32nd International Conference of the

TOC Practitioners Alliance - TOCPA

www.tocpractice.com 23 March, 2017 Milan, Italy

Identify the constraint: the

strategic meaning of this
activity and the use of
Throughput Accounting

Tarcisio Mussi, Management Consultant, Italy

23 March, 2017
 Tarcisio Mussi

Tarcisio Mussi is a Senior Consultant who

studies and applies for over twenty years, the
TOC. Degree in Aeronautical Engineering from the
Politecnico di Milano, has dedicated his career to
topics such as innovation, SME competitiveness
and organizational improvement, always with a
systemic approach.
From Operation Manager and, later, as a
management consultant has developed numerous
projects for the improvement of performance using
TOC approach and the Throughput Accounting for
the economic management of the products / t.mussi@alice.it
processes, both at small and medium enterprises +39 333.299.14.76
both in multinational companies.
In addition, he deals with training, management
coaching and project management.
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 the needs !

A lot of times when I start e new project the manager, or company

owner, tells me:

we have problems in that process. We know it in detail, but we

have no idea how remove it. Please help us.

we increased the stock level of row material, but we have not

reduced the Lead time and the number of orders delivered on
time. We need to change our planning process

We have done several activity to improve performance but we

are having again insufficient and discouraging results ..

we continuously are involved in local emergency and urgencies,

so, we can't plan our time to improve the organization
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 the questions

Those owners and managers often are self made men that with
the experiance have obtained a lot of successes.
They strongly believe that only through experience and
practice you can solve problems !

Always, my questions are:

How can I help them?

How can I solve their problems ?

and
How can I help them to create a vision and strategy
to grow their company?

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 my personal method

To give answers to these questions I adopted this strategy

1STEP - Know the system. I collect all available data and I

make a lot of numerical analysis
2STEP - With the data, and observing how the processes work,
I arrange a calculation sheet (excel) to simulate the system
and every possible scenario. The algorithm is the one of
Throughput Accounting. Its a real simulator!
3STEP - Simultaneously to the activities of step two, while I
meet and interview people to understand the processes, I
noticed all UDEs I listen from them to prepare a PRT to define
an action plan. In this plan I try to include all necessary activity
to solve problems that management explained from the first
time!
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 my personal method

4 STEP - Implement the first three step of TOC:

using the simulator and from observation of processes,
choice of constraint as a results of the data analysis
exploit the chosen constraint (reducing the variability,
eliminating as much as possible the time waste)
subordinate the system to the constraint (defining new
procedures and, if necessary, the process flow ,
reorganizing of resources, rewriting the jobs description...)

LOW INVESTMENT HIGH RETURN

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 my personal method

Why use THROUGHPUT ACCOUNTING from the first step?

Because often it is difficult to find process performance data, but in opposite
wise, its easy find a lot of economic data; the selling price, the TVC and the
process time (at least the average cycle time of each item) are usually known
by management.
Moreover, the simulator and the THROUGHPUT ACCOUNTING is very
helpful to reach my aim to give answers to management
To see how far they can go with their company
To understand what are the obstacles to the possible development
To figure out where invest and for what
To better understand the request from market and the products margin
To define aggressive budget for selling
but above all
to build and choose the right strategy by simulating all possible
scenarios
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 the case ME.COM

ME.COM is a small enterprise

dedicated to the machining of metal
sheet and to the services connected
with it for third parties.

Wide is the range of productive sectors to which ME.COM is

offering own services: from textiles to the furnishing sector, from
machine tools to automation, from components for transport to
the handling industry, in the food, agriculture, health etc.
Three production areas: Laser Cutting, Bending, Assembling

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 the contest

ME.COM is a family business that is experiencing a

generational change.
Furthermore, the father is not able to see the profound change of
market and while he claims to have left the control of company to
his son and daughter, everyone, including them, continued to see
him as the company decision-maker and authority.
With a big confusion !

The Laser has always been the winning technology for

MECOM, and continue to be so. As such, everything must be
evaluated and taken in account in relation to the laser.

The other departments exist only because there is the laser !

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 UDEs .and expected DEs

Our customers are asking us only lower prices; the competitors in the
laser cutting are increasingly aggressive and convenient for the customer!
Our production capacity seems clearly superior to the results that we obtain (we
have low yield)
we do not have a method and the ability to focus on activities to reach
the maximum efficiency of production processes and the objectives that we
given us
It is not clear where we should invest and for which goals
Customers complain about late deliveries; we fail to meet schedules with
laser
We have high stocks and yet we always work in emergency
Changes of program and priorities are continuous
Roles and responsibilities of management are not clearly defined

