Theory of Constraints — A Concise, Expert Management Briefing

TOC — Software

Much of the effort in implementing traditional ERP or even Finite Scheduling is unnecessary and pointless

Spreadsheets can schedule some quite complex environments ... as a starting point

Dedicated software can be very effective but expensive and sometimes overly sophisticated

There is a useful TOC-based Distribution & Supply Chain software package from Europe, plus a new entry from the USA

Critical Chain Project Management is almost impossible without dedicated software

Software in support of a Theory of Constraints implementation: often unnecessary, sometimes an obstacle, mostly useful, occasionally vital

When a Theory of Constraints consultant learns his or her soon-to-be client has just bought or is in the middle of an implementation of "standard" software, it's understandable that the first reaction is often "oh dear."

Usually this means an ERP (Enterprise Resource Planning) software package, perhaps with a Finite scheduling module (but still mostly not), perhaps with an Advcanced Production Scheduling or Manufacturing Execution System embedded or tagged on.

A lot of issues are inevitably going to come into play.

Popular Scheduling Software usually cannot, and does not, generate valid schedules

First, while much manufacturing software is sold based on a premise of improved shop performance, it will rarely deliver. Because it cannot. Friends who implement some of the most popular software tell me that as few as 10% of the package owners ever actually implement the shop floor scheduling and control software ... and I venture to suggest this is a good thing. Software that is NOT Finite scheduling in nature will almost never be able to generate effective schedules because the logic simply doesn't reflect reality.

The bad news is that most finite scheduling software also does a pretty lousy job of scheduling a shop floor because once again, the logic in the scheduling mechanism doesn't reflect scheduling realities. Just being "Finite" isn't enough. Eli Goldratt's understanding of effective scheduling remains head and shoulders over most others ... and that understanding is reflected in pitifully few software packages.

In the days before there was effective Drum-Buffer-Rope software Eli Goldratt, always diplomatic, advised companies focusing on scheduling software to "cut out the middleman — connect your printers directly to your shredders."

Don't be fooled by speed or a great-looking display

The vendor might brag about how fast it can reschedule a complex plant (in terms of number of routings and parts and orders etc) ... perhaps claiming you can reschedule 4 or 5 or more times a day, if necessary.

Well, this is our definition of chaos! Do you really want your shop priorities changed several times a day? A valid Theory of Constraints shop schedule typically remains stable for long periods of time, even as Murphy strikes and new orders arrive and customers change their minds, etc.

You'll also find software with displays of load versus capacity and so on that are just amazing; extremely impressive. This doesn't mean "bad;" but neither does it mean "good." Some of the most ineffective scheduling software has some of the most impressive graphics. But the stuff that works can look pretty good, too.

Introducing the VPAI — the Very Powerful Alternative to Improvement

There can be many more issues, of course. A traditional manufacturer might have many layers of Bills of Material ... the TOC preference for effective scheduling (fast flow through the plant, low WIP, etc) might call for far fewer levels, even just two (not always the case, of course). (There are usually work-around's but it is a pain).

Also, the traditional software can have a whole host of invitations for managers to get pulled into putting a lot of time and effort (and elapsed time) into what we call VPAI's ... Very Powerful Alternatives to improvement. Such as, multi-layer bills. Work orders for intermediate-level parts at many levels of a Bill. Spending months getting data accurate. Defining hosts of routings and work center combinations to have set-up times and run times to two decimals of accuracy and embedding wait times or queue times that become self-fulfilling prophecies. Defining batch sizes. Calculating labor variances. Creating then trying to follow dispatch lists.

Eventually, when a lot of time and money has passed under the bridge and the results aren't there, the blame will typically be placed on a lack of data accuracy, so teams get formed and ... it gets cleaned up. Months later when the business improvement results still don't show, it's usually blamed on a recalcitrant workforce who refuse to follow the schedules (it's inconceivable that the schedules might be wrong, of course ... after all, this was a VERY expensive software system with thousands of users). Next, a lack of Management commitment gets blamed. Or, poor training. And so on. Eventually you're a few years in and the new managers decide it's the lousy software that's to blame (because they've fixed everything else) so they undertake a new search for better software ... in the meantime, the TOC consultant is still waiting patiently in the wings for the company to remove it's focus off the software and onto really improving performance. When the call does come, one problem is that the company no longer has the cash to pay for the real improvements the Theory of Constraints will bring ... and then there's the manager who invested the most into convincing others to acquire the software and in selecting the specific package; he or she has a vested interest in the decision and the selection proving to have been the right decision, and a vested interest in anything else not being too successful, too quickly ... as in "Theory of Constraints." Or am I being too cynical?

