Central Theme:= Continual Improvements (like JIT)

Emphasis: To deal with system constraints as best as possible by

Identifying system constraints

Decide how to expl= oit the constraint (make it as effective as possible)

Subordinate everyt= hing else to that decision (Align every other part of the system to support= the constraint, even it makes non-constraint resources less efficient)

Elevate the system constraint (if output is still not adequate secure more of the resourc= e so it is no longer a constraint)

If, in previous st= eps, the constraint has been broken, go back to step 1, but do not let inertia become the constraint (it is about continuous improvement)

Key Concepts

Bottleneck—Resource whose capacity is less than the demand placed on it.

Capacity—Time available for production.

Non-Bottleneck—Resource whose capacity is greater than the capacity placed on it (should have idle = time rather than producing too much—more than needed)

CCR (Capacity Constrained Resource)—utilization of the resource is so close to its capacity, that it is potentially a bottleneck; therefore, it m= ust be monitored and scheduled carefully to keep it from becoming a bottleneck.=

Drum—paces the system controlling the flow through the system. The bottleneck should pace the sys= tem-it is the drum.

Buffer—Inventory (time buffer—so many hours/days of inventory). Keep inventory in front of the bottleneck and other critical resources in the network, to prevent lost throughput.

Rope—Communication back to upstream work centers what is needed from them so they do not over = or under-produce building inventory or starving the bottleneck.

Action plans geared to:

Reduce lead times<= /li>

Reduce WIP

Monitor closely, p= rotect, manage effectively bottleneck processes.

Increase through p= ut

Cultural change = =3D> develop the "right" corp. culture

Quality Control= 212;you should monitor quality of inputs to the bottleneck to be sure it does not was= te capacity working on stuff that is no good. Special attention needs to = be afforded to downstream w= ork centers to make sure they don’t mess up bottleneck output—= it would be output lost to the system forever!

Batch Size versus = Transfer Batch—they need not be the same. You adjust them to balance the = flow and keep the bottleneck resource busy.

OPT Principles:

1. Balance the flow not the capacity<= /p>

2. Bottleneck determines utilization of non-bottlenecks.

3. <= /span>Utilization of resource not equal to Activation of a resource.

4. <= /span>An hour lost in the bottleneck is an hour lost to the entire system.

5. Bottlenecks govern throughput and invento= ries.

6. An hour saved in a non bottleneck is a mi= rage

7. Transfer batch need not =3D process batch=

8. Process batch should be variable =3D> = not fixed

9. Scheduling should be done considering all constraints simultaneously. Lead times are a result of the = schedule--not fixed; therefore, one can influence lead time by adjusting 1.) lot size, 2.) transfer batch, priorities, and other factors. They should no= t be assumed fixed.

Performance Measures

Financial: (All must be in order for success)

&nbs= p;

Net Profit

&nbs= p; Return on Investment

&nbs= p; Cash flow

Dollar Days—a measure= of the value of inventory and the time it stays in an area. Total Value of Inventory * days sp= ent in the Area (department)

Operational:

&nbs= p; Throughput—rate at which money is generated through sales.

Inventory—money syste= m has invested in purchased things it intends to sell.

Operating Expenses—al= l the money that the system spends to turn inventory into throughput.

Productivity: Actions that bring the company closer to its goal.

The real GOAL is to ma= ke money. You do that by increasing throughp= ut while simultaneously decreasing inventory and operating expenses.

To Implement OPT:

3 steps

1. Identify bottlenecks (largest queues usua= lly)

2. <= /span>Schedule and operate to fully utilize bottleneck resource(s) (keep bottlenecks runni= ng at full capacity)

3. <= /span>Schedule non-bottlenecks to keep bottlenecks well supplied and WIP low. (Flexible scheduling of NBN Resour= ces)

May split lots to reduce lead time, keep flow balanced= , and bottlenecks busy. Extra setup= s no problem due to excess capacity at non-Bottlenecks.

* = forward schedule BN Resources

* = backward schedule NBN Resources

* excess capacity at non-bottle= necks. Serves same purpose as W.I.P.=

* WIP used to protect Bottlenec= k and critical portion of production system

OPT scheduling focuses on BN--manage it.

JIT scheduling focuses on final assembly schedule--tri= es to eliminate bottlenecks.

OPT IS UNLIKE JIT IN THAT:

A. Does not rely on a uniform mix of products made at a uniform rate over &= nbsp; time.

B. <= /span>Is not a pull system as in JIT.

C. <= /span>Does not advocate elimination of WIP, but does reduce it and use it &nb= sp; strategically relative to protecting the bottle neck (and a capacity &n= bsp; constrained resource possibly)

D. Manages the bottleneck---not elimi= nate it.

OPT IS LIKE JIT IN THAT:

A. It emphasizes a philosophy of cont= inual improvement.

B. Attempts to increase efficiency and reduce lead times and WIP.

C. Can improve efficiency, effectiven= ess, and employee morale.