Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 14

Theory of Constraints Chemical Products Company (CPC) produces a variety of chemicals, primarily adhesives, lubricants, and polymers for industrial use by manufacturers to produce plastics and other compounds. Don Leo, the production vice president, has been informed of a disturbing trend of increasing customer complaints regarding late deliveries from the Canton, Kentucky, plant. The Canton plant is one of the firm’s newest and most modern plants and is dedicated to the manufacture of two products, Polymer 1 and Polymer 2. Don has downloaded some incomplete recent information about the Canton plant onto his laptop; he plans to analyze the information in the hour or so he has before his next meeting of the CPC executive committee. He is concerned that some comments will be made about the problems at Canton, and he wants to have an idea of how to respond. Because CPC views Polymer 1 and Polymer 2 as very promising in terms of both sales and profit potential, the news of these problems is likely to spark some comment. The data downloaded by Don is as follows:

	Number of Hours Required for Each Product
Activity	Polymer 1	Polymer 2	Number of Hours Available per Week
Filtering	2	4	320
Stripping	2	3	320
Reacting	3	5	320
Final filtering	2	1	160
Mixing	3	3	320
Other information
Current sales demand (per week)	60	40
Price	$1 45	$185

Don has sketched the following flow diagram for the Canton plant. He believes it is relatively accurate because of his frequent contact with the plant.

Required Prepare a set of notes that Don can use in the executive meeting if questions come up about the problems at the Canton plant.

Step 1 of 3

With the information available Don can complete the first two steps of TOC as shown below. The analysis shows that the reactor process is the constraint, and that in the short run, Polymer 1 is the most profitable product. The most profitable product mix is 60 units of Polymer 1 and 35 units Polymer 2. Until the production delays can be dealt with (TOC steps 3-5), Don should advise CPC to meet all the sales demand of Polymer 1 and to advise customers of Polymer 2 there would be some delays in the short–term. Then, CPC should work quickly to relieve the constraint, reactor time, by applying the third, fourth and fifth TOC steps. Without specialized technical knowledge of the manufacturing processes in this industry, one can only speculate about what these steps might be. 

First: Identify the Constraint
Total Time Required for Each activity for Given Demand
		Time Required for			Total	Time	Slack
		Polymer 1		Polymer 2	Time	Available	Time
Filtering		60x2=	120	40x(2+2)=  160	280	320	40
Stripper		60x(1+1)=	120	40x(2+1)=  120	240	320	80
Reactor		60x3=	180	40x5 =  200	380	320	-60
Final Filter   60x2=			120	40x 1 =   40	160	160	0
Mixing	60x3=		180	40x3 = 120	300	320	20
?	The  reactor is the constraint , since there is a demand of 380 hours but only 320 hours available.