In my last post we finished our discussion on TOC’s version of Project Management, Critical Chain Project Management. I explained how projects are tracked using CCPM’s fever chart for individual projects and for your entire portfolio of projects. I finished my last post by telling you that by changing from the most common project management method, the Critical Path Method (CPM) to TOC’s version of project management, Critical Chain Project Management (CCPM), project completion times can be reduced by as much as 50% and that your overall project completions will finish on-time, on-budget and on-scope will rocket upward to over 95%. In today’s post I will begin a discussion on different types of system constraints.
Types of Constraints
In previous posts we have gone to great lengths to explain that you must identify the physical constraints in a manufacturing process if you are to improve flow. But what if the constraint isn’t located inside the process? What if the constraint is not physical in nature? In this post we will begin a discussion on the different types of constraints that can and do exist within a company. We will also discuss how to identify these different types of constraints and what to do about them.
Dettmer  explains that, “Identifying and breaking constraints becomes a little easier if there is an orderly way to classify them.” Dettmer also explains that there are seven basic types of constraints as follows:
Let’s look at each of these constraint types in more detail and how we might be able to overcome them.
This type of constraint exists when the demand for a product or service is less than the capacity to produce or deliver the product or service. That is, the company has not developed a competitive edge to realize enough orders for its product or service.
Marketplace constraints come about simply because the company is unable to differentiate itself from its competition. So how can a company differentiate itself? Quite simply, there are four primary factors associated with having or not having a competitive edge.
Quality, in its most basic form, is a measure of how well a product conforms to design standards. It is clear that Japanese manufacturers such as Toyota and Honda are the world’s recognized leaders when it comes to producing the highest-quality products, but it is also clear that this was not always the case. You probably know the history here, when Dr. Deming went to Japan and taught the Japanese how to become competitive.
The secret to becoming quality competitive is first, designing quality into the products; second, the complete eradication of special cause variation; and third, developing processes that are in control and capable. It is not rocket science, but so few companies focus on these three success elements for creating products and services that differentiate them in the marketplace. So if you want more orders, the first step is to distinguish yourself from the competition from a quality perspective.
On-time delivery requires that you produce products to the rate at which customers expect them. This means that you must have product flow within your facility that is better than that of your competition. The basics involve focusing on and improving the physical constraint that exists within your facility, removing wasted time within your processes (both physical and nonphysical), eradicating things like downtime, quality problems, variation, and all the other things that cause your processes to be inconsistent. It also involves reducing unnecessary inventory that lengthens cycle times and hides defects. You must create consistent, reliable processes that do not impede your ability to produce and ship on time.
Customer service simply means that you are responsive to the needs of your customer base. Customers must feel comfortable that if their market changes, their supply base will be able to change right along with them. If the customer has an immediate need for more product, the supplier that separates itself in terms of response time will become the supplier of choice. This means that your manufacturing lead times must be short enough to respond to the ever-changing demands of the market. This only comes by creating processes with exceptional flow. It is important to remember that the greater the amount of work-in-process inventory, the longer the lead time to produce.
Cost is perhaps the greatest differentiator of all in a down market. But having said this, low cost without the other three factors in place will not guarantee you more orders. Low costs are only achieved by removing waste and operating expense within the company. In order to be the lowest cost provider in the marketplace, companies must clearly manage all parts of the business. The quality of the products must be superior, with little scrap and rework. The quantity of raw materials must low enough to minimize the carrying costs. The amount of labor required to produce the product must be optimal, with little or no overtime.
The cost of expedited shipments must be minimized. All these factors and more make up the cost of the product or service. If the costs are less than the competition’s, cost can be a differentiator, but not without the other three factors, quality, on-time delivery, and customer service.
 Goldratt’s Theory of Constraints: A System’s Approach to Continuous Improvement, (Milwaukee: Quality Press, 1996)
In my next post we’llbe discussing several more of these different types of constraints and how we might go about counter-acting them. As always, if you have any questions or comments about any of my posts, leave me a message and I will respond.
Until next time.
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