Constraints

&

JT

Moving beyond the stark implementation

contrasts reveals that the two leading management
philosophies share many related principles.

Not Necessarily

CUTTHROAT

ENEMIES
By Eli Schragenheim
& H. William Dettmer
At-a-Glance
Just-in-Time (JIT) and the theory of
constraints (TOC) are two different
schools of thought that have more in
common than meets the eye.
JIT and TOC both challenge traditional
notions of production efficiency and
attempt to address the waste of excess
inventory, albeit from different
viewpoints.
According to the authors, TOC is broader
in scope, touching on subjects such as
product cost and management policy
while JIT remains focused on the
production floor.

Editors Note: In the January 2001 issue we took a look at lean

manufacturing, tracing its roots in TQM and discussing its supply
chain management implications (see Origins and Reality of Lean
Manufacturing by Nelson J. Teed, CPIM). This month, we asked
leading theory of constraints (TOC) experts Eli Schragenheim and
H. William Dettmer to look at Just-in-Time manufacturing, a key
component of lean manufacturing, through the lens of the TOC
an entirely different management philosophy. Their conclusions
may surprise you.

irect competitors usually dont have complimentary

things to say about each other. The theory of constraints (TOC) and Just-in-Time (JIT)competing
management ideaseach offer their own tools and techniques
for managing manufacturing organizations, especially procedures for planning and controlling the production floor. Since
the procedures suggested by JIT are distinctly different from
those of TOC, you might assume that this article, written by
two TOC advocates, would constitute a direct assault on JIT. If
thats what youre expecting, you might be disappointed.

D
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Instead of comparing the different techniques of each in

detail, we prefer to highlight some of the concepts underlying
the two approaches. In doing so, we find that the two are
aligned in broad areas, and, yes, there are also some differences.
Understanding the underlying basic assumptions and concepts
is critical for comprehending the rationale of the different
techniques and identifying when the differences are truly influential in achieving superior organizational performance.

vents companies from responding quickly to true market

requirements. In the 1980s, such an assertion might have been
greeted with disbelief. After all, the whole point in creating
inventory was to enable fast response to market demands. We
now understand much better that in most cases producing
inventoryanticipating the demand ahead of timeonly
draws attention to a companys inability to anticipate effectively what will be required at a specific time.
Customer satisfaction. Theres an even more critical conJust-in-Time ideas
cept lurking behind JITs opposition to creating inventory. Very
JUST-IN-TIME (JIT) can be considered the westernizamuch like TQM, JIT emphasizes customer satisfaction. One
tion of the concept that originated as the Toyota Production
expression of customer satisfaction is access to a wide variety
System (TPS). According to the APICS Dictionary, Just-inof products on very short notice (preferably instantaneous
Time is defined as:
response). This demand for variety and fast response drives
A philosophy of manufacturing based on planned eliminacompanies to avoid creating inventories. Instead, the ideal
tion of all waste and on continuous
manufacturing
organization
improvement of productivity. It
should be able to react fast
encompasses the successful execuenough to any new or changing
tion of all manufacturing activities
market demand to produce it
required to produce a final prodfrom scratch in virtually no time.
uct, from design engineering to
Setups. One potential obstacle
delivery, and includes all stages of
to fast response to an unexpected
APS advanced planning
conversion from raw material
demand is the length of setups.
and scheduling
onward. The primary elements of
Not only do setups take time that
Just-in-Time are to have only the
does not generate value, but, more
CCR capacity-constrained
required inventory when needed;
importantly, if too many setups are
resource
to improve quality to zero defects;
done, bottlenecks emerge. Queues
DBR drum-buffer-rope
to reduce lead times by reducing
of work-in-process, all of it needed
setup times, queue lengths, and lot
for firm orders, become longer and
JIT Just-in-Time
sizes; to incrementally revise the
response times drop dramatically.
TOC theory of constraints
operations themselves; and to
So in JIT, significantly reducing
accomplish these activities at minisetup time becomes necessary for
TQM total quality management
mum cost. In the broad sense, it
fast response to any new market
TPS Toyota Production System
applies to all forms of manufacturdemand.
ingjob shop, process, and repetiComplexity vs. simplicity.
tiveand to many service indusAnother obstacle to fast response
tries as well.
is the complex nature of most
Inventory. We can deduce from
manufacturing organizations.
this definition that one underlying assumption JIT makes is
Bills of materials and routings seem difficult to control, and it
that inventory is an unnecessary waste. This assumption also
seems to require a significant amount of time to activate and
implies that any work that doesnt absolutely need to be done
synchronize all the resources and materials needed to produce
now is also waste. We might even generalize two potential devian order. How fast can any response be in such an environment?
ations from sound production control: one is that we were
JITs solution is to vastly simplify the shop floor. The kanban
supposed to do something and we failed to do it; the other is
system used in the TPS is a simple mechanism to move material
that we did something that we werent really supposed to do.
through many work centers and assembly operations under
Western organizational culture used to recognize the first kind
perfect control. The pull concept operationalizes the concept
of deviation as evil, but forgave the second as long as the work
of doing only what is absolutely needed now and deploys it
done was perceived as needed for some time in the future.
from its origin in the market through every operation and
But JIT advocates recognized that in doing things that arent
material that contributes to a particular order. There is no
needed now, one might easily fail to do what actually is needed.
inherent need to use computers to help overcome complexity.
Consequently, waste is worse than simply performing unnecesJIT also applies the notion of simplicity in planning how a
sary work; it can damage efforts to perform work that should
new product will be produced. Each production step is physibe done.
cally simplified and made as straightforward as possible to
In other words, JIT considers inventory evil because it preeliminate the potential for making mistakes.

