The Theory of Constraints (TOC) was invented by Goldratt and has been defined as “a management philosophy that focuses on the weakest rings of the chain”. The TOC is principled on the rationale of a throughput perspective, seeking to increase the production flow and decrease operation expenses and inventory. It also aims to alleviate problematic areas within the operation, improve service times, information flows, sales and logistics functions. These in turn result in increased profits and customer satisfaction which are the main objectives of a company.
The Five-Step Focusing Process
The Theory of Constrains puts forwards a specific methodology for identifying and eliminating the constraints within an organization. This methodology is referred to as the Five-Step Focusing process and is a cyclical process.
1. Identify the system’s constraints and prioritize them: In the first step of the process, the company must identify the system’s weakest link. This might be something tangible or intangible.
2. Decide how to exploit the constraints: Before undergoing any expensive changes, it is first important to try using the capacity already in place in order to optimize this process.
3. Subordinate everything else to the above decision (avoid starvation of constraint): Any non-constraint components should be adjusted in order to provide the constraint the ability to operate at the maximum efficiency.
4. Elevate the system’s constraints: In the case that steps 2 and 3 did not work, the next step is to take action in order to eliminate the constraint including any major changes and upgrades.
5. Prevent Inertia: If in any of the previous steps a constraint is broken, go back to step 1.
Critical Success Factors
Constrains represent possible opportunities for improvement but in order for this to happen TOC must be implemented correctly. Some critical success factors are:
- Cooperation and knowledge within the organization.
- Culture of ongoing improvement, supported by the focusing process and the DBR approach for effective planning and scheduling
- Measures of performance
- Alignment to company mission and vision
- An implementation plan
Barriers to implementation
Some of the most common barriers to the implementation of the Theory of Constraint are:
- Resistance to change and reluctance to shift to the adoption of TOC.
- Lack of an implementation plan and preparation
- Lack of resources and capabilities to accommodate TOC measures.
- Lack of knowledge by top management
- Lack of training and understanding by the workforce
- Lack of effective measurement criteria and evaluation procedures.
Benefits of TOC
The benefits of TOC in the service setting are illustrated through Balderstone and Mabin’ study (2012) that has yielded significant results, with a 69% mean a reduction in lead time, 66% mean reduction in cycle times, 60% mean improvement of due-date performance, 50% mean reduction in inventory levels and finally a 68% mean increase of revenues or throughput. Therefore, TOC’s holistic approach effectively identifies the weakest link of the service system and alleviates the weight on bottlenecks that hinder the organization from achieving its objectives. Resulting, TOC increases performance, profits and decreases operating expenses.