eli goldratt’s legacy in the world - tocpractice.com

Eli Goldratt’s Legacy in the World 46th TOCPA International Online Conference

18-19 March 2021

www.tocpractice.com

Ryoma Shiratsuchi Japan, Juntos Consulting, https://tocpractice-japan.com

© 2021 Juntos Consulting All Rights Reserved.

About myself

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2001: Read “The Goal”

2004: CCPM Implementation into Juntos (Bridge Design & Construction Business)

2006: Met Oded at Project Mgmt Conference in Fukuoka

2007: Started TOC Consulting Business

2008: Met Dr. Goldratt in Miami

Now: Co-president at Juntos Consulting Ltd. Outside director at ASAHI Seisakusho Inc. Founding member of TOCPA Faculty for TOCPA School Japan


We are the 3rd Generation

3

TOC Core Production/

Supply Chain

TOC TP/

S&T Tree Projects


For production,

• Manufacturing organizations that deal with both MTO and MTS/MTA orders are expected to;

Produce both standard products and custom products by using the same resources.

Respond to firm orders with short delivery times while producing based on forecast.

For projects,

• Project organizations that deal with not only project works but also non-project works are expected to;

Perform the tasks of specific projects with the same resources responding to unexpected “short-works” (ex. Defect response/Fixing bugs/Sales support) and/or assignments in the super upstream process (ex. Requirements Analysis in system development)

Team leaders/Experts are expected to address the issues raised by members and stakeholders while responding to the need of changing specifications during the execution phase (especially for large-scale projects)

The Areas that we are going to talk

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Mixed Environment – Examples

5

Bellows are some examples of Japanese companies:

• Manufacturers suppling the goods to distribution channels

The company has grown by selling a wide range of products (specials/projects) through MTO/ETO mode of operation and expanded to new markets that have more demands for standard products.

The company had enjoyed “Low-mix High-volume production”. However, Industry 4.0/IoT encourages the movement to “mass customization” – More pressures to respond to the market various needs.

• Suppliers suppling the parts to the final manufacturer

SDBR user – Before TOC, mainly produced parts for prototype of semiconductor equipment. Improved service level for the customers enables the company to get more orders for mass-produced products.

The main customer implemented MTA and decided to extend it to the purchased items through PTA – Purchase to Availability. Some suppliers are asked to participate in the replenishment system.


Why Mixed Environment?

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• TOC has two types of production solutions – SDBR for MTO and Replenishment for MTA.

• MTA gives the production the ability to ensure availability of the goods for the downstream chains with very effective level of stock.

• However, offering excellent availability of ALL items does not make sense. It means that some items are MTA, others are MTO or MTS.

• Defining proper MTA items is very important decision-making. For that, we may use the ABC analysis of the product-mix.

Production Volume

items High Runner

(fast-moving items)

Low Runner

（slow-moving items）

A B C


Challenges for Implementing PTA

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• For MTA, we have to ensure that the purchased items such as raw materials and components are available when replenishment orders are released.

• In many cases, purchase orders (PO) are placed to suppliers through MRP, and they operate based on these orders, which is usually MTO system.

• Implementing PTA demands that the suppliers change their supply mode from MTO to MTA. However, it is not realistic to manage all items under MTA. Consequently, they have to deal with Mixed (MTO/MTA) environment.

• How to get your suppliers to participate in the replenishment system? Are you going to ask them to take the following actions?

▪ Establish the warehouse and hold inventory to give commitments of ensuring availability

▪ And perform frequent replenishment (with smaller quantity)

• Can you see any tangible benefits for the suppliers?


The following assumption is different from the existing standard solutions (DBR/SDBR, MTA, CCPM):

Conceptual Difference

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In the same organization (department/production line/factory), there may be different systems that are governed by different constraints.

Systems are identified according to the constraint in the flow.

Different systems that have different constraints should have different algorithms of managerial decisions.

System X

System Y

Variability

Question： Each system has its own variability. Therefore, in order to achieve the target performance, there is a need to hold buffers to absorb the variability. For the above organization, how should the buffers be set?


Assumptions to be challenged

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Each system holds the appropriate buffer in consideration of the variability that each system has.

［Production］

Planning

Execution We synchronize the priority of each work order and achieve higher DDP/Availability by following the 3 color BM rule.

［Project］

We shorten project lead times and increase organizational productivity by completing tasks on CC continuously and quickly (like a relay runner)

Really?

Stock Buffer for MTA

Time Buffer for MTO

Project Buffer/Feeding Buffer


TOC Buffers

Area TOC Buffer Type General Sizing Rule Practical Sizing

Example

MTO

Production Buffer

TIME

“Challenging But

Achievable”

(3 x Touch time) plus safety

1/2 of current avg. PLT < PB <

current avg. PLT

MTA

Stock Buffer

STOCK

“Maximum Forecasted

Consumption within the

Reliable Replenishment

Time (RRT)”

Past consumption value of avg.

plus 2 sigmas for consecutive

times of current avg. supply LT

(avg. wait time to release + avg.

PLT)* 1.2

Project

Project Buffer

TIME

“1/2 the length of the

critical chain” Use CCPM software

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Conflict between MTO and MTA

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Some practitioners claimed that it was difficult to maintain both performance of MTA (Availability) and MTO (DDP and QLT) simultaneously. MTA performance often has been high on the expense of other MTO items.

Reserving capacity for MTA requirements is effective way of giving safe dates in planning. However, the real problem lies in the execution phase.

