Page 460 - Design for Six Sigma for Service (Six SIGMA Operational Methods)

418 Chapter Twelve

Profits

Operating
Throughput + Inventory +
expenses
Figure 12.3 Relationships between Throughput, Inventory, Operating Expenses,
and Profit

Clearly, high profitability can be achieved by increased throughput and
decreased inventory and operating expense. The theory of constraints
believes that the throughput is always limited by at least one constraint, as
we illustrated by Example 12.1, so the throughput will not be able to
increase unless the corresponding constraint is elevated, that is, the bot-
tleneck is enlarged. Therefore, the most efficient and economical way of
increasing throughput is to work on enlarging the bottleneck. Consequently,
the best way to increase the profitability is to enlarge the bottleneck. Any
improvement on nonbottleneck activities will not improve the throughput;
therefore, it will not improve the profitability.

12.2.2 Constraints

A constraint or bottleneck is defined as any department, workstation, or
operation that restricts the flow of product through the production system.
Constraints management is crucial in improving process throughput and
profitability. There are three types of constraints: policy, resource, and
material. Each type of constraint has a different impact on the process
and should be managed differently.

Policy Constraints
A policy is a rule, a measurement, or condition that dictates organizational
behavior. According to Woeppel (2001), policy constraints are the most fre-
quently encountered constraints and are the least expensive to fix. Batch
size rule, resource utilization rules, and project management policy are all
considered as policy constraints.

Policy constraints cannot be spotted directly, but a shortage of resources
(material, machine, time, and so on) in some process steps may lead to the