Two goals of enterprise information management: LP or TOC

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Taking ERP as the backbone, integrating the philosophy of restraint/lean--The new realm of enterprise management
Cai Ying
Taking ERP information integration as framework (backbone), combining with the whole view of TOC constraint theory, implementing lean Lean Management method, the enterprise management achieves a new realm-information integration support decision-making, rapid response, analysis of the constraints of enterprise development, the maximum elimination of waste.
The management thought of enterprise is popular now
1, what is the ERP hub (backbone).
ERP system is the enterprise's various business functions (such as human resources, finance, manufacturing, accounting, distribution, etc.) linked to a common system, so that the business process flow and transaction processing standardization. The integration of ERP and the sharing of data make ERP more inclined to play the role of application software Integration Framework. Specific core business operations, such as some automated, intelligent optimization functions are given by the TOC, Lean, SCM, CRM and other software to complete. Its management thought is integrated into the theory of restraint and the philosophy of lean production.
2, what is the TOC constraint theory (Theory of Constraints).
TOC: There is at least one constraint on any system, otherwise it may have unlimited output. Therefore, to improve the output of a system (any enterprise or organization can be regarded as a system), it is necessary to break the system constraints. Any system can be imagined to consist of a chain of rings, the ring and the ring buckle, the strength of the system depends on its weakest link, not its strongest one. In the same way, we can also see our business or organization as a chain, each of which is one of the chain. If we want to achieve the desired goal, we have to get a significant improvement from the weakest link, that is, from the bottleneck (or constraint). In other words, if this constraint determines the rate at which an enterprise or an organization has reached a goal, we must start by overcoming that constraint before we can significantly improve the output of the system in a short time. TOC a set of thinking methods and continuous improvement procedures, called the five core steps, these five core steps are:
(1) To find out what constraints exist in the system. (2) Find a way to break through these constraints. (3) All other activities of the enterprise are subject to the various measures proposed in the second step. (4), the implementation of the measures proposed in the second step, so that the constraints identified in the first step is no longer the constraints of the Enterprise (5), back to step 1, do not let inertia become a constraint, continuous improvement.
Nine production planning principles for TOC:
(1), do not balance the production capacity, but to balance the logistics
(2), the utilization level of non-bottleneck resource is not determined by its own potential, but by the system constraint.
(3) The use and vitality of resources is not matter
(4), the bottleneck loss of 1 hours, equivalent to the entire system loss of 1 hours
(5), non-bottleneck save 1 hours, no practical significance
(6), the bottleneck restricts the system's production and sales rate and inventory
(7), transshipment volume can not be equal to 1, and in most cases should not be equal to the processing of bulk
(8), processing volume is not fixed, it should change over time

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(9), priority can only be set according to the constraints of the system, lead time is the result of the job plan (not pre-set)
3, what is LP Lean production (Lean Production).
LP Lean production: including JIT (Kanban), GT Group Technology (Cell Manufacturing), TQM Total Quality management. It is developed on the basis of flowing water production mode, through the system structure, personnel organization, Operation mode and market supply and demand changes, so that the production system can quickly adapt to the changing needs of users, the implementation of user-oriented, people-centric, to streamline as a means, the use of team work and parallel design, The practice of JIT, the promotion of the negation of traditional reverse thinking, and the full use of information technology as the content of the production mode, finally to include product development, production, daily management, collaboration, supply and marketing and other aspects of the best results.
Lean production comes from Toyota Motor. Lean production is centered on punctuality (jit,just in time), seeking lean ways for product development, production and sales, and lean thinking is reflected in five interrelated areas:
(1), according to user needs, redefine the value (2), according to the value stream reorganize all production and operation activities (3), so that the value of the flow (4), so that users need to pull the value stream (5), and constantly improve, to achieve perfection
Lean thinking is directly opposed to waste, including a lot of waste, such as: defective, exceeding the demand for excess production, idle commodity inventory, unnecessary processes, the need to mobilize personnel, the unnecessary transport of goods, various waiting and so on. All of this will lead to non-lean, and therefore will and lean thinking are inherently antagonistic and irreconcilable, so lean thought opposes and strives to eliminate any form of waste. It is the principle of lean that only all activities and actions are committed to creating value for customers.
The common point of restraint theory and lean production
1, the value aspect
The constraint theory and lean are emphasized to the customer's value as the orientation, the customer value is the most critical. The lean value view is only defined by the end customer. Similarly, the TOC point of view: Production and Sales is the amount of money paid by customers. Therefore, the demand of customers in increasing the production of products play a decisive role.
2, Value stream aspect
Both LP and TOC emphasize value streams. The analysis of the value stream shows that interdependence is not just a production value chain. Value-added and non-value-added activities. Both LP and TOC are acutely aware that everyone in the company is working to turn inventory into sales and production. Define the system and create a real process flow.
3, material flow aspects
Emphasis on brevity is the importance of mobility. And the material wants to flow like water, to achieve synchronous production. The management principle of synchronization is to balance the flow of things rather than the ability to balance production. This is the flow advocated by TOC and lean. LP has extended the flow concept from the factory to the factory, extending to the design and order acceptance process.

