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TOC for Electric Utility industry.........................Part 1

Being a big fan of Dr. Eliyahu Goldratt's philosophy of Theory of Constraints, I always thought, how effectively can we apply the concepts of TOC to the Utility industry Asset management? As illustrated by Dr. Goldratt in his best seller novel 'The Goal' (novel for a management philosophy sounds abnormal but it is a novel), the ultimate objective of any organization is to make money now and in future. Here in relation to an electric utility industry I would like to modify it to say that its goal is to make money with minimum additional capital investment (I guess that would be true for any other industry as well). An electric utility industry being an asset intensive industry the focus of TOC would be more on to reduce the equipment down time to increase the total throughput of the system rather than just adding the extra capacity. This is just not applicable to the Generation side of business but also relevant for the T&D business functions.

The revenue that utility earns is through the power and services that it provides to its customers. No doubt with combined T&D and power trading these organizations are able to sell all that they have generated. But this means for a utility to grow it would need to increase its generation capacity while it is trying to grow on customer base. This would bring it back to the volume game which is prevalent everywhere which satisfies one part of its Goal to make money but does not guarantee  the higher return on investment. To achieve this goal the utilities are already focusing on the asset management which will minimize the down time thereby increasing their efficiency.

The basic philosophy of TOC is to identify the system constraints, help the organizations to remove the constraint thereby helping them to achieve the overall organization objective or Goal. The constraint can be a machine, human resource, process or a procedure which restricts the throughput of a system.

This is where the thought process begins to effectively use the TOC management techniques to identify, exploit, subordinate and elevate the constraints to achieve the ultimate organizational goal. The objective of all other improvement initiatives like TPM, RCM, Lean or even Six Sigma is to improve your system efficiency thereby increasing the throughput. And to achieve this improvement no single strategy is sufficient but its intelligent mix of these improvement initiatives across the different functions.

One of the important maintenance activities in utility world is the generation plant overhauls. These events are to be planned to the minutest detail and executed with utmost supervision to successfully complete the activity and make the plant ready for power generation, but I am not sure if TOC was ever applied to a plant overhaul activity or if it can be applied or not. TOC however has been demonstrated to bring in good improvements in such big maintenance programs. The theory helps in identifying the constraints and planning around it to exploit the constraint without piling up the excess inventory for the repair work. These programs may start with disassembly of various units of power plant and unintentionally push the parts for repair to the repair shops without considering the resources (material, tools, services and manpower) availability for completing the work. Though the plant overhaul is a planned activity it brings lot of surprises in terms of addition of new repair work which was not anticipated by the planner. This is where planning and scheduling around the constraint resources is important to avoid overshoot of overhaul activity and excessive inventory piling. The entire overhaul activity is quite huge activity and has different processes involved in it. First step of TOC is to identify the constraint in the system. There is at least one or at most times multiple constraints in the system. TOC provides different tools and techniques to derive the cause and effect relationship which help the TOC champion to arrive at the real root-cause that affects the systems throughput. This overhaul is managed as a Project and hence each project should have a critical path which if impacted could increase or help decrease the overall project duration. This critical path can be analyzed using TOC's critical chain concept to identify the weakest link in the chain. If a utility is able to identify its constraint in the plant overhaul process it would be able to reduce the effective system downtime or at least be able to avoid the delays that are anticipated in the process.

More in next blog


A nice write up Abhijeet! “The Goal” by Goldard is indeed a great novel, a unique writing style and the best part – his funny notes for explaining the complex ToC concept. I certainly see a potential of applying ToC in the work management. For Instance, a major equipment breakdown would require a well-coordinated Inventory stocking /procuring of spares and making them available at the right time for the identified constrains in the critical path for reducing downtime. This will be a key determinant of a successful work planning. Looking forward for the Part 2

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