Abbreviation List

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APICSThe Performance Advantage

April 2001

Variation. JIT also strives to eliminate variation from the

shop floor. If a company must produce 150 units of product A,
32 of product B, and 27 of product C, all today, it better be certain to complete all of them in the expected time. What happens if a work center goes down for 4 hours, or a new operator
is too slow to finish everything in the required time? Identifying a problem is an opportunity to close yet another door on
variation. When variation is identified, engineers immediately
validate that todays problem wont return again tomorrow.
Protective capacity. In a JIT environment, companies must
produce everything it is committed to producing today, even if
a disruption delays production. Some planned protective
capacity is maintained to ensure that when problems create
delays, enough capacity remains to catch up.

work-in-process is accumulated in front of the CCR to ensure

that its capacity is never wasted by idle time. So for TOC,
inventory is not necessarily evil as long as it is just enough to
protect the truly critical areasthe CCR and the committed
dates for firm ordersfrom Murphy (see Unmasking Murphy). This ensures smooth shipments to the market while
drawing more production from the floor than JIT.
Buffers. While TOC agrees with JIT that variation should
be eliminated, TOC recognizes that despite an organizations
best efforts Murphy will still visit their operations. So until a
way can be found to further reduce the occurrence of variation, TOC provides a way for companies to buffer themselves
from the damage the current level of variation might cause. It
does this by manipulating time (primarily) and inventory (to a
lesser extent) to protect the truly critical areasthose that
Theory of
limit the ability of the organizaconstraints ideas
tion to make more money, now
ALL OF THE JIT concepts menand in the future. This serves to
tioned above coincide with TOC
draw more through the system
principles, but TOC verbalizes and
without sacrificing its robustness.
applies them in different ways.
Efficiency. Both TOC and JIT
Everyone knows Murphys Law: If something
Moreover, the underlying concepts
challenge the notion of effican go wrong it will go wrong. In Goldratts novels
behind TOC might be considered
ciency as typically defined in
on the theory of constraints, Murphy gets
more generic. In some situations
western production management
treated like a character that embodies Murphys
they can lead to different solutions,
culture. In JIT, kanban cards conLaw, a gremlin always trying to find ways to foul
and in some specific casesnot
stitute permission for an operator
up schedules and plans. In essence, Murphy
very commonthey might actuto produce. When no kanban
causes unpredictable variation in processes that
ally conflict with JIT prescriptions.
card is issued, the operator is formust be accommodated. The glossary of Victoria
TOC begins by determining the
bidden to produce. This clashes
J. Mabin and Steven J. Balderstones The World of
organizations goal. For most busidirectly with the western notion
the Theory of Constraints: A Review of the
nesses, the goal is to make money
of an idle resource being wasted.
International Literature has the following entry:
now as well as in the future and
TOC doesnt use kanban cards,
Murphy From Murphys Law, a colloquial
money is made when a product is
but it does preclude unnecessary
term for statistical fluctuation, or what can go
sold, not when products are proproduction by controlling the
wrong will go wrong.
duced. Doing only what is clearly
introduction of materials to the
necessary to satisfy an order for a
manufacturing floor via the
firm sale is a good idea, provided
rope in the drum-buffer-rope
companies are able to respond to
method.
any request quickly enough to avoid losing the sale opportuProduct costs. TOC challenges the sacred notion of prodnity.
uct costing while JIT does not address the topic directly. WithCapacity-constrained resource. What often keeps us from
out getting into the details of why, TOC maintains that product
taking advantage of every market opportunity is insufficient
cost is a mirage and that it has nothing to do with reality. Sufcapacity in just one work center. JIT often passes up such
fice it to say that the controversial principle is crucial to TOC
opportunities in the interest of preserving enough protective
and it is an important distinction between the two.
capacity at all work centers. TOC, on the other hand, argues
Waste. It is instructive to compare the thinking of JIT and
that its possible to have one capacity-constrained resource
TOC in three interpretations of waste.
(CCR) but still have a plan for very robust production.
The first is inventory. JIT considers any inventory to be
The notion of a constraint is central to the TOC philosowaste. While TOC agrees that inventory is certainly not an
phy. Instead of treating all work centers alike, TOC recognizes
asset and is usually damaging, TOC uses time buffers, which
that most work centers will have capacities that are very differresult in a certain, small amount of inventory ahead of critient from one another. One of these is likely to have less capaccal points in the process. These buffers protect the capacity of
ity than all the others. TOC provides a way to exploit the capacan internal constraint and therefore the integrity of the shipity of such a CCR, provided enough protective capacity is
ping date. In actual practice the total inventory created by the
maintained on the non-constrained resources, and some
TOC buffers might be lower than the total of small amounts

