A Systematic Approach Theory of Constraints


By

Saji Joseph
Bhargav Pandya
Lecturer
Shree Leuva Patel Trust MBA Mahila College
Amreli (Gujarat)
E-mail:
bhpandya@rediffmail.com
 


Background:

The Theory of Constraints (TOC) is a philosophy of management and improvement originally developed by Eliyahu M. Goldratt and introduced in his book, The Goal. It is based on the fact that, like a chain with its weakest link, in any complex system at any point in time, there is most often only one aspect of that system that is limiting its ability to achieve more of its goal. For that system to attain any significant improvement, that constraint must be identified and the whole system must be managed with it in mind.

The body of knowledge and analytical tools (the TOC Thinking Processes) that give power to TOC come from experience in the "accurate sciences" and are based on rigorous, but easily understood, cause-and-effect logic. These tools also provide the ability to support the development of breakthrough solutions through the premise that in the real world, all systemic conflicts that inhibit action are the result of unexamined assumptions that can be identified and corrected for true win-win solutions.

The TOC Thinking Processes, taken as a whole, provides an integrated problem-solving methodology that addresses not only the construction of solutions, but also the need for communication and collaboration that successful implementation requires. They have been used to create powerful generic, "starting-point" solutions for various business functions, including:

Production, project management, distribution, supplier relations and marketing

What exactly is Theory of Constraints?

A number of things actually, but mostly it is a Management Philosophy. It is a set of principles for improving performance, a process approach to running our offices, and a framework to identify and remove constraints.

What exactly do we mean by "theory?"

According to The American Heritage Dictionary (4th Edition, ©2000 by Houghton Muffin Co.), the definition of theory is:

  • A set of statements or principles devised to explain a group of facts or phenomena, especially one that has been repeatedly tested or is widely accepted and can be used to make predictions about natural phenomena.
  • A belief or principle that guides action or assists comprehension or judgment.

Exactly how much has Theory of Constraints been used?

Theory of Constraints is widely taught and accepted. It is taught in numerous MBA programs and is practiced in numerous and various organizations throughout the world, including public sector service organizations.

What exactly does Theory of Constraints do in the workplace?

Theory of Constraints treats the office as a complete system, not as a collection of independent processes. It involves using special thinking processes. The key is BALANCE (Remember our motto?).

Using Theory of Constraints, we can define our goal - in this case, to improve customer service, maximize federal incentives, and increase collections. We re-examine all actions and measures for how well or how poorly they serve the goal, and from that, make local operating decisions based on the Theory of Constraints.

And by doing that, we could possibly break down constraints for more effective use of time, resources, and results?

Constraints:

The word constraint has been said a lot when discussing this, but what "exactly" is a constraint and how does it affect us? A constraint is anything that limits us from moving toward our achieving our goal. They can come from resources, the environment, even policy.

Constraints can include any of the following:

    Bottlenecks Excess Inventory Excess Capacity Backlogs Schedules Dockets Waiting Room or Parking Lot Space Inefficiencies Time Frames Lack of Priorities Lack of Productivity CSRP Slots 

The output of any system that has multiple steps, where the output of one step depends on the output on the previous step(s). Therefore, the output of one step dependent on a previous step could be limited, or constrained, by the Least Productive Step. If a certain step is low productive, all steps following it have to be low productive, no matter what their abilities are.

In other words, the strength of any chain depends on the weakest link.
(Hey, it's just like that game show!)

So the key is to find out where that "weakest link" is and strengthen it, which will turn not only strengthen it but all processes following it.

Goals

There are two very important goals we wish to accomplish when using Theory of Constraints:

    • INCREASE THROUGHPUT
    • DECREASE INVENTORY

What does this mean for Work SMART? Well, let's take a look at what we consider our throughput and inventory:

Throughput = the number of obligations your office establishes Inventory = all unobligated cases

Once that is figured, you can take those goals and add more details, so that you can define your goal in your office.

5 Steps to Addressing Constraints

Here are five important steps in taking care of constraints:

    • Identify
      Identify the constraint in your office that most impedes you from achieving your goal (Hint: Look for bottlenecks, excess inventory, backlogs, inefficiencies).
    • Exploit
      Decide how to manage or limit that constraint.
    • Subordinate
      Make every decision and action in the whole office support reducing and eliminating that constraint.
    • Elevate
      Continue to work toward breaking constraints.
      Then...
      ...once you "break" a constraint, start over at the beginning.

WHAT???

That's right, go back to Step 1 and do it all over again. Remember this, there will always be another constraint somewhere in the system.

Author Gerald Weinberg once said, "Once you solve your number one problem, number two gets promoted." Since you fixed one constraint, that means that something else in the process is now the constraint, which means you have to follow these steps again to find and eliminate that constraint. Then, so on and so on.

Basic Logical Tools:


Common Sense

The Theory of Constraints is a compilation of "common sense" approaches to teaching managers, division directors, and organizations as a whole to return to the underlying principles that started the organization. It is a reminder that the organization does not achieve the set goals without all areas functioning together as a whole.

Links in a Chain

The Theory of Constraints is a way of looking at production systems that assumes all tasks are connected like the links in one chain or a network of chains. Within this network of chains, there is one or several links, called constraints, which will limit the amount of work, or throughput that can be performed within a specific period of time. The Theory of Constraints identifies your process constraints, optimizes the constraint and thus improves productivity within the entire workflow.

SUMMARY --

The Theory of Constraints and the Thinking Process tools are already being used to great effect in many companies throughout the world. These companies manage change, rather than letting change manage them. Many of them already have reported astounding results.  For example, Avery Dennison reported a 20% increase in market share only 18 months after adopting the Theory of Constraints.  One Vice President of Texas Instruments recently reported that that company improved operations to the extent that it could defer a $600 million investment in new plants.  Results such as these suggest that the Theory of Constraints will soon sweep not the nation but the world.  Last year, Toyota expressed an interest in the subject.

References:

    Krajewaski, Ritz man Larry, Operations Management, New Delhi, Pearson Education 6th Edition
    Mukhopadhyay S.K. Theory of Constraints, Mumbai, Jaico Publishing House, 2005.
    www.triz-journal.com
    www.anshawn.com
     


Saji Joseph
Bhargav Pandya
Lecturer
Shree Leuva Patel Trust MBA Mahila College
Amreli (Gujarat)
E-mail:
bhpandya@rediffmail.com
 

Source: E-mail September 21, 2005

  

Back to Articles 1-99 / 100 onwards / Faculty Column Main Page

 

Important Note :
Site Best Viewed in Internet
Explorer in 1024x768 pixels
Browser text size: Medium