Product mix optimization and system analyze with the theory of constraintsapproach

Businesses need to manage their production processes effectively in order to maintain their competitiveness in the digitalizing international market with rapidly advancing technology. Producing only products or providing services has lost its competence in such a global environment. Increasing profitability has a great importance considering the current economic conditions and cost items in the production process. Theory of constraints is a very important management discipline which argues that there is at least one limited resource in each production system and a solution should be found for this limited resource in order to increase the market share and profitability of firms. As the bottleneck in the system is identified and managed, the productions will be produced on time and presented to the customer, since the waitings in the production process will be eliminated. Moreover, costs will be reduced as the efficiency of the bottleneck in the production line will be increased, thus the company can reach its profitability target. The aim of this study is to determine the optimum product mix under the presence of limited resources in the system with the five-step continuous improvement process of the theory of constraints. Within this framework, research has been conducted to solve the multiple bottleneck problems in a company operating in the metal processing industry. In the application, by analyzing capacity utilization rates of the resources bottleneck resources in the system were identified and the optimal product mix was determined. A new algorithm was proposed with the alternative scenario and the results were compared with the current situation. The problem was stated as an integer linear programming model and solved by optimization package program called GAMS.ide.