A

Have a successful

production

D’

Stick to the planned

capacity allocation

between MTO and MTA

C

Ensure enough capacity

for completing MTO

WOs within the agreed

time period

D

Allocate more capacity

for MTA WOs when

MTA requirements are

beyond reserved capacity

B

Meet demand

for MTA items

© 2021 Juntos Consulting All Rights Reserved. 12

Area TOC Buffer Type General Sizing Rule

MTO Production Buffer TIME “Challenging But Achievable”

MTA

Stock Buffer STOCK “Maximum Forecasted Consumption within the Reliable Replenishment Time (RRT)”

Different Algorithms to determine Buffer Size

Time

Challenging but

achievable

RRT

Both MTO and MTA use TOC Buffers. Even though the type of buffer is different, the meaning of buffer penetration is same. So, we are expecting to use color priority

system through Buffer Management. Really?

Stock Buffer is determined in consideration of demand variability

while Production Buffer is not.

Pro

bab

ilit

y o

f

com

ple

tion

Con

sum

pti

on


Core Conflict

13

D

Accept demand

variability as it is

D’

Do not accept

demand variability

as it is

(accommodate/reject)

C

Ensure effective use

of available capacity

A

Have successful

business today and

in the future

B

Meet customer’s

demand


Best Practice?

Capacity

Load Add capacity by overtime

Demand Variability

and/or

In many manufacturing organizations, the current way of dealing with variability in demand and supply is to extend lead time and/or add capacity at a cost.

Time

Too early release

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Buffer Equivalent Exchange

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“It’s a trade-off. The more inventory we allow before the bottleneck, the more time

is available for upstream resources to catch up, and so, on average, they need

less spare capacity. The more inventory the less spare capacity and vice versa.”

Tolerance Time

Spare Capacity required

Inventory Constraint Cap

acit

y

Load

The extra on-hand inventory within Stock Buffer can be exchanged for a free spare capacity to be served as Capacity Buffer.

(Eliyahu M. Goldratt, Jeff Cox, The Goal: A Process of Ongoing Improvement; 30th Anniversary Edition, p.324-325)

Holding more inventory brings tolerance time

to release orders.

Capacity Buffer


Buffer Equivalent Exchange in Mixed

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Tolerance Time for

MTA items

Constraint

The extra on-hand inventory within Stock Buffer for MTA items can be used for absorbing the variability that MTO items have.

Production gains free

capacity for giving higher

priority to MTO WOs.

Capacity

Buffer

MTO

MTA WOs

MTO WOs

MTA

Example:

MTA : MTO = 70% : 30% (in terms of capacity required)

If on-hand stock of MTA items is increased from 5d to 15d, then tolerance time for MTA items is increased by 10d. It is exchanged to a free spare capacity of 7d (10d*0.7).

This brings the pipeline Capacity Buffer of 7d that can be used for giving higher-priority for MTO items. It accelerates its WO completion by max. 23d (7d/0.3).


Hybrid Drum Buffer Rope – Hybrid DBR

Hybrid DBR is a new application for the mixture environment of MTO and MTA.

The chosen constraint: Response Time

In Hybrid DBR, we build MTA Stock Buffer with the aim of absorbing the demand variability of not only the corresponding MTA items but also MTO items. It enables the production to immunize against the demand variability.

MTO

MTA WO MTA

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time

Load

MTO WO


Case Studies of Hybrid DBR

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Company Implementation Area Results

TOPPAN PRINTING Nov-30, 2018, at 41st TOCPA Conference https://tocpractice.com/conferences/2018/11/04/41st-tocpa-conference-japan/

Manufacturing factory of magnetic

cards

• WIP reduced by 32%

• Total inventory reduced by 20%

• Charter truck/month

46.5 8.3 (82% reduction)

YAMAHA MOTOR Nov-30, 2018, at 41st TOCPA Conference https://tocpractice.com/conferences/2018/11/04/41st-tocpa-conference-japan/

Nov-18, 2019, 44th TOCPA Conference https://tocpractice.com/conferences/2019/11/03/44th-tocpa-jta-joint-conference-18-november-2019-tokyo-japan/

Engine parts production

• Eliminated delivery delays

• Production LT reduced by 55% (pilot)

• Supply LT reduced by 33%

(camshaft)

• Supply LT reduced by 65% (cylinder)

OGURA KINZOKU Nov-18, 2019, 44th TOCPA Conference https://tocpractice.com/conferences/2019/11/03/44th-tocpa-jta-joint-conference-18-november-2019-tokyo-japan/

Metal parts production

• DDP increased from 79% to 93%

• WIP reduced by 9%

• Overtime reduced by 34%

MITSUBISHI ELECTRIC FA INDUSTRIAL PRODUCTS Nov-18, 2019, 44th TOCPA Conference https://tocpractice.com/conferences/2019/11/03/44th-tocpa-jta-joint-conference-18-november-2019-tokyo-japan/

Supplier producing parts for geared

motors

• Expediting reduced by 80%

• Hand-carry reduced by 45%

• SFG inventory reduced by 17%

https://tocpractice.com/conferences/2018/11/04/41st-tocpa-conference-japan/














https://tocpractice.com/conferences/2019/11/03/44th-tocpa-jta-joint-conference-18-november-2019-tokyo-japan/


























































Insights gained by Hybrid DBR

Using Buffer Equivalent Exchange, buffers that are built in a specific system can be used for protecting the organization from the variability that the other system has.

Instead of holding buffers in the system that has bigger variability, it is better to build buffers in the system that has smaller variability and use it by exchanging. It enables us to manage buffers more effectively.

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MTA

MTO

eli goldratt’s legacy in the world - tocpractice.com

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