OK, I'm perhaps being a little unfair. Some traditional manufacturing DOES improve things in some environments. Even if the new schedule is invalid, at least there's a clearer picture of load/capacity issues on a broad scale, which can lead to overtime reductions. But the improvement is usually only a fraction of what is really possible.

Here's our take on things (other TOC consultants might disagree).

Project Management

The Theory of Constraints application to project management, Critical Chain, MUST BE supported by dedicated software. There are a few packages around; some are better than others, the good ones are excellent. They start very inexpensively, too.

Production

Whenever possible a Theory of Constraints consultant will try to make use of any existing software, worst case using it to feed the DBR logic in an add-on application (which might simply be a spreadsheet), sometimes using work-around's on standard software to set-up a simple DBR system so that even a dedicated DBR spreadsheet is not needed.

Many production environments, even complex-seeming environments, can be very effectively scheduled with a spreadsheet. One client of ours, in the pharmaceutical business, scheduled a busy operation with 2700 sku's, 600 intermediate products and 200 materials with a pre-Windows spreadsheet sat on top of a fairly old MRP system. They were probably the highest performing company in their industry with that set-up. A spreadsheet can be a good way of modeling a Drum-Buffer-Rope system, it has the advantages of being fairly quick to customize, it can handle some pretty sophisticated scheduling and calendar issues, but of course it's not robust and the time comes when it makes sense to replace it with hard coded software; custom or package. By that time, though, the main aspects of a Theory of Constraints operation — policies, procedures, measurements, behaviors— are thoroughly in place, people are bought-in, they know what they want, and the selection and implementation process takes on a very different hue than a conventional software implementation. It gets 'sucked in" by the people, rather than "pushed down" by management.

There are some Drum-Buffer-Rope software packages that simply sit on top of an ERP system; being fed the necessary data to come up with excellent, realistic Drum-Buffer-Rope schedules and offering powerful Buffer Management techniques for daily operational management and long term continuous improvement. The price range varies a lot ... a couple are quite inexpensive for smaller plants, while others would have to be considered expensive for a smaller plant or a corporation with many small or mid-size plants. The TOC benefits will make the ROI a certainty, though, even for these. A colleague of ours (USA) has developed some very useful inexpensive DBR software.

Also, a few of the more traditional and more popular ERP packages and traditional Finite Scheduling packages have added Drum-Buffer-Rope logic ... with varied results. Some have done a good job of it, some clearly haven't understood DBR from a practical perspective.

Almost any manufacturing business will benefit from having some modules of an ERP package even if just to be a central database for a lot of data. Larger enterprises simply must have useful computer systems in place. But if a company first understands Theory of Constraints and even implements the Drum-Buffer-Rope technology first, it is likely to have different criteria for choosing software; may well choose different software than it otherwise would; implement it differently; ; and use it differently.

Distribution & Supply Chain

For companies compelled to carry a finished goods inventory in order to meet customer demands within the customer's tolerance time (even after shrinking cycle times and exposing additional capacity with Theory of Constraints), a replenishment system using the logic of the TOC replenishment approach is a great solution. Again, some of the TOC dedicated software can handle this. Some effective spreadsheets also exist.

When the solution spreads to the downstream customers, to provide a supply chain solution, again there is often enough power in traditional software plus custom-developed spreadsheets to handle the replenishment logic. There is one powerful piece of Theory of Constraints software from Europe, though, that handles the supply chain solution extremely well. It monitors the inventory and usage levels at the downstream inventory buffers, recommends adjustments, recommends replenishment, etc, all in a simple manner over the Internet. Recently a colleague of ours introduced some powerful software with similar functionality.

 

Recommended: If you want to learn more on this topic.. Unless you are willing to commit to a workshop with a TOC Expert, you cannot beat the educational material developed by Eli Goldratt, the originator of the Theory of Constraints. He is an amazing teacher.

The 8 Videos in his Satellite Program are a best-buy for a company, intended for use by groups of employees. His provocative coverage of every industrial application of TOC challenges managers to think in new directions, and to recognize the sacred cows in their organization and their own thinking.

The 16-CD Self Learning Program is extracted from the same material but intended for use by individuals on their own PCs, rather than groups.

The TOC Insights is a new interactive PC-based tool for individuals. As a TOC Expert I thought they were too "cute" ... until I used them with clients. They proved to be highly effective learning tools for the 5 major applications, and the Distribution and Supply Chain solution is documented in detail here for the first time anywhere.

Planned: a Monthly TOC EZine This EZine is intended to be 100% practical, offering tips, advice and illustrations of users' experiences with the different TOC applications.

TOC Experts with practical suggestions to real problems encountered with clients will also contribute.

The EZine will promote the use of TOC in combination with other technologies, for improved results.

We will be taking subscriptions soon.

 

 

 

 

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