Embrace Theory of Constraints and Advanced Planning and Scheduling Software as Your Competitive Advantage

Theory of Constraints and Advanced Planning and Scheduling Software:

Together they are the fastest way to industry leadership and exceptional financial performance.

What is the greatest obstacle to manufacturers adopting Theory of Constraints  (TOC) as a continuous improvement model?

The most difficult part for executives in manufacturing to understand is that such a simple and straightforward concept can yield such powerful results. 

From our perspective, we are not quite sure why the world hasn't flocked to Theory of Constraints. From our experience, once a customer embraces the TOC principles and engages us to help them put them in place, the results can be immense.  

While overall productivity goes up, it is entirely possible that the productivity of some work centers may go down, especially if they are not constrained resources. Once the true constraints are identified, we're able to help our customers do cross-training and redeploy resources where the real bottlenecks are.

At times, two factors can cause leaders to not implement Theory of Constraints quickly. The first is managing the constraint using Drum Buffer Rope (DBR). The drum is the constrained resource which determines the pace of production in the factory. The buffer is the mechanism by which process variability is addressed and maximizes the output of constraint. The rope is the signal that releases material into production. All three working together synchronizes the flow of material and information in support of satisfying customer demand.

The second factor is throughput accounting. If you want to achieve on-time delivery, DBR is the enabler. If you also want to maximize financial performance, throughput accounting is essential. 

At times, manufacturers resist giving up cost accounting, often referred to by Dr. Eli Goldratt (author of “The Goal” and the father Theory of Constraints) as “public enemy #1”. Managing  by cost accounting is an “after the fact” financial management tool, not a real time decision support for what is happening on the factory floor. 

Throughput accounting is a means for profitability resolving production issues in real time. We believe it’s the only means to drive optimum financial performance relative to scheduling and production variabilities. 

Simply put, cost accounting tells managers what they did. Throughput accounting tells managers what to do.

Due to the complexity of today’s manufacturing environments, we often have to bring in a tool such as an advanced planning and scheduling (APS) application. It calculates the timing of the arrival of parts at various work centers, generating realistic schedules in seconds. Managers can forget clunky and time-consuming spreadsheets. The results are executable schedules where the right parts arrive at the right time. 

The Benefit of Implementing Advanced Planning and Scheduling Software

Advanced Planning and Scheduling software will create a stable schedule for the shop floor. After the schedule is sent to the floor, the amount of time remaining before each order becomes late (its remaining time buffer) will be calculated. The APS will generate exception messages for each order that has less than a specified percentage of its buffer remaining. Material expeditors, or production control employees, will have accurate information about which order really needs attention.  A significant portion of their time will be made available for other value-added order fulfillment activities.

In less complex manufacturing environments, such as make-to-stock, APS software may not be as crucial. In these cases, we are often able to work with the ERP (or demand planning) tools the manufacturers are already using. This saves the manufacturing operation from having to make an additional investment before seeing any results.

Software is often seen as getting in the way because implementing a piece of software becomes the focus rather than the means to a valuable end: on-time delivery and value creating financial performance. Uniquely, APS software is a fast-track to improving overall company performance.

On-Time Edge is very careful to help our customers to stay focused on the objective of improvements to financial results, instead of the myriad of software options. 

In many cases, both the project cost and the software expense are offset by the savings in operating costs and the reduction of work in progress. 

The ability to consistently hit due dates with the same resources, reduces the overall cost of a project to a mere fraction of the savings which are achieved.