Lean Manufacturing and Theory of Constraints can go hand in hand

Lean Manufacturing and Theory of Constraints can go hand in hand:

Lean Manufacturing tries to separate value streams so that they use dedicated resources for the same capacity i.e. it makes value flow through the factory. TOC takes this idea further by finding out critical constraints or bottlenecks, it works in such a way that it figure out which are the most overloaded resources that determine maximum flow rate of production, and making value flow through these constraints. In order to meet market demand manufacturers can optimize production through their critical constraint.

Because of these reasons, a TOC production planning solution might be appropriate for manufacturers with make-to-order (MTO) environments, where different product lines take same resources, hence results into bottlenecks. Thus by offering daily production planning, TOC enables business performance improvements in such environments by increasing throughput and sales, cycle time or lead time reductions, service level improvements, and inventory level reductions.

Hence, where lean planning focuses on the flow and the takt (maximum time allowed to produce a product in order to meet demand) of the flow through the factory, TOC optimizes the flow through the factory by focusing on planning the takt of the flow through the bottleneck.

Similarities between TOC and Lean Management:

1) TOC throughput: In TOC lingo, throughput is the rate at which the system generates money through sales, i.e. sales generated by system which converted into money will be counted, hence building inventory is not throughput in TOC terms.

Lean Manufacturing: In this focus is on the customer and customer value adding activities.

2) TOC inventory: In TOC terms Inventory is all the money that the system has invested in purchasing things which it intends to sell such as finished goods, raw materials, work-in-process (WIP) Hence inventory is a liability and not an asset.

Lean Manufacturing: Above statement is consistent with lean manufacturing's focus on eliminating waste.

3) TOC operational: All the money the system spends in order to turn inventory into throughput, such as depreciation, employee time etc., thus increasing throughput, while reducing inventory and lowering operational expenses.

Lean Manufacturing: The TOC accounting system is somewhat similar to activity-based costing (ABC). And as TOC costing is closer to a cash flow concept of income, TOC accounting provides more accurate form of direct costing, subtracting true variable costs.

Hence exploiting constraints to make more money for the firm.

So Avenir helps to maximize throughput on the bottleneck, which is equal to the profit, as we think “an hour lost on the bottleneck is lost forever and an hour saved on a non-bottleneck is a mirage.”

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