While the focus of the theory and the ensuing improvement is the constraint, there are important assumptions that are considered vital to the success, or to some the downfall, of the theory. Goldratt asserts that all organizations and processes can be measured by three characteristics: Throughput, Operating Expense, and Inventory. Of course, by measuring these three characteristics, we can then track and therefore control them. The variations that are inherent in these is what leads to the constraint.
A good example is to look at an organization and its three characteristics. Throughput can be viewed as sales, or even the revenue generated through these sales, Operating Expense is exactly that, and Inventory is reflected in the investment in goods or services that the organization participates in to sell their own goods and services.
By measuring all of these characteristics, and tracking and controlling them, we can identify the constraints upon which this theory is built. These constraints are the heart of the theory, and state that there is always at least one, and at most very few, constraints that are holding the organization back from either fulfilling the goal or limiting the rate at which the goal is achieved. These constraints may be internal or external. Some examples of internal constraints are equipment, people, and policy.
The key to success, Goldratt claims, is to follow “five focusing steps”, which assist in identifying the constraint and destroying it such that we are no longer constrained by that specific constraint and instead another constraint takes its place. It is imperative to understand that a constraint always exists, but the limiting constraint may change as they are identified and improved or cleared.
If you assume that the goal is clearly articulated, then the five focusing steps are:
1. Identifying the constraint. This is the resource or policy that is preventing the organization from achieving the specified goal. This is found by monitoring the three characteristics as defined previously.
2. Exploiting the constraint. Ensuring the constraint’s full resources, attention, and intention are dedicated toward the goal. Then, identifying ways in which more resources, attention, and intention can be focused solely on the limiting constraint.
3. Subordinating all other resources and processes. This entails taking full inventory of the processes and resources available to the organization and dedicating them toward supporting the exploitation determined in step 2. This usually includes aligning the entire organization around the decision behind step 2.
4. Elevate the constraint, if necessary. If necessary, dedicate more resources or processes toward eliminating the constraint outlined, or perhaps place more resources on the constraint so the constraint’s capacity is increased.
5. Re-evaluate the constraint, and repeat with step 1. Over the course of accomplishing steps 1-4, the constraint may have shifted or changed. Re-evaluate the constraint and start again from step 1. One very important characteristic to note is the propensity to continue with step 4 indefinitely, not recognizing that there is a new constraint.
If managed correctly, this is a constant cycle which is repeated indefinitely, and is identified by Goldratt as the Process of Ongoing Improvement (POOGI).
Like anything else, there is always variation when we measure our three characteristics. Because of this, Goldratt preaches the use of buffers, particularly during the exploiting and subordinating stages, to eliminate or reduce the variation effect on the constraint. According to the TOC model, the organization should always be able to output up to the capabilities of the constraint. With the buffers, that constraint is constantly the constraint, ensuring no other piece of the organization becomes the constraint.
The Theory of Constraints can be used by any complex system or organization in which the desired outcome is a goal that is either achieved faster or more cost effectively. By systematically reducing the constraints that keep us from attaining this goal, we dedicate more resources toward the constraint and less toward other operations that are not constraining the process. You should use this tool over others when your organization cannot define what the single most constraining process is that is affecting your organization’s process capability.
A good example is one of a widget manufacturing line that has been manufacturing widgets for the last 20 years. The company has used lean and six sigma for the last 10 years to bring its costs down significantly, and is now the leading manufacturer of widgets across the country.
A manager has been brought in to analyze the process used to manufacture the widgets and recommend areas for additional improvement. The manager, has decided to use TOC as a tool. He then took about 16 weeks to measure the throughput of every workstation and has found that a single workstation is the constraining factor. They are constantly working on a backlog, and while lean processes have cut their production time by half, they are still the weakest link in the chain.
Management decided to put a second workstation dedicated to that constraining factor, therefore doubling the capacity of the constraint, and thus increasing the capacity of the line. While the cost was increased twofold, so was the production output, allowing the organization to increase their sales offerings and double their revenue.
The Theory of Constraints is a process for ongoing, continuous improvement of a process or organization. By taking this tool onboard and implementing it, you will find the most constraining factor that is holding back your company from its best performance.