TOC or LP?

Mabel Qiu, Lawrence Fredendall and Zhiwei Zhu have addressed the
production scheduling problem from two fundamentally different
approaches, the theory of constraints (TOC) and linear programming (Lf).
LP is a complicated mathematical approach while TOC is much less
quantitative in nature. Both approaches were applied to the real operations
data from a fibre manufacturer. It was found that the schedule produced by
TOC is very similar to the one generated by L f

heuristic was developed
using part of Goldratts
theory of constraint (TOC)
to perform hierarchical
production planning. Goldratt and
Coxs heuristic consists of the five steps
described below:
(I) identify the systems constraint(s),
(2) decide how to exploit the systems
constraint(s),
(3) subordinate everything else to the
above decision,
(4) elevate the systems constraint(s),and
(5) if in the previous steps a constraint
has been broken, go back to step 1.
Many successful applications of this
heuristic have been reported by prac-
titioners. A detailed discussion and
review of TOC can be found in several
books-3 and articles4.The five steps do
not guarantee an optimal solution, but
they do provide optimal solutions in
most situations tested to dates,6.How-
ever, most of the cases reported in prior
research have been small and academic
in nature. This prior research has not
examined the effectiveness of TOC
using real-world scheduling problems.
This paper examines the use of the
five-step heuristic in a hierarchical
production planning system. To the
best of our knowledge, there has been
no prior research applying the TOC
heuristic to a hierarchical production
planning problem. To ensure that the
T O C heuristic is tested with a realistic
problem, we use the data provided
in Qiu and Burch, who proposed
and tested a tnatheniatical hierarchical
production planning model for a fibre
plant. This data was disguised to protect
the firms confidential information, but
it still provides a realistic test of the
perforinance of the T O C heuristic.
Plant background
In a typical yarn manufacturing firm,
there are three basic processes that have
to be schedulcd: polynier preparation,
spinning, and drawing. The primary
process of a fibre yarn nianufacturer is
spinning. Spinning controls the entire
production process and is usually the
plant bottleneck due to its relative
capacities. Clearly if a feasible schedule
is developed for spinning the rest of the
production planning becomes trivial. In
fact, scheduling the polymer production
and the drawing operation is deter-
Table I Spinning machine splits
capacity
Numberof 1 2 3 4 5 6 7 8
Dositions 10 4 16 12 20 8 16 12
Table 2 Times and costs of machine
setups by level
1 4 hours $1,868
2 2 hours $700
3 1.5 hours $868
4 0.5 hours 0 The aggregate model is shown below,
mined after the spinning schedule is
developed.
The fibre plant under study has
four spinning machines. Each spinning
machine is divided into two splits or
groups of positions. Each split can
produce only one product at a time. The
productivity of a spinning machine is
measured as pounds per position per
hour. A position is the smallest produc-
tion unit, and the capacity of a split is
determined by the number of positions
at the split. The number of positions
varies for each split for this plant is
shown in Table 1.
Setup costs are significant. The
temperature is reduced to setup the
iliachine and any fibres produced before
the inacliitie reaches the correct temp-
erature are a lower quality fibre. In this
plant, there are four different levels of
machine setups. Table 2 shows the times
and costs corresponding to each level of
machine setups. In addition to these
four levels of machine setups, some
products are only run on certain splits.
Those products that have a preferred
split are called standard products, while
the products that do not have a prefcrred
split are referred to as non-standard
products.
Linear programming model
Master p d w t i o n schedule
Qiu and Burch7 developed an aggre-
gate cost miniinisation model to make
production schedules for the fibre plant.

