Optimized Production Technology (OPT)

Optimized Production Technology (OPT) Prepared by Clint Ward Brigham Young University

A Brief Overview OPT Defined

Importance

Operational Measures

Goal of OPT

Brainstorming Activity

Nuts & Bolts

Real World Example

Rules of OPT

Exercise

OPT Defined • Optimized Production Technology is a planning & production system focused on throughput maximization by alleviating bottlenecks (Precursor to Theory of Constraints)

Why is OPT important? “A chain is no stronger than its weakest link” An organization can only speed up the length of the entire process if the bottleneck is alleviated

OPT Operational Measures • Throughput = “the rate at which the system generates money through sales” • Inventory = “all the money that the system has invested in purchasing things which it intends to sell” • Operational Expense = “all the money the system spends to turn inventory into throughput”

The Goal of OPT “Increase throughput while simultaneously reducing both inventory and operational expense”

Brainstorming Exercise • Pull out a piece of paper • Identify all of the area or processes on the floor • Jot down bottlenecks – Take 3-4 minutes; allow more time if needed to visit floor and find bottlenecks

OPT Nuts & Bolts Dependent Events: all processes count on the completion of sequential operations Statistical Fluctuations: process times fluctuate around an average Due to these facts, a plant’s capacity must be unbalanced and bottlenecks are inevitable

OPT Nuts & Bolts (cont.) First, Third, Identify bottlenecks Shift work off of bottlenecks and give it Second, Increase capacity of bottlenecks to non-bottlenecks by minimizing machine idle time, avoid processing defective parts, avoid processing outside current demand

Obstacles 1. Knowing what to change 2. What to change to 3. How to institute the change

Real World Example: Dow Corning Corporation “Our plant’s on-time delivery was 50% and we were carrying over 100 days of inventory. We had six months to turn things around. Within my unit we identified the bottleneck and began to focus our resources there. By the time the six months were up, we had started to make significant changes using ‘The Goal’ as a reference. When I left the department cycle time had reduced 85%, operator headcounts reduced 35% through attrition, WIP were down 70%. On-time delivery was increased to 90%.” -The Goal by Eli Goldratt

Ten Rules of OPT 1. Utilization and activation of a resource are not the same 2. The level of utilization of a non-bottleneck is determined not by its own potential but by some other constraint in the system 3. An hour lost at a bottleneck is an hour lost for the total system

Ten Rules of OPT 4. An hour saved at a non-bottleneck is just a mirage 5. Bottlenecks govern both the throughput and inventory in the system 6. The transfer batch may not and often should not be equal to the process batch 7. The process batch should be variable, not fixed

Ten Rules of OPT 8. Capacity and priority should be considered simultaneously, not sequentially 9. Balance flow, not capacity 10. The sum of local optima is not equal to the global optimum

Break-out Exercise • Pull out your brainstorm lists of bottlenecks • Gather in groups of 3-4 • Round-robin through everyone’s lists (3 min) • Everyone pick 1 bottleneck (should have duplicates) and jot down ways to increase capacity • Discuss effects of the changes

Summary • Any process can be improved! • Focus on the bottlenecks! • Identify ways to increase bottleneck capacity! • Never forget the goal: “Increase throughput while simultaneously reducing both inventory and operational expense”

Readings List • Ellram, L., Fawcett, S., Ogden, J. (2007), Supply Chain Management, Pearson Education, Inc., Upper Saddle River, New Jersey. • Goldratt, E., Cox, J. (2004), The Goal, North River Press, Great Barrington, MA. • http://blog.jackvinson.com/archives/2010/12/20/the_rules_of_opt__precursor_to_theory_of_constraints.html • http://bulatov.org.ua/teaching_courses/logistics_files/Logistics%20Lec 2%20OPT.pdf • http://en.wikipedia.org/wiki/Eliyahu_M._Goldratt • http://www.angelfire.com/ca2/jlui/thegoal.html • http://www.blackwellreference.com/subscriber/uid=1129/tocnode?id= g9780631233176_chunk_g978140511096919_ss7-1 • http://www.tangram.co.uk/TI-Glazing-Manstrat_04.html