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The Theory of Constraints is a business philosophy first introduced in 1984 by Dr. Eliyahu M. Goldratt. In his novel The Goal, Goldratt suggests that productivity in any system is hampered by limitations or bottlenecks that delay key processes. Goldratt refers to these bottlenecks as constraints, from which his theory derives its name, and states that every system has at least one constraint that limits its maximum capacity. He’s Theory of Constraints offers a five-step procedure designed to improve efficiency, productivity, and profitability by managing or circumventing these constraints, thereby increasing the capacity of the entire system.
Goldratt’s Theory of Constraints takes a logic-based approach to problem solving and relies on measurable data to determine goals. The three measures that attract your attention are revenue, usually defined in terms of sales, operating expenses, and inventory. He suggests that by following his five-step process, throughput can increase while operating expenses and inventory decrease, making the entire operation more profitable.
Implementing the theory of constraints is a fairly simple process. The first step is, of course, to identify a single constraint, preferably the most restrictive bottleneck in the entire system. Then, in a process that Goldratt calls “exploiting the constraint,” the activities of the chosen constraint are examined, with particular attention to dedicating that element to maximum efficiency focused entirely on a single primary function, thus ensuring that efforts related to the restriction is in place. homework and are not wasted on any non-essential activities.
In the next step, the focus shifts from the constraint to the activities and processes that are holding back or the resources that are not constraining. Instead of slowing these items down to match the pacing of the constraint, the downtime of these other resources is subordinated to help overcome the limitations of the constraint. In this system, previously inactive items would be transferred to a child task, which helps reduce the constraint constraint. So, for example, warehouse teams waiting for the finished product can help with manufacturing or packaging to speed up production.
Once this subordination has been carried out, it must be determined whether productivity has increased sufficiently. If not, more drastic changes may be necessary to increase the capacity of the restriction. Once the bottleneck is overcome and the rest of the system is no longer slowed down, it is no longer a constraint. The last step in using the Theory of Constraints is to go back to the first step and identify a new constraint.