. An hour saved at the bottleneck adds an extra hour to the entire production system but an hour saved at a nonbottleneck is a mirage and only adds an hour to its idle time.
Batch size determination is important in synchronous manufacturing. For bottleneck resources, larger batch sizes are desirable. For nonbottleneck resources, smaller process batch sizes are desirable and reduce work-in-process inventory.
MRP and JIT are often compared to synchronous manufacturing. MRP uses backward scheduling after being given a master production schedule while synchronous manufacturing uses forward scheduling because it focuses on the critical resources. JIT like synchronous manufacturing does an excellent job in reducing lead times and work in process but is limited to repetitive manufacturing and requires a stable production level.
The production system must work closely with the other functional areas to achieve the best operating system. Cost accounting, for example, is changing to support production performance measures. Marketing communicates and conducts activities in close harmony with production for better operations too. The firm should operate as a synchronized system with all parts in harmony and supporting each other. The key to competitive advantage through operations is for the firm to operate as a synchronized system, with all parts working in concert. Companies that do this well are well on their way to achieving the fundamental goal of the firm -- profitability.