How we did the right production

By the way, it took six years of research.

Obviously, if you produce something (or carry out projects, it is not so important), then you really, really want to do it:
- quickly
- high quality
- right on time
- with minimal cost (investment)
This means that some solution must be found that allows you to do this.

But there is a nuance. Any multiuser environment does not accept complex solutions. Or you will have to go broke on training and advanced training, bringing the level of education of employees to the candidates of sciences.
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We began our research in this part of the year in 2006, believing that the best solution for production is MRP. In 2010, after some implementation tests, we realized that the MRP does not lead to an increase in efficiency. The number of orders made on time does not increase, stocks do not decrease, production speed does not increase. And often the opposite. I wrote an article about it. Pretty emotional. Apparently seriously hurt those who earn on the implementation of MRP. But after all, the goal of implementing any management system should be an increase in efficiency, shouldn’t it? Many people forget about this, as, indeed, that the goal of a business is to make money. Therefore, the introduction of MRP often turns into a project for the implementation of MRP, but not in a project to improve production efficiency.

In 2009, we found the right solution. This is the Theory of Constraints (Theory of Constraints, TOC), which by that time had been actively spreading in the west for about 10-15 years (Hitachi, Boing, GM, P & G, ABB, Philips, etc.). But in Russia, as is often the case with innovations, almost nobody has heard about it. The Theory of Constraints offers algorithms for both production management and project management. We made a bias towards production, but we did not forget about the projects.

I read the book “The very goal” and understood that the Theory of Constraints allows you to produce and execute projects (this is another book, “Critical Chain”) in accordance with the four theses that are written at the beginning of this article. Reading the book, you understand that this is what you need. But how can words be turned into software ???

We need algorithms, but they were not. Finding people who know the TOC well was almost unbelievable. I went to the courses, but there was either a banal retelling of the book, or just the calculations that were removed from life. And I had to understand how to issue production orders, how to build a production schedule, how to determine the importance of a project task, etc.

And we started our own research and started trying to develop software. Began to actively talk about it. And it was here that there appeared people who find this interesting too. Meetings began, the exchange of experience. We collected information bit by bit, modeled, there were already implementations, after which we introduced corrections to the algorithms. And so, in 2013, we finally got what we had in mind.

The Theory of Constraints states that there is always only one place in a company that limits the performance of the entire enterprise. And the performance of the entire enterprise is strictly equal to the performance of this particular place.

You can invest as much as you need in new machines (or other objects), but if they are not a bottleneck, you will not get an increase in productivity of the entire enterprise. This is an easy retreat for those who want to evaluate the effectiveness of investments. The effectiveness of investments in restricted areas is zero at best, and may be negative if you invest in a new equipment to a bottleneck and do not agree on capacity. At the same time, investments in bottlenecks are the most effective, as they allow to increase the productivity of the entire company.

Five fundamental steps of the Theory of Constraints.

1. Identify the narrow link.
2. Use its capabilities to the maximum.
3. Agree on the power of all other sections with a weak link (restriction).
4. Increase the performance of a narrow link.
5. Go back to step # 1.
The systematic execution of these steps will inevitably lead to an increase in the productivity of the entire company.

Stop.
And how to find a narrow link? And how to use its capabilities to the maximum? And how to coordinate the power of other sites?

So we asked ourselves these questions for a number of years and looked for answers to them.
And after a lot of research, the answers were found and translated into software algorithms.

So first, a little philosophy. You have customers, they need something from you. You have to do what they need in a strictly fixed period and then customers will be loyal and will order more. Accomplishment of orders (projects) on time is one of the ways to increase sales. And if you do it quickly, then ...

Goldratt proceeded from this rule. Everything must be subordinated to the achievement of precisely this task. Execution of the order \ project just in time - the main task, and the work of the company should be built in accordance with it. That is, all parts of the enterprise — procurement, production, and the execution of tasks — must work towards the fulfillment of this task. Then the goal of the business - to make money - will be achieved.

The basics of our algorithm

1. Determined the need to produce what the customer ordered. Do I need to produce it at all? If the order is provided with inventory, it is not necessary to produce it. But that can change very quickly. The need to produce a product from each order is determined by any change in the situation. An example for clarity:

The client called you and ordered the product number 1 in an amount of 3 pieces and asked him to provide it to 31.05.2013. If you have 3 items in stock, you do not need to produce anything. Or if you have a production task in which such a product is made with some stock and this stock is sufficient.

