Theory of Constraints
The Theory of Constraints is an organisational improvement methodology that is focused on profit improvement. The essential concept of TOC is that every organisation must have at least one constraint. A constraint is any factor that limits the organisation from getting more of whatever it strives for, which is usually profit. In a manufacturing environment for example, constraints occur as a result of the following three factors:
- Low through-put in operation => high cycle-time in relation to adjacent processes
- Low availability => Down-time can create constraints even on relatively fast processes
- Low Quality Yield
This relationship also applies to many non-manufacturing organisations. The constraints are often hard to identify but they still exist, such as market demand, or a sales department’s ability to translate market demand into orders, payroll departments processing huge amounts of timesheets always only in one or two of the first days of the month and various other examples.
The Theory of Constraints defines a set of tools that change agents can use to manage constraints, thereby increasing profits. Most businesses can be viewed as a linked set of processes that transform inputs into saleable outputs. TOC conceptually models this system as a chain, and advocates the familiar adage that a “chain is only as strong as its weakest link. Since the focus only needs to be on the constraints. Implementing TOC can result in substantial improvement without tying up a great deal of resources, with results after three months of effort.