Theory of Constraints and Manufacturing Facility Essay

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Introduction

The theory of constraints is an overall management principle. The concept was introduced by Dr. Eliyahu M. Goldratt in his book titled “The Goal,” which was released in 1984. (Kevin, 2003). Mr.Godratt is highly revered for his contribution towards the cause of operations management and providing solutions to vexatious problems facing the operational workforce, which could dramatically cut out inefficiencies and increase productivity programs.

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The book details, inter alia, that any organization or system can achieve its primary goals by using a very small number of constraints, the minimum being one. The theory revolves around changing and restructuring an entire organization around that place constraints on the organization through positive usage of five focusing steps.

Theory of constraint in supply chain vs. Manufacturing Facility

Supply chain targets convert raw material into a finished product and make sure it is available to the end consumer. Multiple checks join together to make this possible, and at each level, it is important to find out the most crucial constraint among them. The primary responsibility of supply chain management is to fulfill customer demands and requirements through the efficient use of available resources. The theory of constraints significantly helps in reducing the number of bottlenecks in a process.

The Theory of Constraints approach is a much more potent tool than orthodox supply chain management to justify a separate name. When a retail outlet, cloth, yarn, and garment maker set up their Theory of Constraints (TOC), there is a quite substantial increment in turnover in the region of 30%, or so, as a result of which each member of the supply chain process undergoes a real increase in return on investments. (Theory of constraints application, n.d., Supply chain, para.1).

In supply chain management, TOC also ensures an increase in velocity and availability, which directly leads to an increase in sales.

Manufacturing facilities have a limited number of constraints. A bottleneck can be defined as an event when the capacity of a resource is equal to or less than the demand. Hence the theory of constraints is most effective on bottlenecks that are of critical concern in scheduling. This is because bottlenecks limit the overall production output of the manufacturing facility. An organization can also use reduced downtime, improved productivity, and reduce changeover times to ensure effectiveness. In a manufacturing unit, it is important for TOC to maximize the usage of throughput or funds which is generated and trying not to have constraints that are within the control of the firm. Within manufacturing facilities, the usage of TOC includes lower inventories, lowered manufacturing lead times, increased service levels, delivery, and higher productivity.

Supply chain strategy

Invariably, supply chain strategy is mixed up with supply chain management. Though one might find some similarities between the two, supply chain strategy is a broader term. Supply chain strategy defines how the supply chain should operate in order to retrieve maximum profits and compete with rival firms.

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Supply chain strategy is a repetitive process. It evaluates the cost-benefit trade-offs of operational components. Most organizations have an elaborate business strategy but pay very little attention to their supply chain strategy. A perfect supply chain strategy enhances value creation for the firm. (Supply chain strategy, 2005, p.2).

There are four key drivers in the field of supply chain strategy, namely;

  • Inventory: Inventory plays a crucial role in deciding the disparity between supply and demand within a supply chain strategy.
  • Logistics: This driver helps in the movement of goods and services within a supply chain policy.
  • Technology: This includes even position and other technical developments which help in the building of a goal-directed and competitive supply chain strategy.
  • Information: Information is the driver that joins all the other drivers within the supply chain of an organization.

Inventory

The chosen driver is inventory. In certain business conditions, this aspect may appear to be the root of all evils. In the supply chain, the flow of goods will be in coordination for achieving reduced inventory levels. High inventory levels may be viewed as an unsuccessful supply chain system within the organization. It needs to cut down its inventory holdings by working with a trusted supplier or otherwise first-class suppliers. Carrying superfluous inventory always affects the quality of products and also keeps production costs high. With the usage of the theory of constraints, it is possible to make inventory one of the key constraints and keep inventory at an all-time low, and help in gaining a competitive advantage in that particular field. When the inventory level is checked, then the revenue earned is always increased. With the available inventory and technology, we need to obtain the maximum, which is also known as exploiting the constraint.

Once the inventory is in place, then we need to align technology, information, and logistics so that materials do not have to queue up at a non-constraint resource which is not required. After that, we need to make sure that the output of inventory at a particular level is enough to supply the market demand.

Case study

Europa lab is the research lab of Europa Technologies. The lab is located within Silicon Valley, California. Europa lab’s research focuses on information and communication technology. The lab has four departments, namely, chemistry, computer science and software, physical sciences, and mathematics. The lab grew from less than 20 members in 1980 to approx 200 members in 2002. Each dept has ahead, and in the early stages, the lab focused on the scientific study in the field of chemistry, physical sciences, and mathematics. Its interest then shifted to eliminate the departmental aspect of research and work harmoniously across a wide range of autonomous departments. The employees within the organization complained about the top management and working conditions. Europa labs were also undergoing a process of AITRO (Association of Industrial and Technological Research Organizations) which represented a worldwide recognition as a symbol of quality research. (Abstract: P1). (Choe & Herman, n.d.).

The AITRO accreditation was viewed as confirmation that research organizations were serious about their achievements. But at that time, employee morale was at its least. None of the staff meetings generated full attendance. To resolve this issue, they started the usage of the current reality tree (CRT) to identify the core problems. The company ensured the participation of their employees in implementing the same and broke them into groups for brainstorming. Within a short while, they came up with at least 20 undesirable effects (UDE’s), including the reduction of contracts to ways and means of dealing with unpleasant management.

Conclusion

Dramatic organizational changes took place, and employees were often consulted about frequent changes that happened within the firm and seek constant feedback from them.

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The final resort was to fire the Lab director due to his poor managerial skills. All these events eventually led to Europa labs getting back to their rightful place at the top of the list. The Thinking Processes, which is at the root of TOC, lead decision-makers to identify the root cause of unwanted repercussions and simultaneously “ develop an improved logic regarding the root cause that, in turn, leads to more desirable effects.” (Kevin, 2003, theory of constraint, para.1).

References

  1. Choe, K., & Herman, S. (n.d.). Using theory of constraints tools to manage organizational change: A case study of euripa Labs.
  2. Kevin, W. (2003). Using the theory of constraints to improve competitiveness: an airline case study. All Business: A D&B Company.
  3. Kevin, W. (2003). Using the theory of constraints to improve competitiveness: an airline case study: Theory of constraints. All Business: A D& B Company.
  4. (2005). UPS: UPS Supply Chain Solution. Web.
  5. (n.d.). Fast Massive & Sustainable Performance Improvement for Small to Mid- Sized Manufacturers: Synchronix: Technologies. Inc. Web.
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IvyPanda. 2021. "Theory of Constraints and Manufacturing Facility." November 5, 2021. https://ivypanda.com/essays/theory-of-constraints-and-manufacturing-facility/.

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