Recap of Previous Session:

Understanding Service Operations Management:

A brief look into Indias services sector
Service Design and applications
Indias digital story and applications
Queueing System
Variability Pooling

Operations Management-104

*Images available in the public domain

Session 12
Constraint Management

Operations Management-104

Debabrata Ghosh

Continuing with Variability

(Variable)

(Constant)
Process Time (B)

Process Time (A)

10

12

10

14

Item
Number

Start Time

Processing
Time

Finish
Time

Item
Number

Start Time

Processing
Time

Finish
Time

14

14

14

10

24

14

12

26

26

10

36

26

10

36

36

10

46

36

44

46

10

56

44

50

56

10

66

Source: Operations and Supply Management, Chase, Shankar, Jacobs and Aquilano, Mc-Graw Hill, 12thEd.,2010

Operations Management-104

Continuing with Variability

(Constant)
Process Time (B)

(Variable)
Process Time (A)

10

10

12

14

Item
Number

Start Time

Processing
Time

Finish
Time

Item
Number

Start Time

Processing
Time

Finish
Time

10

10

10

16

10

10

20

20

28

20

10

30

30

10

40

30

10

40

40

12

52

40

10

50

52

14

66

When one process takes longer than the average, the time can not be made up
Rather than balancing capacities, the flow of product through the system should be balanced
Operations Management-104

Re-visiting Gotham City!

What to Produce:
Autobot Gamma has decided to launch his own door production company. He
decided to focus on three types of doors according to the needs of the Gotham
city customers. The three door types are A,B,C with selling price per unit of Rs 80,45
and 60 respectively. The raw material costs to manufacture these doors are Rs 70, 30
and 40 respectively. And the production rate of these doors in his factory are
estimated to be 4 units/hour, 5 units/hour and 3 units/hour respectively. Which door
type should Autobot Gamma choose to produce and how much of these door types
should his factory produce, assuming there is enough demand for each type of door
in Gotham City?

Approach 1: If Autobot Gamma decides to maximise his revenues/sales , he would

simply choose to produce door type A.
Approach 2: If Autobot Gamma decides to maximise his margins, he would choose to
produce door type C.

Operations Management-104

A new approach
Approach 3
If Autobot Gamma is worried about the utilization of his factory, based on the
production capacities available to him, he would focus on the gross margin/hour
which are Rs 40/ hour for type A door, Rs 75/hour for type B door and Rs 60/hour for
type C door. Thus, Autobot Gamma may decide to choose B for his new production
plans.

How much to Produce:

Consider that Autobot Gammas production facility has two machines installed and
he now plans to produce all three type of doors A,B and C. The profits from each
door are estimated to be 40,30 and 35. The unit processing times in these two
machines M1 and M2 are 15, 16 and 12 and 14,11,9 minutes respectively. A total of
2400 minutes of production time is available in the week and the weekly demand for
the doors have been estimated to be 70,80 and 60 respectively. How much of each
door type should Autobot Gamma decide to produce in his production facility?

Operations Management-104

How much to Produce the constrained resource utilization approach

Solution Approach:

Available weekly production time =2400 minutes

Profit

40

30

35

M1 (time)

15

16

12

M2 (time)

14

11

Demand

70

80

60

Assuming all demand can be fulfilled:

Production time required of M1 = 70*15 + 80*16 + 60*12 = 3050 minutes
Production time required of M2 = 70*14 + 80*11 + 60*9 = 2400 minutes
Given the production time availability of 2400 minutes in a week, M1 is a bottleneck
resource.
A bottleneck is any resource whose capacity is less than the demand placed
upon it.
Operations Management-104

How much to Produce the constrained resource utilization approach

Considering the bottleneck resource utilization

Available weekly production time =2400 minutes

Profit

40

30

35

M1 (time)

15

16

12

M2 (time)

14

11

Demand

70

80

60

Profit/min. of
bottleneck
utilization

40/15= 2.66

30/16 = 1.875

35/12 = 2.91

Produce C first. Production time on M1= 60*12 = 720 mins. Balance Production
time = 2400-720 =1680 mins. Profit from C = 60*35 = Rs 2100
Produce A next. Production time on M1 = 70*15 = 1050 mins. Balance Production
time = 1680 1050 = 630 mins. Profit from A = 70*40 = Rs 2800
Produce B last. 16x = 630 => x = 630/16 = 39.375 ~ 39 units. Profits from B = 39*30
= Rs. 1170
Operations Management-104

Linear Programming Approach to Product Mix Problem

Max 40 x1 + 30 x2 + 35 x3
s.t.
15 x1 + 16 x2 + 12 x3 <= 2400
14 x1 + 11 x2 + 9 x3 <= 2400
x1 <= 70
x2 <= 80
x3 <=60
(x1, x2, x3) >= 0

Operations Management-104

Exercise
A company makes a single product whose weekly demand is 100. Identify the
constraint when

The plant works 8 hours shifts (5 days) and takes 20 minutes to make a
product.