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and the notation is explained in Table 3.
Subject to:
M is a number big enough to force
YILp= 1 when XILp# 0.
N M
lb 5 E XlL1 LI,5 ub for all i,p
,=1 L=l
(6)
YiLp E (0,l) for all i,L,p
The objective fmction of the model
is made of three cost components;
production, setup, and inventory. The
constraints are of three functional
types. Constraint 1 is used for the first
month at the beginning of the planning
horizon because the initial inventory
was recorded in pounds. Constraint 2
is the balance constraint for the rest of
the planning horizon between the
demand and the variables of production
and inventory (in days of production).
Constraint 3 is the capacity constraint
that limits production quantities and
inventoiy levels during each period.
Constraint 4 is the aggregate inventory
target that specifies level of inventories
to be used to smooth production. The
inventory target I, is set based on
the physical warehouse capacity. The
inventory shortage variable S,, is utilised
to avoid unfeasibility at the lower level
of the model and maintain a stability of
the schedule. Constraint 5 ensures that
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Table 3 Legend
inachinc setup occurs when product is found in Table 4.
change-over takes place on a machine.
Constraint 6 is used to set lower and
upper bounds of monthly inventory
level for individual products. In the S.T.
aggregate model, all the variables are
continuous, except machine setup, Y,,,,,,
is a zero-one variable.
Given the information on forecasted
demand, inachiiie capacities, and total
inventory target (warehouse capacity),
the aggregate model determines the
monthly lot size, machine (or split)
assignment and ending inventory level
for each individual product. At the
disaggregate level, a network model
schedules production on each split to
niininlise setup costs on each split
individually. Thus the daily operational
schedule is determined at the aggregate
level.
Daily operational sclzedule
A network model is used to dis- The objective functioii of this network
aggregate the aggregate schedule into a model niniiiises total setup cost. The
detailed schedule. The notation for the model uses the output of the aggregate
model given in Qiu and Burch's model model (i.e. desired production quanti-
Table 4 Legend
Indices
d = 1,...,Q day
i , j = l , ...,N product
L = I ,...,M split
P Time period
Parameters
CSll set up cost to switch from product i to product j
CLP capacity (in days) of machine L during period p
DIP demand (in pounds) of product i during period p
Decision variables
YiLd = 1 if production of product i takes place on machine L on day d,
= 0 otherwise
ZijLd = 1 if a changeover from product i to j occurs on machine L during day d,
= 0 otherwise
191

ties and split assignments) and the initial
split status (i.e. which products were last
run in the previous period) as input.
The variable Z y L d is defined as the
changeover from product i to product j
on split L at the beginning of day d:
Zi,Lrl = I, if the changeover occurs and
0 otherwise. With this product a
production changeover can occur any
day, but there will not be more than
one changeover on any machine in a
given day. Thus, a 0-1 variable defines
the possible changeovers. Constraint 7
satisfies demand D,, which is deter-
mined at the aggregate level. Constraint
8 recognises capacity constraints. Con-
straints 9, 10 and I1 ensure that only
one setup is scheduled on a given split
per day. Constraint 9 restricts splits to
producing only one product a day.
Constraint 10 recognises that split L is
changed from producing j on day d to
producing product i. And, constraint 11
restricts changeovers between product
j and i on day d to those where i is
produced on day d-I (is. the previous
day). It also ensures that a setup cost is
assigned to the setup variable (ix. Z g L d )
when a production changeover occurs.
Constraint 12 restricts each split to one
changeover per day
Five-step heuristic
Only the first 3 steps of the T O C
five step heuristic introduced at the
beginning of this paper are used to
Table 6 Preliminary loading of standard products
Split ID Load of Products Time required on
the split respectively
Table 7 Capacity analysis of production system
Split ID total time required
(in davs\
< , < >
1 7
2 25
3 31
4 0
5 13
6 10
7 8
a 10
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Table 5 Split preferences for each
between the selling price and the cost of
product number
raw materials. The first 3 steps of the
Split TOC heuristic create a master schedule.
1 2 3 4 5 6 7 8 To adapt this heuristic to create both an
1 aggregate plan and a master schedule,
2 2
4 4 we apply it in two separate terms. To
5 5 create an aggregate production plan
6 6 6 we first use T O C to plan for each
7 7 7
8 8 month. Then we use TOC to schedule
9 9 9 each machine, thus creating the master
10 10 10 schedule. This two-step procedure is
11 11
12 12 similar to the traditional hierarchical
14 14 planning procedure, which creates an
15 15 aggregate plan and then creates a
16 16 16
18 18 detailed schedule.
19 19 19
20 20 Master poductiou schedule
21 21
22 An explanation of the use of the three
23 23 steps for aggregate planning is below.
24 24
25 25
Step 1: Identify the system constraint
This step was done by calculating
schedule the plant. Step 4 of the five the capacity required at each split to
step heuristic actually increases the produce the demand for the standard
capacity of the bottleneck constraint. product. The first months demand for
The purpose of this study, however, is standard products was then compared
to compare the effectiveness of T O C to the capacity available at each split.
scheduling to the Llmodel, so we The split with the tightest capacity was
do not consider the case of capacity considered to be the systems constraint.
increases. Likewise, Step 5, which is Only the standard products were used in
to identify the new bottleneck after this calculation because these products
capacity is increased is not considered. are restricted to certain splits. The
As a first step in making TOC non-standard products can be run on
operational, we calculate the contri- multiple splits and can be scheduled
bution margin for each product. The on a non-bottleneck split.
contribution margin is the difference The demand for the non-standard
products was computed and compared
to the available capacity remaining after
the standard products were scheduled.
Total time required
When the total deniand was greater
than the total capacity some products
could not be produced in that month.
Step 2: Exploit the system constraint
If there was any demand which could
not be scheduled, all the products were
ranked by their contribution margins
per pound divided by the processing
time per pound. The products were
then scheduled on a split in descending
time available % required order of their contribution margin per
(in dam\
I ,
unit ofprocessing time. During the next
31 23% month if a standard product was to be
31 81 %
31 100% scheduled and there was no room on
31 0% its preferred split then the inventory of
31 42 % the standard product was used to satisfy
0 (testing new products) -
31 26% demand. If there was not enough
31 32% inventory that could be used and if there
MANUFACTURING ENGINEER AUGUST 2002
 Split 4 (12 positions)
Month 1 2 3 4