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4, demand pull
Both TOC and LP advocate The pull principle, and the control technology used is based on market-driven product flow. Lean's pull concept is the use of Kanban technology, upstream of the people until the customer downstream requirements should be produced. The drawing of the TOC is the drum-buffer-rope (drum-buffer-rope) drive source. DBR serves as a market-demand method for planning to provide the basis for a constraint (drum), which is a production process for distributing the foundation (rope) of any material.
5, The Pursuit of perfection
The goal is constantly changing, and companies are constantly improving to achieve their goals. Endless pursuit of perfection. The TOC is consistent with the lean. Lean and TOC both emphasize the need for staff to improve. In the process of company improvement, the participation of employees is very important.
The difference between the restraint theory and the practice of lean production
1, in the process of continuous improvement, TOC and lean have a completely different focus: lean emphasis on reducing waste. The TOC emphasizes increased production and sales.
Lean pursues the elimination of waste. Toyota's production systems provide intrinsic lean thinking. Toyota production is an effective method because it is an effective tool for the production of the ultimate goal-benefit. To achieve this goal, the main method of Toyota's production system is to reduce waste, or improve productivity. Cost reductions and productivity improvements are achieved through a variety of waste elimination. For example over-stocking and excessive staffing.
In both worlds, the profit calculation method is the same, reducing the operating costs. However, TOC advocates production and sales-by increasing profits as a first priority. All decisions are based on the impact of production and sales volume to assess inventory and operating costs. The main emphasis is on increasing the production and sales.
In the actual case, the continuous improvement of Lean, the reduction of waste and the increase of production and sales of TOC, this is the company's different strategies.
2, the method of implementation-wasteful view
Obviously, the products and services should be customized by the customer and to match the market demand, in most of the companies implementing TOC, the focus is to improve the status of the initial system. If it is a market constraint, then it can be defined by the customer. If the constraint is internal, the company should do something right. In fact, the long-term health of any company depends on the company's ability to meet its customers ' needs.
In practice, however, many TOC implementers miss the opportunity to eliminate real waste. Many managers in the company implementing the TOC, in the absence of capacity, take full advantage of constrained resources and first increase their purchasing power. Highly concentrated and looking for waste that is most likely to cause downtime, and prohibit production and sales volume. The constraint of material preparation time, the constraint of quality problem, or the constraint of material shortage directly affect the production and sales.
Lean thinks 15 of the 7 types of waste:
1, people who absorb resources but do not create value activities. 2, error requires correction. 3, the production of no need, the backlog of inventory. 4, unnecessary process. 5, no purpose moves-an employee or a commodity from one place to another place. 6, the ability to idle-because in the upstream activities are not delivered on time and lead to downstream waiting for the people and goods 7, can not meet customer needs of products and services.
In the process of lean implementation, the waste reduction is very important. In the cost world, this way of thinking is very appealing. Unfortunately, few successful companies rely on a frugal approach to prosperity. When eliminating waste is an important task, not all waste is born equal. The priority of the company should be based on whether it affects the profit (sales, inventory, operating expenses).