Unmasking Murphy

April 2001

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of inventory used by JIT but spread throughout the production floor.

The second is CCR capacity. According to TOC, any time
the constraint is not effectively exploited constitutes waste.
This is not a type of waste that JIT recognizes.
The third is unused nonconstraint capacity. Neither JIT nor
TOC accept the traditional western definition of unused (but
paid for) capacity as waste. Both view the unused capacity as a
requirement for fast response to customers.
Scope. The scope of TOC is considerably wider than JIT,
or any other management philosophy. The term constraint
is applied not only to capacity-constrained resources but to
everything that prevents an organization from achieving
more of its goal. Thus, in TOC huge importance is attached
to the term policy constraint. TOC accepts that yesterdays
solutions might hamper us from achieving more today. Consequently, when no internal capacity constraint is active
(meaning that there is a significant amount of excess capacity), TOC suggests that the organization begin looking to the
market as the probable location of its next constraint. And
relieving market constraints usually requires examining and
challenging existing policies.
Policy constraints. TOC maintains that managerial efforts
should be directed toward identifying the basic assumption,
paradigm, or policy that really blocks the organization from
achieving more. Can the market demand be truly limited?
TOC forces management to recognize that, for practical purposes, this isnt likely to be the case and the reason the market is
perceived to be limited really lies within.
The critical few and the trivial many. TOC distinguishes
between the key problemsthe ones that have a major impact
on a companyand the many small problems that dont really
affect the performance of the organization as a whole. JIT in
most cases doesnt make this distinction. Consider setup
reduction, for example, to appreciate the different attitudes of
TOC and JIT practitioners. From the TOC perspective, theres
no reason to concentrate on setup reduction unless the setup
time happens to be the factor that truly blocks the organization
from doing more. Certainly, reducing the setup at the capacityconstrained resource is much more important than reducing
setup time on any resource with considerable excess capacity (a
nonconstraint). Expending effort to reduce setups on nonconstraints might rob time from efforts to identify the companys
real blocking factors.
When TOC meets JIT
HOW COULD AN ORGANIZATION that already has

implemented JIT benefit from what TOC has to offer? TOC

looks for the area where improvement will yield the most
immediate results. Assuming that the JIT implementation
was effective, in most cases the existing JIT practices would
not be a candidate for change. A TOC practitioner would,
instead, search for a policy constraint that is probably hiding
outside of operations. Perhaps the marketing approach needs
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Instead of treating
all work centers
alike, TOC
recognizes that
most work
centers will have
capacities that
are very different
from one another.
challenging (especially when we realize that product costing
still dominates the assessment of the optional market segments). Or perhaps the constraint might lie in sales procedures or product development.
If you truly want to compare two different management
approaches, dont focus on their techniques and tools. If wed
done so here, wed have seen two seemingly very different
processes. After all, drum-buffer-rope (DBR), the TOC planning methodology, doesnt seem to have much in common
with kanban cards. In fact, in some respects the tools of DBR
might seem to have more in common with advanced planning and scheduling (APS) systems than with JIT or lean production. But this isnt the case. The TOC paradigm is much
closer to JIT than it is to APS. The search for simple, effective
rules is common to both TOC and JIT, but its alien to APS.
This kind of insight isnt clearly visible if we look closely only
at detailed techniques.
The similarities between JIT and TOC are many. The areas
of difference are few. Key differences lie primarily in considerations that TOC addresses and JIT does not. The underlying
reason for these differences is that by its very nature, TOC takes
a broader view of systems management than does JIT.


April 2001

Eli Schragenheim and H. William Dettmer are co-authors of Manufacturing at Warp Speed on the application of the Theory of Constraints (available through the APICS Bookstore, stock #03734). Eli
can be reached at elyakim@netvision.net.il.