processing 19 12 8 14 6 2 29 30
time +---A --__ + _---__ +A--+ __--_ A---+-+ ____-_____ +____________;
Product 19 T 19 21 14 14 T T

I = idle T = testing new products

w-ere noii-staiidard products scheduled
on its preferred split these non-standard
products were moved to a different split.
Step 3: Subordinate everything else to
the above decision
This step ensures that all decisions
about the use of other iliachines and
personnel support the schedule devel-
oped in step 2. This inay require that we
improve the daily schedule to reduce
setup times at the bottleneck splits. For
exaniple, if loading of a non-standard
product to a bottleneck split creates
excessivc setup times, we search for a
better split to place it onto.
An exaniple demonstrating the appli-
cation of these stcps is shown below.
Step 1 : the plant scheduler used the
split preference table (see Table 5) to
assign products to their preferred split.

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 Split 4 (12positions)
Month 1 2 3 4
processing 19 12 3 18 8 2 29 30
time +---A _ _ _ _ +_-__-_ +--+ _______ A_--+-+ ---__-____ +__-----___--
Product 21 T 14 19 1 19 T T

Split 5 (20positions)
Month 1 2 3 4
processing 6 15 10 1 1 0 15 2 1 7 14 8 5 25
time +--+ ___- AAA+-AA-+-~---+ _ _ - - +_- + - A - - + --_- +-AA+A-~, _ - - _ _ _ _ - I

Product 2 12 1 1 2 12 6 6 4 6 I I 6

Split 6 (8 positions)
Month 1 2 3 4
processing 31 3 25 1 1 4 7 9 30
time +--_-_-________-+-A ---_--____- + A __--- + --+ - A A + _ _ _ _ _ - A---
Product T I 10 10 20 21 I i

I = idle T = testing new products

As sta d earlier this iiiiproves both
quality aiid productivity. In Table 5, the
bold faced product iiuinbers indicate
their preferred splits of each product.
For example, products 1 , 2 and 4 prefer
split 5. The standard products (Le.
products that prefer a split) are products
1, 2, 4, 5, 8, 11, 12, 15, 18, 22, 23, 24
aiid 25. The production times required
to produce Jaii~arysdemand ofstandard
products on each split was calculated
(see Table 6). This was then compared
with the production time available on
each split (see Table 7).
In table 7, split 6 was used for test-
ing new products, so no capacity was
available on split 6 in iiioiith 1 . Product
12 had 18 days of inventory available,
which exceeded its requirements on
split 6 as shown in Table 6, so demand
was met fi-ominventory Therefore, split