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3, Value stream definition
TOC and lean are from the value chain point of view of enterprises, to create value for customers. Their great difference is in how to define their own value stream. Lean's business is to define the value stream around a particular product. The disadvantage of this view is that some of the company's resources can be used in many products.
Lean is suitable for the reorganization of equipment resources for specific products, forming a production line. Lead to potentially incomplete utilization of certain machines and equipment. Unfortunately, this incomplete utilization is sometimes able to change non-constrained resources into constrained resources. Although lean advocates recommend a reduction in special large machines. But it's not always realistic. When a small machine is not present, the system must still operate using the current resource.
The view of the value stream of the TOC is to include shared resources in the value stream. In the TOC enterprise often arranges production around several products, through the common resources that interact with those products. One of the first steps in the TOC implementation is to define the system to be improved. Although this can be the definition of the initial system constraint. And not to the full value chain,. If necessary, you will define another part of the value chain: design, order acceptance, manufacturing constraints. Nonetheless, TOC advocates will agree to consider and improve the entire value stream.
When analyzing the entire value chain, it is often frustrating to analyze constraints even at the outset. The value chain consists of multiple functions, different companies, or different departments with different priorities and measures. Until it was severely damaged by competition, the entire value chain agreed to improve. The focus of any system analysis is to constrain the operations (for example, because of the lack of engineering tooling, which leads to slow mold changes resulting in batch. Or because of poor production design leads to quality problems). Ideally, it should be an analysis of the entire large system. However, the complexity of system interactions cannot be underestimated throughout the system analysis. Focus should be narrowed to a specific value stream (including shared resources).
4, Stock
In the treatment of inventory, the TOC view is simple. The only purpose of inventory is to support the production and sales during the period of time. In some cases, the inventory is kept free of change by maintaining a buffer in the upstream operation. The stock uses drum-buffer-rope method to achieve synchronous flow. Lean the lack of a practical view of the buffer stock, that all inventories are wasted. This view is based on the concept of single-piece flow.
Two philosophies have advocated reducing the variability of buffer inventories first. The main difference is that the TOC retains the buffered inventory and reduces variability. The lean removes all buffer stocks and opposes significant changes. If the system's constraints are internal-unit operations, the concept of no buffers will always cause constraints. This is due to the fact that in any production system is mutable. The worry is that lean only see inventories shrink, eliminating WIP inventories, without taking into account the impact of production and sales. In some cases, inventory is a real waste. In another case, it provides a critical buffering role when constraining upstream flow conflicts in the operation. During the removal of inventory, it may be necessary, and perhaps even later, to strategically maintain the defined buffer stock and to protect the company's production and sales volumes.
In the face of an imperfect system, buffer Inventory management provides a tool to handle the improvement priorities. The basis of buffer inventory management is to record and analyze the reasons for the downtime caused by the lack of material in the constraint. This analytical area is where most of the effort needs to be improved. Those materials that start and often lead through the buffer zone, both to protect production and sales, and to allow the buffer stock to be reduced after being improved.
5, capacity
Like surplus inventory, lean also sees excess capacity as a waste. Starting from the design pipeline to consider each piece of work or due to quality problems all stop. Frankly, these are the problems that all people have to face. In this way, it is difficult for managers in variable, interdependent systems to accept.

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Requirements for systems operating at full load:
(1), multi-skilled training of workers. Because it is impossible to perfectly balance the production line. Workers must move. (2), the machine is 100% available and accurate (TPM Comprehensive Preventive Maintenance) (3), the work of the team work strictly standardized (4), error can be corrected in time
Even when the above elements have been dramatically improved, we have found a completely improved production system. In a period of time, variability is present. An orderly, predictable system must have the ability to protect itself in an active and continuous process of improving progress.
6, cost
The traditional accounting system emphasizes direct labor cost accounting. However, in the lean environment, the management cost becomes the main cost, it may be 20 times times the direct labor cost. With the multi-skills of employees, starting to maintain equipment and other work, direct labor and indirect labor costs for cost accounting has become very blurred. The cost of cost accounting for Lean is based on the production time of the product in the system, not on the direct manual hours and the machine.
The cost view of the TOC is that the inventory cost includes only the raw material cost. Labor and other overheads are part of the operating costs, which are controlled by the factory and not assigned to a specific product. Gross Profit = Price-Raw material, net Profit = Gross profit-operating costs. The maximum of gross profit is used to analyze the variety decision.
Enterprises should choose the best side of restraint theory and lean production
As a TOC advocate, many parts of Lean's thinking are entirely consistent. It can be used to evaluate the practice of lean using TOC method.
The TOC is premised on 5 centralized steps, providing a highly effective example of ways to improve the management of the enterprise. Combine many lean practices and principles to reinforce examples. This combination enables the organization to achieve greater improvements and profitability.
1, accept the view of production and sales volume.
The inventory and operating cost is to create the production and sales volume, the goal is the profit. In addition, the view of production and sales is focused on how to create value outside the organization, how the organization can create greater value for its customers.
2, define and measure the improvement of the system, the goals of the improvement.
At the beginning, you should get internal controls before trying to change your customers and suppliers. When you gain internal control, you can get the right direction to influence your customers or suppliers reliably.
3, define the constraints of the system.
The value stream analysis process defines the flow of the logistics process, and the flow chart form to eliminate completely unnecessary steps. For constraints, it is not just a cost reduction, but the ability to reduce dependency and increase protection. Less interdependent processes mean less capacity to increase protection. System less confusion, buffer inventory, time booking is less, and shorter.

