1 Introduction to the Theory of Constraints J.Skorkovský, PhD.; KPH ESF MU.

Slides:

Advertisements

Similar presentations

Throughput Profit Multiplier Based on the books: Building Lean Supply Chains with the Theory of Constraints Managing Business Process Flow.

Advertisements

Profitability and Risk Management 1 Theory of Constraints Let’s go back to the CVP model: What “constrains” your profit? If you can choose X to be arbitrarily.

7 – 1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Constraint Management (Short-term Capacity Planning) 7.

Theory of Constraints Part II: TOC Concepts

Basic Management Accounting Concepts Management Accounting: The Cornerstone for Business Decisions Copyright ©2006 by South-Western, a division of Thomson.

Supply Chain Management

1 Presentation by: Tim Sullivan CIRAS (Center for Industrial Research and Service) Iowa State University Extension.

The Goal The Goal by Eliyahu M. Goldratt and Jeff Cox, North River Press, Inc., Second Revised Edition (1992). 8/27/04 Paul A. Jensen Operations Research.

23–1. 23–2 Chapter Twenty-Three Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

Introduction to Management Accounting Introduction to Management Accounting C H A P T E R 1.

Chapter 18 Synchronous Manufacturing and the Theory of Constraints

7 – 1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Constraint Management 7 For Operations Management, 9e by Krajewski/Ritzman/Malhotra.

© The McGraw-Hill Companies, Inc., Synchronous Manufacturing and Theory of Constraints.

Introduction to Financial Statement Analysis Introduction to Financial Statement Analysis C H A P T E R 5.

Chapter six Variable Costing: A Tool for Management.

1 Slides used in class may be different from slides in student pack Chapter 18 Synchronous Manufacturing and the Theory of Constraints  Goldratt’s Rules.

Evaluating Financial Performance. The Key Questions: 1.Does the firm have the ability to meet maturing financial obligations? 2.Does management do a good.

Relevant Costs and Benefits

What are the five major factors that make Profit and Cash different from each other?

Ricardo Ernst Top Management Program in Logistics & Supply Chain Management (TMPLSM) Production and Operations Management 6: Theory of Constraints.

Managerial Accounting for Business Professionals ACC 330 UNIT 2 Dr. Doug Letsch.

Chapter 17 – Additional Topics in Variance Analysis

Introduction to Theory of Constraints

PowerPointPresentation by PowerPoint Presentation by Gail B. Wright Professor of Accounting Bryant University © Copyright 2007 Thomson South-Western, a.

Introduction to the Theory of Constraints (TOC) & Critical Chain Project Management (CCPM) Major Mark McNabb.

Increasing, Diminishing, and Negative Marginal Returns Labor (number of workers) Marginal Product of labor (beanbags per hour) –1 –2.

Financial Ratios & Break-Even Analysis

©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.

Part Chapter © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 1 McGraw-Hill Understanding Financial Information and Accounting 1 Chapter 12.

BACTNG1 QUIZ BEE. Question #1 List Price:200,000 Trade Discount:8% Credit Term:3/10, n/30 How much is the invoice price?

TOC 1 Theory Of Constraints. TOC 2 Theory of Constraints How does TOC differ from the conventional shop control theory? Throughput definition * Emphasis.

Theory of constraints Slovak University of Technology Faculty of Material Science and Technology in Trnava.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 1.

Synchronous Manufacturing and Theory of Constraints

UNDERSTANDING EBITDA & FREE CASH FLOW CORPORATE HUMAN RESOURCE

Chapter 2 Introduction to Financial Statement Analysis.

1 Introduction to the Theory of Constraints Introduction to the Theory of Constraints J.Skorkovský, PhD.; KPH ESF MU.

Chapter 18 Inventory and Production Management Cost Accounting Foundations and Evolutions Kinney and Raiborn Seventh Edition COPYRIGHT © 2009 South-Western,

1 Introduction to the Theory of Constraints Introduction to the Theory of Constraints J.Skorkovský, PhD.; KPH ESF MU.

1 Introduction to the Theory of Constraints Introduction to the Theory of Constraints Ing.J.Skorkovský, CSc. Department of Corporate Economy Faculty of.

© The McGraw-Hill Companies, Inc., Chapter 17 Synchronous Manufacturing and the Theory of Constraints.

Copyright © 2006, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Variable Costing: A Tool for Management Chapter Seven.

ETM 627 Fall 2014 Dr. Joan Burtner The Certified Manager of Quality/ Organizational Excellence 3 rd Edition Westcott, ed. Chapter 14 Process Management.

