Operations Management Principles Db 5

This was an A paper

Unit 5 DB

Supply, chain, and location

The most important element of Goldratt’s Theory of Constraints is that the throughput of a plant is determined by the capacity of the bottleneck process. It serves no purpose to operate other processes at capacities greater than the bottleneck process because that will not increase the throughput but merely add to the inventory. In the Mexico plant there are processes that are creating bottlenecks. The capacities of these processes have to be increased in order to increase throughput and meet the increasing demand. Two options are available. One is to outsource work on these processes. The other is to add capacity in these processes. The second option would require moving some employees from other jobs and training them to perform the bottleneck processes. But it would give greater control over the processes than the outsourcing option. (Winter, 2005)

The creation of inventory decreases the bottom line. Operational expenses are incurred to create the inventory. If that inventory lies idle because of a bottleneck at some other process then it is a drain on the resources. Hence all processes must have a throughput equal to the throughput of the bottleneck process. It is required to maintain in-process inventory only for the bottleneck process to ensure that the bottleneck processes do not idle. That would decrease the throughput of the overall plant. Inventory for the other processes need not be maintained because the capacity of those processes can be raised in order to make up for breakdowns or other stoppages. (Winter, 2005)

Goldratt’s philosophy was radical when he proposed it. He realized that there would be resistance to change for several reasons. Some of these reasons are manifest in the Mexico plant. Arguments that the undesirable effects are beyond control or that the proposed change can have negative