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 the data analysis

Carico BYSSTRONIC periodo gen 04 - ott 06

800

700

600

500

400 Carico MAZAK periodo gen 04 - ott 06

700
300

600
200 analisi commesse - assemblaggio
rapproto carico reale su previsto
Reale-previsto
8,00 media
lsup 500
100 linf
7,00
6,00
5,00 400
0
4,00
3,00
300 Utilizzo Robot
2,00
1,00 10
lead time 200
lead time richiesto media valori
0,00
limite sup limite 9inf
-1,00 gg lavorativi
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65
a sup b sup8
100 a inf b inf 7

100
6
0
5
80 4
-100
3
60
2
40 1
0
20
/0 07

/0 07

/0 07

/0 07

/0 07

/0 07

/0 07

/0 07

/0 07

/0 07

/0 07

/0 07

/0 07

/0 07

07
/0 /07
07 /20

10 /20

13 20

16 /20

19 /20

22 /20

25 /20

28 20

03 /20

06 /20

09 /20

12 20

15 /20

18 /20

20
04 /02

2/

2/

3/

3/
2

3
01

-20
1 22 43 64 85 106 127 148 169 190 211 232 253 274 295 316 337 358 379 400 421 442 463

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 the data analysis

The first surprises !

TOTAL CAPACITY % OF
HOURS
PROCESS (H) OF THE UTILIZATION
UTILIZATION PERIOD +/-5 %

LASER 700 1440 50 %

SHEET BENDING 370 720 50 %
ASSEMBLING 950 1920 50 %
TECHNICAL
DEPARTMENT
200 720 30 %

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 The choice of constraint

The laser was chosen as constraint due to:

backlog of work to the laser; almost the totality of delays was caused in
this first phase
the high level of laser technology versus those of the other departments
(easier to increase, easier to subordinate to the laser capacity) and the
large possibility to exploit it, seen the low % of utilization
the availability of detailed data of the laser process
the easy planning of laser activity (cycle time defined by few standard
parameters)
the high percentage (more then 95%) of customer orders requiring the
laser process
the high focalization of the management to the laser
..

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 the Tput simulator

LASER or ASSEMBLING ? Where is the constraint ?

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 the Tput simulator

The assembly would seem to be the constraint !

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 the Tput simulator

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 constraint management

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 constraint management

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 activities done

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 project steps and results

Time zero After After

9-14 month
Start project 3-5 months 6-8 months

We started with a very brief

First results
training, data collection and
the variability of the system is reduced
their analysis
the LT improves
data and the analysis are more reliable
the % of utilization of machines decreases

What we have done the system is stable, we have excess capacity in all
sharing of analysis results areas of production, the LT has been reduced and its
choice of constraint reliability is perceived by customers, revenue
define planning procedures and increases without saturating capacity.
constraint management As expected, the constraint has moved outside
feedback to sales A second project has been started with the pourpose
continuous monitoring of tput to introduce new sales procedures to change market
parameters for each job approach.

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 the final result

Time 0 7 months later

% of orders delivered on time 75 % 98 %

Average lead time of orders 100 % - 40 %

Utilization of total capacity 100 % 65 %
Revenue from sales of period
(vs previously period)
100 % + 30 %
Tput / revenue
(vs previously period)
100 % + 34 %
Tput / Operating expensis
(vs previously period)
100 % + 58 %

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 the case SABO

SABO is a small company of Roberto Nuti

Group, a distributor of several
components for industrial vehicles (shock
absorbers, air springs, components for
steering and suspension.)

Since the middle of the 1970s, SABO Srl has produced shock
absorbers under the SABO trademark for trucks, trailers and
buses: a range of products which are entirely interchangeable
with all principal brands on the world market, for heavy
vehicles.

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 the target

.I need to increase performance by at least 20% to

cope with the reduction in workload due to start up of our
associated Indian company

General Manager

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 the choice to move the
constraint

New constraint, Initial constraint was

strategically moved in clearly identified in this
this assembling phase phase of production flow

With an excel calculation sheet we simulated the Tput generated in different

scenarios ("what if") by moving the constraint from one phase to another of
the process without variation in OE.
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 the choice to move the
constraint

As a result of simulations of different scenarios we have identified the best

solution:
produce with external resources the components initially assembled in the
constraint phase of the production flow
use the retrieved resources (operators) to increase the hourly production
capacity of the new constraint phase.
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 activities done

To improve the cosntraint performance:

we reviewed the organization and sequence of all operations
we reorganized the work shifts of operators to increase the exploitation of
the time constraint
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 the final result

4 months
Time 0
later

Total production capacity 100 % +35 %

Average orders lead time 100 % - 3050 %
Operating costs 100 % -12 %
Selling price 100 % -1012 %
Throughput 100 % + 19 %

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 final comments

With these two simple cases, I wanted to illustrate how I like to

operate by applying the TOC and how the use of Throughput
Accounting is, in my opinion, of fundamental importance in the
strategic choice of the constraint (and not only for its
identification).

I find this approach very useful and powerful not only to provide
quick results but also to guide managers and business owners
to have a clear vision of where to invest their time and money to
get the best performance from their company.

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 final comments

thank you
for your attention

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