Advanced Manufacturing Laboratory Department of Industrial Engineering Sharif University of Technology Session #10.

Chapter 2 Introduction to Financial Statement Analysis.

Copyright © 2008, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Chapter 7 Variable Costing: A Tool for Management.

Variable Costing: A Tool for Management

Module 10: Theory of Constraints Operations Management as a Competitive Weapon.

1 Introduction to the Theory of Constraints Introduction to the Theory of Constraints Ing.J.Skorkovský, CSc. Department of Corporate Economy Faculty of.

Understanding the Economics of One Unit  One way to analyze profitability is to look at how much profit the business makes every time a customer buys.

BUS 630 Week 4 Assignment Master Budget Exercise To purchase this material link Assignment-Master-Budget-Exercise.

ACCT 434 W EEK 2 M ASTER B UDGET F LEXIBLE B UDGETS Check this A+ tutorial guideline at

Introduction to the Theory of Constraints

Supply Chain Management

Introduction to the Theory of Constraints (TOC) & Critical Chain Project Management (CCPM) Major Mark McNabb.

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved

Aggregate Planning Chapter 13.

Synchronous Manufacturing and Theory of Constraints

Synchronous Manufacturing

© 2015 Cengage Learning. All Rights Reserved.

Performance Measures, Capacity Planning & Scheduling

Supply Chain Management

What are the five major factors that make Profit and Cash different from each other? Virtual Teams in International Business.

SE503 Advanced Project Management

Introduction to the Theory of Constraints

Chapter 24 Differential Analysis and Product Pricing Student Version

Theory of Constraints Part II: TOC Concepts

Theory of Constraint.

Synchronous Manufacturing and Theory of Constraints

Presentation transcript:

1 Introduction to the Theory of Constraints J.Skorkovský, PhD.; KPH ESF MU

2 (TOC metric) Measuring the goal (TOC metric) ( T, I and OE will be explained later in this course) -> T=Net Sales – TVC =S-TVC Net profit (NP=T-OE) : ( T, I and OE will be explained later in this course) -> T=Net Sales – TVC =S-TVC Cash Return on Investment (ROI=NP/I) For a manufacturing enterprise, the goal can also be measured by: Throughput =T Inventory = Investment =I Operating Expenses =OE

3 Metrics and their relationships

4 TOC –required trends Inventory Throughput Operational Expense

5 T,I,OE,NP and ROI example NP=T-OE = (S-TVC) - OE ROI=(T-OE)/I=NP/I where T=total throughput A B CDE 1.Only one product 2.Unit Price (Selling price) = 100 USD 3.Raw material /one product =35 USD =OE 4.T/product=100-35=65 (S-TVC) hours/month (contraint of the company) 6.T=176 * 7 = 1232 parts/month 7.Monthly T =1232 * 65 USD = USD CCR=Capacity Constraint Resource= =weakest link of the chain= bottleneck

6 T,I,OE,NP and ROI example 1st suggestion is to optimize B from 13->14 parts per hour You cannot produce more than 7 !!!! T will not increase ->You cannot produce more than 7 !!!! Investment to optimize B=5000 USD with depreciation 10 % OE(month) =(5000 USD * 0,1)/12= 41,67 -> 42 USD A BCDE CCR=Capacity Constraint Resource= =weakest link

7 T,I,OE,NP and ROI example throughput T = throughput will not increase 41,67 USD /month NP (Net Profit) will decrease based on increased OE (41,67 USD /month) Based on NP decrease ROI is negative Bad suggestion !!!!!! Bad suggestion !!!!!! A BCDE CCR=Capacity Constraint Resource= =weakest link

8 T,I,OE,NP and ROI example 2nd suggestion is to optimize C from 7->7,1 parts/hour part of the 2nd suggestion is an extra load of E so it goes from 11->10 (remains the same) Necessary investment is 5000 USD (remains the same) Increase of the production/month = 0,1*176=17,6 parts Increase of the company T= 17,6*65 USD= USD >7,1911->10 A BCDE

9 T,I,OE,NP and ROI example 5000 Necessary investment is 5000 USD = I =Inventory= Investment Increase of the production/month = 0,1*176=17,6 parts Increase of the company T= 17,6*65 USD= USD OE42 OE/month =(5000 * 0,1)/12= 41,67 -> 42 USD OE OE will be increased by 41,67 USD/month OE114442)* Annual increase of the NP = (T-OE)*12=( )*12 = USD ROI=NP/I = /5000 = 265 % !!! T does not measure local efficiencies, except at the constraint >7,1911->10 A BCDE