5
Nov
2010
Goldratt’s Golden Nugget #12
Light blue 2, or: A way to exploit the protective capacity using orders (as opposed to using stock)
(MTA combined with MTO)
In MTA environments there is a need to hold protective capacity. The problem is that in order to use the protective capacity when needed, this capacity is on average idle. In the previous nugget (“light blue 1″, no. 11) we discussed a way to directly exploit the protective capacity; to use this idle capacity to satisfy more sales. The first light blue method is based on the use of protective capacity to produce to stock, which is then offered in segmented markets – dumping markets. The nugget ended with a warning not to use this method if the company cannot find suitable dumping markets. In cases where the company can’t find enough such markets, and consequently a part of the protective capacity is left unutilized, there is another possible method that can enable exploitation of the remaining free protective capacity. This method is based on processing clients’ orders by the protective capacity and therefore it is applicable only in mixed MTA+MTO environments.
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22
Sep
2010
Goldratt’s Golden Nugget #11
Light blue 1, or: A way to exploit the protective capacity – Have your cake and eat it too.
(MTA)
One of the crucial elements required in any MTA environment is maintaining high enough a level of protective capacity1. Practically, it means that the work centers are not allowed to operate 100% of the time. In fact, the most loaded resource will be, on average, about 20% idle2. However, as we all know, people feel very uncomfortable with the idea of idle capacity. This is especially true in environments that utilize highly expensive equipment, and even more prominent in environments where full activation of resources is theoretically possible, since they have saleable products at many different intermediate stages of the production process. Such environments do exist, and are evident in many V environments.
The reluctance to hold capacity idle may cause companies to dip into the protective capacity, especially when we bear in mind that most companies are not used to operating with a decisive competitive edge and therefore, at least in the early stages of implementation, are not fully aware that having a decisive competitive edge does not only help in getting more sales, but is the foundation for stable growth. How can we make sure that the proper amount of protective capacity will be maintained?
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26
Jul
2010
Theory of Constraints Golden Nugget
#10 MTA + MTO Mixed environment
In many companies, some SKUs are consumed on a regular basis, whether by one or multiple clients, while other SKUs have a sporadic consumption pattern, either because the demand is rare, or because the SKU is customized for a particular order of the client. In these environments, regular consumption should be supplied immediately from stock (MTA), while sporadically consumed SKUs (as well as exceptionally big orders of regular SKUs1) should be made only to clients’ orders (MTO); in other words, they should operate as a partly MTA, partly MTO environment.
The mechanisms to control both the MTA and the MTO in a mixed environment are the same mechanisms used in an environment of pure MTA or pure MTO. The only difference is that when using load control for providing promised due-dates and for determining the time to release the material for MTO, we regard only the MTO production segment instead of taking into consideration the total capacity and load. More explicitly, the way to allocate the capacity in such mixed environments is as follows: first assign capacity for MTA based on the current coverage; then add 20% protective capacity (Note: The needed protective capacity is not 20% of the total capacity, but only 20% of the capacity required by MTA). The capacity remains is allocated for MTO.
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28
Apr
2010
Theory of Constraints Golden Nugget
#7 – Minimum batch progression
(MTO and MTA production)
There are times that a technical consideration at a certain work-center forces us to process a minimum batch which is bigger than the order (e.g. a mixer that requires a minimum of 20 liters). Then, of course, we have no choice but to work on more units than needed for the order. But that doesn’t mean we have to carry those extra units onwards through all the processing chain (after passing the work center responsible for the technical consideration), as is too often done… Click here to continue reading.
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17
Jan
2010
Theory of Constraints Golden Nugget
#3 – Immunizing against competitors’ price reduction
(Inventory turns offer; Sales)
One of the reservations initially raised by our clients’ sales people, regarding the inventory turns offer, is that even though they (at last) see the benefits of that offer to their prospects (distributors and/or retailers – resellers), a competitor can still easily win by simply reducing prices.
Not only that there is a decisive answer for such a reservation, but its explanation deepens the sales force… Click here to continue reading.
| Watch Dr. Goldratt’s detailed presentation on defining the target market where capitalizing on the Inventory Turns concept can create a decisive competitive edge. The magnitude of the breakthrough of this solution is well described and explained in Goldratt’s TOC Golden Nugget #3. | ||||
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28
Dec
2009
Theory of Constraints Golden Nugget
#2 – The Stray Elephant
(MTA; Production)
When initially determining the proper buffer target, we need to determine the maximum consumption within replenishment time. That is done by looking back at the consumption during past time-intervals (intervals that are equal in length to replenishment time) and choosing amongst them the max value – or actually, the reasonable max. What does a “reasonable max” means? Well, statistically, the consumption behaves, roughly, as a normal (Gaussian) distribution… Click here to continue reading
| Watch Dr. Goldratt’s detailed presenation on determining inventory targets in a make to availability environment. This common sense solution is then complemented with a specific secenario, described and explained in Goldratt’s TOC Golden Nugget #2. | ||||
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16
Dec
2009
Theory of Constraints Golden Nugget
#1 – The Evergreen Elephant
Managing production priorities in an Make to Availability environment is simple when using the Theory of Constraints buffer management solution. Yet, for specific environments, some considerations have to be taken into account as described and explained in the TOC Golden Nugget #1. Click here to access the first Goldratt’s TOC Golden Nugget.
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