Say we have identified the bottleneck machine of a production process. List at least four things suggested in the book that will result in a greater throughput without actually expanding the physical capacity of the machine.
Throughput is the money coming in to a company; it can also be referred as the rate at which money is generated by a system through sales (Goldratt, and David, 74). Throughput generally increases when the inventory, which is money spent on purchasing items meant for sale and operation cost, money spent on inventory to turn it to throughput, are both reduced (Goldratt, and David, 74). A number of things after the identification of the bottleneck machine help in increasing the throughput.
A company can use the bottleneck machine to control the flow of products produced through the whole system to what gets in to the market. The bottleneck machine production capacity can be used to determine the capacity expected from a company’s entire machines, and then it is a company produces a capacity that is a little bit less than the demand. This will ensure the inventories will not be increased and operations costs will remain at the right level, therefore, resulting to a greater throughput (Goldratt, and David, 81).
A company can outsource services not available within the company that will lead to the bottleneck machine being more productive. Even if this will increase the operational costs, the number of sales made will be increased since the machine will be more productive (Goldratt, and David, 102). Sales will be boosted by the extra cost incurred in outsourced services that ensures even an hour of the bottleneck machine is not lost. Machine hours available for this machine should be used optimally to produce the right capacity for the market demand.
Carrying out quality control activities is also essential for any company so as to reduce the number of defective products and ensure high quality products are produced for the market. This will attract more customers, increase sales and throughput (Goldratt, and David, 134). Quality control activity should therefore be carried out before an identified bottleneck machine has carried out its production process instead of after the production process.
It is also important to ensure the quality controls introduced before the bottlenecks machine production processes are effective (Goldratt, and David, 136). This makes sure that the products that have passed through the machine may not become defective after they are passed on to other machines for processing.
Say you have a plant producing a single product that passes through several machines. The industrial engineer suggests that it would be a good idea to make all machines have the same capacity. That way when demand exceeds the capacity, all the machines can run at 100% efficiency. What would Jonah say about this?
Increasing the efficiency of machines to 100%, results to increased capacity from all plant machines. However, it does not necessarily help in the achievement of the plant’s goal of increasing profitability even if the demand will be met (Goldratt, and David, 166). This is because increased capacities from all the machines lead to an increase in inventories that may be in excess of what is required by the market. The company will also need more people to provide manpower for setting up and running the machines, which results to increase in operational, expenses (Goldratt, and David, 169). The increased inventories and operation costs will not help the plant to achieve a greater throughput. Managing the capacity of the machines is important because it will determine its throughput, when inventories and operational expenses are increased the throughput will be reduced. The capacity should be managed in such a way that it should be a little bit less than the markets demand. The machines should have the same capacities if a bottleneck machine is identified and used to determine the capacities to be produced by all the other machines. The machines production process depends on one another and if one is not efficient it will affect the efficiency of the other machines. Other factors that make up the statistical fluctuations and are passed on through dependency of one machine to another should also be determined by averaging (Goldratt, and David, 243). The plant should be aware of these two to know how much the performance of machines the two affect.
You are the manager of a manufacturing plant. The plant is having trouble making a profit, deliveries are always late, customers are dissatisfied, and the workers in the plant are upset and are threatening a strike. Your boss will close the plant if you do not do a lot better by cutting costs and increasing sales. Besides that, your spouse may divorce you and your children are failing in school. Your staff has come up with the following action plans. Comment on the advisability of each plan in terms of Throughput, Inventory, and Operating Expense. I want more than a direction of change. I want a reason for the change.
The plant supervisor suggests that you should tell each worker that a minute of pay means a minute of work. Make spot checks on the plant floor and if a person is, idle; his or her pay will be reduced.
Reducing the workers idle time ensures the efficiency of the plant will be increased but this is not what is necessarily needed to increase the profitability of the plant. The plant may produce products that are in excess of the market demand resulting to increased inventories and thus lower throughput (Goldratt, 45). However if the man hours have been identified as a one of bottlenecks, then it is important that idle time per employee is reduced. This is because each minute lost by the employee results to an equivalent loss to the entire plant which is the value of the idle time by the employee (Goldratt, and David, 298).
The process engineer suggests that you find the most labor-intensive operation that the plant performs. Reduce costs by automating the operation.
Reducing costs through automation of operation reduces the operation costs; however, it should not be a priority to in ensuring it increases its profitability. This is because the costs may be reduced but not result to increased sales or production of the right capacity of the products that will ensure a higher throughput. The plant should first ensure that all its activities are in line with achievement of a greater throughput and marinating the right levels of inventory then it can reduce costs (Goldratt, and David, 88).
The purchasing manager suggests that you reduce costs by cutting inventory to the bone. Do not order raw materials until the last possible minute.
Reducing inventory costs reduces the plants inventory; inventory should be appropriately reduced so as not to affect the throughput negatively. Ordering raw materials until the last possible minute will help the company to reduce inventory (Goldratt, and David, 325). However, they should be ordered in time to ensure there are no delays and right capacities are produced in time and supplied to the market at the right time.
The marketing manager suggests that you increase sales by reducing the prices charged for your products.
Reducing the prices charged to products may increase the number of sales but not plant’s profitability especially if prices are set below the cost of producing the product. The selling price of one unit of the products should be set slightly higher than the cost of inventory combined with operation costs spent on production and sale of that product. This way the plant will be able to cover both the inventory and operation costs and be left with a considerable profit margin (Goldratt, and David, 148). Therefore, reducing selling price may reduce the throughput even if the company has taken measures to reduce its inventory and operation costs.
The facilities manager suggests that you reduce costs by eliminating excess capacity of the production facilities. All departments in the plant should have the same capacity
Reducing excess costs by eliminating excess capacity of the facilities of production reduces the inventory leading to a higher throughput. Lesser manpower will also be required among other costs when excess capacities are eliminated which ensures operational costs are reduced (Goldratt, 65).The departments’ production capacity should be the same and guided by the existing bottlenecks, this ensures that the capacity is a little less than the market demand. The capacity of one department may be depending on each other and their relationship should be evaluated and proper measures taken to ensure the other does not affect one department.
Your spouse suggests that you embezzle company funds and run away to Brazil so that you can devote some quality time to the family
It is a criminal offence and unethical to take such a step, the manager can face legal consequences and loose his position at the company as well as his family. It will also lead to more losses in the manufacturing plant may be finally be closed down resulting to more losses to all the stakeholders involved. The workers will lose their jobs, the market demand will be unmet, and suppliers of raw materials will also lose their market (Goldratt, 112). It is more appropriate if the manager find other useful strategies to increasing the throughput of the plant. He can discuss the company’s situation with employees and find ways to motivate them to continue to diligently work together with him to improve the situation. He can also discuss the position he is in with his family to find a good solution.
Goldratt, Eliyahu M. Theory of constraints. Croton-on-Hudson, NY: North River, 1990. (34-112). Print.
Goldratt, Eliyahu M., Jeff Cox, and David Whitford. The goal: a process of ongoing improvement. Vol. 2. Great Barrington, MA: North River Press, 1992. (74-325). Print.