Let’s take a simple environment as an example. Say that there are seven operations in this environment:

  1. customer service receives and enters the order,
  2. engineering programs the part, and when released the order processes through
  3. lathes,
  4. mills,
  5. outside heat treat,
  6. inspection, and
  7. packaging/shipping.

Let’s assume the starting condition is a quoted lead-time of 4 weeks with due-date performance of 80%. Work-in-process (WIP) inventory is $100,000.

After an initial Goldratt Theory of Constraints analysis, we determine that milling is the constraint resource. In order to protect the mills from running out of work, we decide we always want a buffer of ready-to-process material in front of milling. And we want to release new work to the floor only at the rate milling is processing.

Since there is more WIP on the floor than desired, our first action is to not allow any new work to be released to the floor! We have a rule of thumb to reduce WIP to about half the level of WIP we started with. The focus is not starting new jobs, but finishing the jobs that have been started.

…to be continued.

Here’s to maximizing YOUR profits!

Dr Lisa Lang

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