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4, decide how to use the system constraints.
The process of using constraints is also a perfect application for lean. The constraint of the system is the resource that constrains the production and sales of the whole system. We often hear some managers say, "We need to buy another machine or hire another worker"; "We don't have enough power." Always, there is a lot of waste in the constrained operation. Waste and preparation time, waste and unskilled skills of employees. At the same time, skilled workers are in short supply. The constraint operation should be the main breakthrough improvement goal. It is often effective to establish an hourly production and sales volume for a constrained operation.
5, obey the constraints of the system.
Both TOC and lean include the concept of obedience. In a DBR system, obedience is mainly the idea of letting some of the material restrict access to the system to avoid overloading the system. This is the lean Kanban system, which resembles a series of short ropes (communication connections) between all the resources. In the concept of the DBR rope, is the connection material put into the inlet process. Once they appear in the work center, the intermediate process is quickly processed as soon as possible. There are many other parts of the activity that are bound to obey. Maintenance work should also be subject to binding processes. In short, all organizations are subject to binding processes. This is based on the constraints on the increase in production and sales, to the whole system to increase production and sales of the idea.
6, evaluate constraints.
As mentioned earlier, when there are no constraints found, the first step is often taken. In fact, in such an example, the operating costs and inventories are higher than needed. Multiple use and obedience steps. The ability to increase constraints. The process of assessing constraints is to increase the overall utilization of resource capabilities to the advanced stage. In the new, alternating process path, the effective method is to remove the constraint. By the way, in "cost world" companies, if a process path changes will increase part of the whole labor or machine, the product will also change, significantly affect the cost of price calculation. This is true and affects the company's profits.
7, avoid inertia.
If the constraint is broken, define the next constraint. Organizations will always have at least one physical constraint-raw materials, internal resources, or lack of markets. When a constraint is broken, the constraint is shifted to another place in the organization. Can not be complacent success, perseverance, continuous improvement.
ERP, restraint theory, effective combination of lean production-world-class enterprise
The notion that the TOC is concentrated and the continual improvement of management constraints may not be as inspiring as the goal of a perfect lean. However, the complexity of modern organizations with unlimited data systems to make managers to improve, the huge amount of task is enough to make serious managers daunting. At the same time, in fact, only those hundreds of potentially improved businesses can achieve the organization's goals. The method of centralizing the TOC is reasonable, and in fact, explicit and stress constraints are an effective tool for the fastest increase in the production and sales of any organization and the lowest cost. At the same time, Lean offers a different approach to improvement. Eliminate the fat of tissues by eliminating waste. An organization is morbid, hypertrophy, and the idea of eliminating waste from the system is easy. And, very attractive. However, most organizations work hard to reduce waste over a long period of time. Where did you start? It is not a small task to eliminate variability. In most cases, it's not going to be done very quickly. At this point, it is useful to use the lean tool. However, they are more useful when they are focused on the organization's constrained resources.
Financial management, the external report is automatically generated by the ERP financial module, the indirect cost according to the artificial allocation. The management report in the factory is calculated from the view of TOC-production and sales rate, inventory and operation cost.

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ERP provides a system framework for basic data, integration of TOC (APS,OPT) software and LP (Demand pull Kanban) requirements-pulling systems to reach world-class enterprises.
Reference:
1, <the goal> Dr Eliyahu Goldratt 2, < The machine that Changed the world> Womack and Jones 3, & Lt Theory of Constraints and Lean Manufacturing:friends or foes> Ph.D. Richard Moore and Lisa Scheinkopf 4, <productio N and Operation Management/manufacturing and services> Richard b.chase and Nicholas J.aguilano and F.robert Jacobs
Introduction: Cai Ying-has more than more than 10 years of manufacturing, material planning, industrial engineering, cost control management experience, ERP project experience. Current fourth shift South China implementation consultant. ycai@fs.com.cn