Theory of Constraint
Abstract (no WIKI functionalities has been used in this version)
The underlying assumption of Theory of Constraint (TOC) is that the performance of a system constraint will determine the performance of the organization. A constraint is anything that limits or prevents higher system performance relative to the goal. The constraint is the weakest link in the chain. A Five Focusing Steps methodology is used to identify an eliminate constraints of an organization as well as being a tool for continuously improvement in the organization. Primarily we would find TOC and Constraint Management applied in manufacturing and scheduling where the speed of a constraint sets the pace of a process in a production line. However TOC was extended to apply an execution of a project as well.
1. General overview
The methodology Theory of Constraint (TOC) was introduced by E. Goldratt in the book “The Goal” in 1984 (REF5), but the roots of TOC can be traced back to the development of the software Optimized Production Technology OPT in the late 1970s (REF6, page 648).
1.1 Assumptions
A main assumption in TOC is that the primary goal of a business is to “make more money now and in the future without violating certain necessary conditions”. (REF, p 649) To obtain this goal according to TOC an organization can be measured and controlled by three measures: Throughput, operational expense and investment (originally called inventory). Throughput, which is the most important measure according to Goldratt, measures the rate at which an organization generates money through sales. Investment is the money tied up in physical things like inventory, equipment, real estate etc.) Whereas operating expense is money spent to create output other than variable costs (capacity cost, taxes, utilities etc.) Another assumption in TOC states that every business has at least one constraint. A constraint (in manufacture often called a bottleneck) is anything that prevents an organization from making progress towards its goal of earning money. See list of constraints in below table 1
Constraint table 1.
1.2 Two perspectives of TOC
TOC can be seen from two perspectives: the perspective of a business system and the perspective of an ongoing improvement process itself (REF6, p 649).
1.2.1 TOC as a Business System
Seen from a business system viewpoint TOC emphasizes change process implemented in three levels: the mindset of the organization, the measures that drives it and the methods employed within the organization (REF6, p. 649). From previous sections we know that according to TOC in very process there is a constraint and that the total throughput can only be improved when the constraint is improved / eliminated. Accordingly, Goldratt introduced a “Five Focusing Steps” methodology to identify and eliminate constraints as well as being a tool for continuously improvement in the organization. See figure 1
Figure 1 The Five Focusing Steps methodology
Table 2 Description of the steps in the Five Focusing Steps methodology.
Goldratt introduced different tools to describe / analyse the process and to develop a constraint schedule to manage buffer inventory in an organization. One of the most known is “Drum-Buffer-Rope” (DBR), which is a method of synchronizing a production to the constraint while minimizing inventory and work-in-process. Figure 2 illustrates an example of DBR.
Figure 2 Example of DBR tool for CT tubes
To protect a constraint (bottleneck) which in this example is the chroming process of a special tube (called CT) in a production line a certain buffer (level of inventory) is maintained ahead of this bottleneck. All other operations are subordinate to secure that the buffer is never idle. The drum is the constraint and the speed at which the constraint runs. It sets the beat (pace) of the process which - in the end - determines the throughput. The rope is a signal generated by the constraint indicating that some CTs have been consumed which triggers the start for new CTs to be processed in the flow.
1.2.2 TOC as an On-going Improvement Process
If you look at TOC from the perspective of an on-going improvement process TOC suggest that an organization must answer three fundamental questions concerning change in order to accelerate its improvement process: 1. What needs to be changed? (How to identify the weakest link (the constraint) in the organization?) 2. What should it be changed to? (How can the organization be strengthened by developing good and practical solutions around the constraint?) 3. What actions will cause the change? (How should the organization implement the solutions?) Goldratt and his team developed a whole set of techniques known as the Thinking Process to address these questions for example: a. The Strategic Current Reality Tree Technique which identifies the root causes behind the mismatch between where the organization is today and where it wants to be at the end of the planning horizon (desired stage).
b. Evaporating Clouds is used to put focus on the root causes of the gaps identified under a. This technique can root out and resolve the conflicts behind the root cause as well as the resistance towards change in the organization.
