Material Constraint Theory - Part I

OVERVIEW

Typical manufacturing environment is said to be governed by three “M’s”, namely:.

• Men
• Machine
• Material

There has been a continuous practice to observe better usage of resources, mainly men and machine. The focus on material was not there except in the recent past, when the competition to get higher business share and still one needs to provide quality products in reasonable price.

It is interesting to note here that all these three resources have different behavior and characteristics. A man has created value primarily because of his skills, a machine because of capacity and processing capabilities and material as base resource [raw material].

The good question that could be asked here is – “what is the importance of material in getting the best or required results?”

If one reads the resources carefully, it is simple to establish that:

Men – has skills, which is function of time and skills are not readily available in the open environment. It requires training and inputs. This means, even if you have shortage of men or skills, it is difficult to bridge the gap in shot time span.

Machine – has build in capacity and processing capability. It generates faster, better and accurate results as compare to a manual process. It is also a fact that in case of capacity shortage, one can’t build the capacity overnight.

Material – forms the base or the raw material for the product to be developed. All the value additions throughout the process is added to material / raw material to create the desired result. It is interesting to note that in case of material shortage, one can fine additional capacity in the open environment to push through larger volumes of the material through the system. Nevertheless, it is a fact that the factor ‘material’ is one of the important points, which affects the process, output or desired results in more than 50% of the cases. Therefore, let’s try to understand how one can manage better in case of ‘material shortage’. This paper will try to explain different scenarios and situations and also put forward the possible action plan to manage the case to achieve the good value out of it.

(I) MATERIAL CONSTRAINT THEORY

In a real life situation, not only the capacity is a constraint, but the material is also a constraint. It means when one starts scheduling from today working forward, has to consider demand, the material available to work with and capacity available in terms of resources. In the other words, launch the work if there is a match of demand, materials and resource.

CASE EXAMPLE:

The manufacturing scope of the Items C1, C2 and C3 is outside the shop. This means either these components are subcontracted or may be are bought outs. Therefore, the due dates of these components are generated by MRP, providing date of scheduled receipts.
The facility has stock on-hand for each of the item.

The manufacturing lot size for item I has been generated by MRP, based on end item demand and stock on-hand. Scheduler takes the same lot size quantity to be produced and generates required manufacturing order.

Normally MRP runs on the base stock policy {(S, s) policy} and shows us what we want to happen and not what actually will happen. It assumes no constraint, and therefore generates a plan, which may not be feasible.

The Problem is:

When the scheduler tries to schedule the Manufacturing Order / Operation for item I, that time it do not know whether the right quantity of all components are available or not. There could be two situations: is there sufficient quantity is available in the stock?

If YES: it proceeds without any problem, and planning is not affected by the material quantity.

If NO : Problem starts, if scheduler assumes that all required quantity is available and schedules the MO/Operation for lot size given. At the end of the MO/operation, it will assume that all the quantity is produced and similar quantity propagates further in the chain of operations till the last operation.
As shown, if the actual receipt of components is less than the scheduled receipt, than quantity to be produced for item I shall be less than planned quantity.

Further to that all downstream operations shall suffer because of material shortage at operation for item I. This problem becomes more complicated as system has on-hand stock for components at time, and one should decide whether to use the stock or not.

THE NEED:
The need is to find out an effective solution that will:

1] Consider material as a constraint and finite resource.
2] Assign the available material to all consuming operation(s), in order to satisfy predefined objective function.
3] It should utilize stock on-hand, as and when necessary to achieve the objective function to the possible extent.
4] Assign the actually produced quantity to downstream operation in an effective manner.

Information Required for Problem analysis:

1] On-hand stock of all components required for processing current MO. [may be confirmed receipts quantities of components on or before time t]
2] Stock Policy [for example Base stock policy (s,S) ].
3] Ratio of consumption of all components required for processing current MO.
4] Objective of the assignment. [for allocating available inventory to all consuming operations].
5] Product demand for those products, which consumes current item.

(II) PROBLEM DEFINITION
The material constraint problem can be classified in distinct three types of definitions:

1) Allocation of material on “Many to One” basis
2) Allocation of material on “One to Many” basis
3) Allocation of material on “Many to Many” basis

In the next post, let us try to understand the base nature of each of the problems identified.