In a dynamic environment where the product mix and customer requirements are continuously changing, it is critical to quickly identify what is constraining the enterprise from being responsive and from delivering ever increasing value at a reasonable cost to customers.
The Theory of Constraints (TOC) is a commonsense way to understand a system (in this case, a business process or a project). TOC maintains that the throughput of every system is limited by at least one constraint. A constraint is anything that prevents the system from achieving more of its goal. Only by increasing flow through the constraint can overall throughput be increased. These constraints are the leverage points in the system.
The primary goal of the Theory of Constraints is to guide management toward where and how they should focus their resources to leverage the best return on investment.
The primary principle of TOC is to focus on the weakest point of the process, the constraint limiting throughput, and leverage all improvement efforts on the constraint.
In typical business processes and projects, the weakest link is a constrained resource that limits the throughput of an organization.
Finding and strengthening the constrained resource gives the greatest opportunity for measurable improvement, both within individual processes and projects and across the entire collection of an organization’s processes and projects.
Focusing on the constraint
TOC identifies the few things that make a difference in the system. It’s much easier to manage a system when you only need to pay close attention to those few things. Decisions become easier because the health of the constraint indicates how well the system is performing. If the constraint is limping, the system is limping. If it’s well, all is well.
A constraint is a positive, not a negative. It is an opportunity for management to focus on what matters, instead of wasting their time focusing on everything.
This releases management from the natural tendency to try and address everything (in effect, focus on nothing) resulting in a failure to improve.
TOC’s five focusing steps to analyze and improve any organization holistically include:
- Identify the system constraint
- Decide how to exploit (not waste) the system constraint
- Subordinate everything to the above decision
- Elevate the system constraint
- If in a previous step a constraint was broken, don’t let inertia become the system constraint, return to step 1.
Identify the constraint
There are a number of ways to identify the constraint (other than by manager intuition):
- Where is there a work backlog?
- Where do most problems occur?
- Which resources or tasks require the most management attention?
- Which resources are heavily utilized?
- Which resource is strategic and whose capacity cannot easily be augmented, is expensive, difficult to get, or cannot be easily outsourced?
- Which resources are used by the majority of the projects?
Maximize the constraint
To maximize the constraint:
- Make certain it is doing what it should be doing.
- Make certain it stops doing what it should not be doing.
- Make certain it has the right amount of work to be effective.
- Make certain it has what is needed to do the job (may include skills/information/data/knowledge, or reliability of partners/vendors).
- Make certain it is protected from delays in other parts of the system.
- Make certain there aren’t rules or business practices that inhibit the maximization of the constraint.