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3 was the most constrained resource. I n
January, 100% of the capacity on split 3
was needed for standard products.
Split 3 was the bottleneck with just
the standard products loaded. The next
stage in step I was to load the non-
standard products. Table 8 shows the
noii-standard products, the splits that
the non-standard product can be loaded
onto, and the demand for the product.
This product was loaded onto the
eligible split which had the most
capacity in descending order of their
contribiition margin. Tlic capacity
analysis once the non-standard products
were loaded is shown in Table 9.
This loading process was repeated
for cach of the next three months. If
a product could not be loaded in
the iiionth it was demanded, cither the
previous months slack capacity was used
to produce enough of a product to
eliminate the constraint or existing
inventory was used to nicct demand.
Step 2 of thc T O C heuristic is to
exploit the bottleneck. To do this nieaiis
that the iiiost profitable products are
loaded onto the bottleneck. As stated
earlier, the profitability measure used
is the products contribution margin
divided by its time on the bottleneck.
If a product has a contribution margin
of $1 per pound weight and it takes
4 minutes to produce a pound, then
its ration is $0,25/niin. In the example
given in Table 9 none of the loadings
determined in step 1 are changed.
Step 3 requires inanagenient to sub-
ordinate all other decisions to decisions
made in step 2. An example of making
a decision to support step 2 would be
to i~iove soiiie production forward
when it is being produced on a niachine
that is a bottleneck in a given month.
If a product requiring one day of
production on the bottleneck is moved
forward, the constraint may be eliini-
nated at the cost of carrying one days
invciitory. Fig. 1 shows the monthly
schedule for each of the four months.
The plan shown, developed with the
T O C heuristic, suggests that splits 1 , 7
and 8 are not coiistraint. Consequently,
inanagenient niay reduce the inventory
levels for the products (5,25and 24) that
are loaded onto these splits, siiice thcre
is excess capacity on te splits, and less
inventory is needed For protection.
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Table 8 Non-standard products
9 $1.oo
6 .95
14
7 .85
19
16
21
20
10
Daily oyciatronal schedule
Once ~ lfour
l months of the projected
demand IE loaded onto a split, tlie
detailed cchedule is created ucing the
firct three cteps of the TOC heuristic.
A detailed schedule wab created one
iiioiith at J time using the T O C
heurictic. Step 1 in January is shown in
Table 9, and the constraint ie split 3. Step
Table 9 Loading of products for
January
5 7 days
15,23 25 days
18,22 3f days
14,, 20, 19 20 days
1, 2,4, 9, 6, 7, 10 13 days
Test new product 31 days
25 8 days
24.16 13 davs
2, examining the contribution margin,
shows that product I 8 is higher than
product 22, so product 18 is scheduled
first. Since product 18 needs 30 days of
production, product 22 is scheduled for
the last days of the month.
Conclusion
This study attempted to look at the
production scheduling problem from
two fuiidaiiientallydifferent approaches.
The theory of constraints (TOC) is
considered to be iiiucli less quantitative
in nature while tlie linear prograiiiiiiing
(LP) ha^ a complicated iiiatheiiiatical
approach. TOC was inipletnented in
the five-step heuristic and was coni-
pared with L1 which is kiiown to
produce thc optimal solution. Both
approaches were applied to the real
operations data from a fibre manufac-
turer (Figs. 1 and 2). It was surprising
that the schedules produced by the two
approaches are so similar on this plants
application. The value of this study is
that TOC iiiipleiiieiited by the five-step
heuristic is much siiiipler to understand
1 day
5 days
.90 1 day
1 day
.80 12 days
.75 13 days
.70 0
.60 7 days
.55 4 days
and uses and generates good production
schedules as cotiipared to the one by
L1. Further research needs to focus on
testing TOC: on different industrial
settings and a variety of scheduling
problems.
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thg
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J[JUV/?C?l (If
~ l ~ d l / c h Jl<CSCf?YC/l,
tl 35, ( h ) ,
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sclicduliiig, Irrtrv~iatiowal Joiirrrcrl (I[
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3042
Dr Mabel Qiu is with f k e Schod of Busi-
npss and Economics, Lorz~qwood Co//e$,
Farnzuilk, VA 23909. Di Lawreme
F:vedei/dall is iuiik t k e Dcpartrmwt qf
Marqemew t, Clemsor/ U/7ivevsity, C I P- ~
S O M , SC 29634. Dr Zkiwei Zku ic
witk the Dyartnient (rfUSAI; Uniuevsify
a ai Lafiycttc, L&)vtte,
LA 70504. T h y rtiay be corztacted by
c-tmi/ir<y zxk u @lo CI isiarza. cdir
0IEE 2002
I95