The company takes 30 minutes to make each product

The supplier can provide raw material at the rate of 15/day

The supplier can give 25 units per day but the organization takes two days
to place the order

Operations Management-104

10

Claim Settlement Exercise

New Life insurance is a service provider to Medicaid and helps process medical claims. For a
small fee, it performs the entire claims processing operation on behalf of Medicaid.
Processing of a claim consists of the following operations:
1. Claims billed by hospitals arrive by mail to the mailroom clerk who sorts them and places
them on a data entry bin.
2. Data entry assistants check claims for completeness and enter into the system only those
claims which are properly formatted or complete.
3. Claims are assigned to a claim process for initial processing.
4. Processed claims are transferred to a claim supervisor for inspection
5. Claims are returned to original claim processors who issues instructions for settlement of
claims.

Operations Management-104

11

Claim Settlement Exercise

Resource Pool (i)

Unit Load (minutes

per claim) (Ti)

Number of Units in
the Resource Pool (Ci)

Effective Capacity of a
resource pool (claims
per minute) (Ci/Ti)

Mailroom Clerk

Data Entry Assistants

1.6

Claims Processor

12

1.5

Claims Supervisor

2.50

The mailroom clerk pool is the bottleneck

The effective capacity of the entire system = 1 claims per minute or 60 claims per hour

Operations Management-104

12

Goldratts Theory of Constraints Guiding Principles

Do not focus on balancing capacities. Instead, focus on synchronizing the flow

The marginal value of time spent at a non-bottleneck resource is negligible. Do
not attempt to reduce time at a non-bottleneck resource.

An hour gained at a non-bottleneck resource is a mirage

An hour lost at a bottleneck resource is an hour of throughput loss
The level of utilization of a non-bottleneck resource is controlled by other
constraints within the system
Resources in the system must be utilized, not simply activated.
A constraint is any element that pre-empts the system from achieving the goal of
making more money.
The transfer batch need not, and many times should not be equal to the process
batch.

Source: Operations and Supply Management, Chase,Shankar,Jacobs and Aquilano,McGraw-Hill(SIE), 12th Edition, 2010

Operations Management-104

13

Understanding Drum-Buffer-Rope Scheduling

A manufacturing system (A to C) has three machines and an assembly D. Product P has two
raw materials , R and S. R gets processed in A and the B, and goes to assembly. S goes to C
and then to assembly. A,B,C and D have processing rates of 40, 20, 30 and 35/hour
respectively. The demand for product P is estimated at 25units/hour. Schedule the
production of P using DBR approach.
145-175 mins

115-145 mins

40
R
Release
time for
R = 175
mins

55-115 mins

Assume Process Batch Size =

20 units of Product P

20
A

B
20-55 mins

30 mins
Drum
Buffer of
30 mins

35

60 mins

Market
Demand

Assembly
65-105 mins

55-65 mins

30

S
C
Release
time for
S = 105
mins

0-20 mins

40 mins

34.2 ~
35 mins

Shipping
Buffer of
20 mins

Assembly
Buffer of 10
mins

Source: Lecture Notes on Manufacturing Management Systems, G. Srinivasan, IIT Madras

Operations Management-104

14

Understanding Drum-Buffer-Rope Scheduling

Identify the Bottleneck
Bottleneck determines the
system throughput

Communicate upstream as to
when and how much of
material to release

40
R
Release
time for
R = 175
mins

20

Assume Process Batch Size =

20 units of Product P

30 mins
Drum
Buffer of
30 mins

Provide time buffer so that

the bottleneck doesnt starve

35

60 mins

Assembly
34.2 ~
35 mins

30
C

Release
time for
S = 105
mins
Balance the Flow and not the
capacity

Operations Management-104

Market
Demand

40 mins

Shipping
Buffer of
20 mins

Assembly
Buffer of 10
mins

Provide assembly buffer so

that non-bottleneck resource
doesnt turn into a bottleneck

15

A note on Batching
While the previous example has not taken set up time of the 3 machines into account,
in real life systems, set-up times play an important role in manufacturing systems
Set up times reduce effective process capacity.
Operations Managers often plan to increase the capacity of a resource by increasing

the batch size. However, batch sizes typically tend to increase WIP or Finished goods
inventory.
Using Littles Law, holding flow rate constant, higher inventory levels will mean
increased flow times.
How to then choose a batch size for a process flow?
If the set up occurs at the bottleneck step (process is capacity constrained), it is
desirable to increase the batch size as this results in a larger process capacity and
therefore, a higher flow rate
If the set up occurs at a non-bottleneck step, it is desirable to decrease the batch size, as
this decreases inventory as well as flow time.

Source: Matching Supply with Demand, Cachon and Terwiesch, McGraw-Hill, 2012

Operations Management-104

16