What is the Theory of Constraints
While planning any important task, most of us do not consider non-critical activities that might introduce a risk to our task. This issue becomes very relevant in case of projects with tight schedules. Theory of Constraints (TOC) was developed by Eliyahu Goldratt in the 1980s and it is considered to be an improvement to CPM.
Theory of Constraints is a business philosophy which tries to strive towards the ultimate objective of a system by understanding the underlying cause, effect dependency and variation of the system. This theory can be applied to both for-profit and not-for-profit organizations and Eliyahu Goldratt claims that the theory of constraints can resolve some permanent problems of organizations.
A constraint is anything that limits the organization from achieving its goal. The Theory of Constraints provides a practical framework for organizations with a focused approach and tries to resolve conflicts between local operating level decisions and global company goals.
As per Theory of Constraint, it is difficult for a system to be better than its weakest part and the improvement of a project and its schedule requires identification and migration of this constraint. In other words, processes or organizations are always vulnerable because a weakest part or person can damage or at least adversely affect the output. Of course, there should be a specifically defined goal before applying TOC.
Theory of Constraints recognizes two types of constraints: physical constraints and non-physical constraints:
- A physical constraint is something that is rigid and has a limit on its ability or throughput in its current state. An example of physical constraint is a machine which can only produce a specific amount of power at a given RPM.
- A non-physical constraint is something like demand for a product or company procedures etc.
Most constraints in today’s organizations are policy constraints. Studies show that most constraints in organizations are their own creation. Never allow inertia to become a constraint.
There are five powerful steps involved while applying TOC starting from identification of the constraint to elevating the constraint. The result is dramatic improvements in achieving the goals.
The following are the steps in applying the Theory of Constraints:
- Identify the system’s constraint(s). Often, it is difficult to identify the constraint and you might have to conduct brainstorming and root cause analysis activities to identify the actual constraint.
- Once the constraints are identified, then the next step is deciding how to exploit the constraints. Organizations need to decide how to get the maximum output out of the constraint in its current state.
- Subordinate everything else in the organization to the decisions taken in step 2. In other words, the whole organization is to be aligned to support the above decision(s).
- Elevate or break the constraints. Once we try to break the constraint, then at some point of time, the constraint will no longer be a constraint.
- If the constraint is broken, repeat the process from step 1.
These steps need to be reapplied several times to identify and eliminate all constraints and thus to ensure ongoing improvement efforts are focused on constraints. It is referred to as Process of Ongoing Improvement (POOGI).