But tomorrow another customer called you and asked for exactly the same product, also in the amount of 3 pieces, but by May 15th.
Question: under what order to produce?
Answer: of course, under the first one, although yesterday it was not necessary to do anything under it.

Thus, the need for production for one order or another is determined by any change in the situation in the company regarding this product.

Then, the system determines the need for the production of nodes of different levels in your product and the need to purchase components using the same scheme. As a result, two lists are agreed upon by dates. The so-called "to do sheet."

• What should we buy
• What should we produce

Both sheets are “alive” and change with any change in the situation.

But this is not enough. It is not enough to understand what you should buy. It is necessary to determine when to buy it and when to produce it. If you need to buy a product, it does not mean that you need to buy it now. You will buy / produce too early - you will spend precious working capital, which then will be “lying” in the warehouse. And you will borrow resources that could take something more than a priority.

You buy / produce too late - you break the final deadlines. For this, the Theory of Constraints suggests using the so-called time buffers, which we also embedded in the to do sheets.

Prioritization! That's what's important! It is important to understand what is most important at the moment. What to do now, and what to do next. The same goes for the tasks in project management. It is important to understand - what is the most important task in the implementation of the project. And the importance of the task is determined by the state of the project time buffer. The less buffer left in the project, the higher the level of the task.

2. To achieve maximum production speed, each production site must do exactly those tasks that have the highest priority in terms of solving the main task. The main task is to complete the order on time. For this, the system builds a production line, where each record has its own priority. Each entry is a title. This is not necessarily the name that the client ordered from you. Rather, it is there for sure, but in addition to it there may be others. For example, intermediate knots of a product made by you. The priority is determined by the degree of approximation of the hour X. The closer the hour X, the higher the priority. Thus, each site receives those tasks that are most important. In the production queue, the same time buffers are used, which I wrote about a little higher.

3. But this is not enough. The above points do not solve the problem of subordination of all production sites to a narrow place. If this is not done, then there is every chance of organizing a “traffic jam” in production. In order not to “fall asleep” the narrow link, the tasks must be issued strictly at the speed that the narrow link is able to “digest”.

And for this we have come up with a so-called traffic light. Before issuing the task to the site, the dispatcher looks at the traffic light readings. If the traffic light is red, then most likely it is impossible to issue a task. But it all depends on the specifics of production. If the bottleneck works in 24/7 mode (maximum utilization of the bottleneck resources, step # 2), then in the evening a queue may accumulate in front of it, which will be eliminated by morning, because non-restricted places, for example, work only during the day.

In short, the traffic light helps the dispatcher to make the right decision whether to issue tasks to the sites or not, thereby coordinating the performance of all the sites with the bottleneck. By the way, the traffic light also helps to identify the bottleneck. A bottleneck is one that is often “red”, that is, it is constantly late in time. It is not always obvious, so the help of "traffic lights" is needed.

This is the workplace of the dispatcher:


Now imagine the purchasing department at work. This is often a model of chaos. The purchasing department not only doesn’t know what to purchase, it doesn’t know how much and when .

Such is the nature of man that he cannot do two things at the same moment. A purchasing manager can only do one thing at a time. Question: what should he do right now?

If he cannot unambiguously answer this question, then he will definitely buy the wrong thing and not when needed. How it will affect the execution of the order, not for me to tell you.

Therefore, the workplace of a sales manager looks like this:



Everything. This is an unequivocal answer to the question "what should I do in the first place, and what in the second." The person is fully focused on what is more important right now. Buy from top to bottom.

Well, and in parallel the responsible citizen is engaged in decision-making in the field of optimizing the level of stocks.
Constantly adjusting them. The system unequivocally gives an answer to the question about the level of optimal reserves for each item.

Why do we need to subordinate non-specific places to a narrow place.

Almost everyone knows what traffic jams are. They occur either in the place where there is a sharp narrowing, or in the event of an obstacle. As a result of the occurrence of a plug, the overall flow rate drops sharply, sometimes to almost zero. If the road always has a constant width and all cars move at a constant speed, without constant braking and acceleration, there will be no traffic jams and the flow rate will be much higher than the flow speed with traffic jams.

The same thing happens in production. The task is very simple - to make sure that the production rate is constantly maintained. This can be done only if this speed is maintained at the speed level of the narrow link. And only after that you can proceed to step # 4 of the Theory of Constraints, that is, increase the throughput of the weak link, thereby increasing the throughput of the entire production.
Well, then step number 5 :-)
Good luck with your TOC implementation.

UPD. Upon persistent requests from commenting, he added pictures to the text.