Theory of Constraints (TOC)

Theory of Constraints (TOC)

The Theory of Constraints asserts that the constraint determines the performance of the system. By finding what constraints the organisation / team in meeting the goals and focusing on managing and improving these we can maximise the performance of the overall system. Focusing on and improving anything that is not a constraint does not improve the overall system. There are 5 key steps in the Theory of Constraints process:

In the book “The Goal” by Eliyahu Goldratt it was established that by following these 5 steps, bottlenecks could be overcome:

1. Identify the system’s constraints – These can be internal or external and can be tangible or intangible (like a policy).
2. Decide how to exploit the system’s constraints – How to get the best out of the constraint. Remember – manage the resources of everything that is not a constraint.
3. Subordinate everything else to the above decision – Everybody works at the pace of the bottleneck – no faster, no slower – to avoid overloading the bottleneck with work in progress.
4. If after doing points 1 – 3 more capacity is still needed to meet demand then elevate the system’s constraints – Continuous attention to a constraint will foster ideas and will eventually break the constraint.
5. If in the previous steps a constraint has been broken, go back to step 1 – Don’t allow inertia to cause a system constraint – always go back to the beginning and look again.

These are called the 5 steps of TOC and provide the foundation for many of TOC’s generic solutions, which include, the management of processes, inventory, supply chains, product development and projects (single and multiple), personnel and decision making.

Maximise Throughput while Minimising Inventory and Operating Expense

Although the above 5 steps of TOC can be applied to every process at every level in an organisation, which is how TOC is frequently often implemented, the true power – and results – comes from:

  • Understanding the inter-dependencies between and across processes that contribute to delivering a product or service,
  • Understanding the impact that those inter-dependencies and normal variability have on their combined, overall performance, and
  • Appropriately buffering for inter-dependencies and normal variability so that performance can be predictably and consistently high

Understanding these three points allows the 5 steps of TOC to be much more than simply another methodology for consistently and significantly increasing the overall performance of systems.