The Theory of Constraints is a methodology for identifying the most important limiting factor that stands in the way of achieving a goal and then systematically improving that constraint until it is no longer the limiting factor. In a manufacturing business, the restraint can be referred to as a bottleneck.
The Theory of Constraints uses a scientific approach to improvement and it hypothesizes that every complex system, consists of multiple linked activities. Each one of them acts as a constraint on the entire system.
Which methods does the Theory of Constraints employ?
- Five focusing steps.
- Thinking processes.
- Throughput accounting.
Dr. Eliyahu Goldratt created the Theory of Constraints and he introduced it to a wide audience through his bestselling novel in 1984. It was titled “The Goal” and since then, the Theory of Constraints has continued to evolve and develop. It is a significant factor within the world of management best practices.
One of the most appealing characteristics of the Theory of Constraints is that it inherently prioritizes improvement activities in a business and the current constraint is always the top priority.
When there is an urgency to improve, the Theory of Constraints offers a highly focused methodology to create rapid improvement.
The following benefits will come from successful implementation:
- Profit increase which is the primary goal of the Theory of Constraints for most companies.
- Rapid improvement by focusing all attention on the system constraint
- Improved capacity by enabling more products to be manufactured.
- Reduced leading times by smoother and faster product flow
- Reducing inventory to avoid bottlenecks.
Five focusing steps:
The goal of a commercial organization is to make more profit in the present and future. Throughput accounting gives these measurements as throughput, inventory and operating expenses.
The Five Focusing Steps are further described in the following table.
|Identify||Identify the current constraint which can be defined as the single part of the process that limits the rate at which the goal is achieved.|
|Exploit||Make quick improvements to the throughput of the constraint using existing resources.|
|Subordinate||Review all other activities in the process to ensure that they are aligned with and truly support the needs of the constraint.|
|Elevate||If the constraint still exists, consider what further actions can be taken to eliminate it from being the constraint. Normally, actions are continued at this step until the constraint has been “broken”. Some circumstances might call for some capital investment.|
|Repeat||Use the same process for all the constraint you have and remember, no business is perfect and there will always be constraints.|