Theory of constraints

The theory of constraints (TOC) is a management paradigm that views any manageable system as being limited in achieving more of its goals by a very small number of constraints. There is always at least one constraint, and TOC uses a focusing process to identify the constraint and restructure the rest of the organization around it. TOC adopts the common idiom “a chain is no stronger than its weakest link”. That means that organizations and processes are vulnerable because the weakest person or part can always damage or break them, or at least adversely affect the outcome.

The Theory of Constraints provides a powerful set of tools for helping to achieve that goal, including:

• The Five Focusing Steps: A methodology for identifying and eliminating constraints
• The Thinking Processes: Tools for analyzing and resolving problems
• Throughput Accounting: A method for measuring performance and guiding management decisions

The five focusing steps

Theory of constraints is based on the premise that the rate of goal achievement by a goal-oriented system (i.e., the system’s throughput) is limited by at least one constraint.

The argument by reductio ad absurdum is as follows: If there was nothing preventing a system from achieving higher throughput (i.e., more goal units in a unit of time), its throughput would be infinite which is impossible in a real-life system.

Only by increasing flow through the constraint can overall throughput be increased.

Assuming the goal of a system has been articulated and its measurements defined, the steps are:

• Identify the system’s constraints.
• Decide how to exploit the system’s constraints.
• Subordinate everything else to the above decisions.
• Alleviate the system’s constraints.
• Warning! If in the previous steps a constraint has been broken, go back to step 1, but do not allow inertia to cause a system’s constraint.

Constraints

A constraint is anything that prevents the system from achieving its goal. There are many ways that constraints can show up, but a core principle within TOC is that there are not tens or hundreds of constraints. There is at least one, but at most only a few in any given system. Constraints can be internal or external to the system. An internal constraint is in evidence when the market demands more from the system than it can deliver. If this is the case, then the focus of the organization should be on discovering that constraint and following the five focusing steps to open it up (and potentially remove it). An external constraint exists when the system can produce more than the market will bear. If this is the case, then the organization should focus on mechanisms to create more demand for its products or services.

Types of (internal) constraints

• People: Lack of skilled people limits the system. Mental models held by people can cause behaviour that becomes a constraint.
• Equipment: The way equipment is currently used limits the ability of the system to produce more salable goods/services.
• Policy: A written or unwritten policy prevents the system from making more.

Plant types

There are four primary types of plants in the TOC lexicon. Draw the flow of material from the bottom of a page to the top, and you get the four types. They specify the general flow of materials through a system, and also provide some hints about where to look for typical problems. This type of analysis is known as VATI analysis as it uses the bottom-up shapes of the letters V, A, T, and I to describe the types of plants. The four types can be combined in many ways in larger facilities, e.g. “an A plant feeding a V plant”.

• V-plant: The general flow of material is one-to-many, such as a plant that takes one raw material and can make many final products. Classic examples are meat rendering plants or a steel manufacturer. The primary problem in V-plants is “robbing,” where one operation (A) immediately after a diverging point “steals” materials meant for the other operation (B). Once the material has been processed by A, it cannot come back and be run through B without significant rework.
• A-plant: The general flow of material is many-to-one, such as in a plant where many sub-assemblies converge for a final assembly. The primary problem in A-plants is in synchronizing the converging lines so that each supplies the final assembly point at the right time.
• T-plant: The general flow is that of an I-plant (or has multiple lines), which then splits into many assemblies (many-to-many). Most manufactured parts are used in multiple assemblies and nearly all assemblies use multiple parts. Customized devices, such as computers, are good examples. T-plants suffer from both synchronization problems of A-plants (parts aren’t all available for an assembly) and the robbing problems of V-plants (one assembly steals parts that could have been used in another).
• I-plant: Material flows in a sequence, such as in an assembly line. The primary work is done in a straight sequence of events (one-to-one). The constraint is the slowest operation.

Applications

The focusing steps, this process of ongoing improvement, have been applied to manufacturing, project management, supply chain/distribution generated specific solutions. Other tools (mainly the “thinking process“) also led to TOC applications in the fields of marketing and sales, and finance.

A successful Theory of Constraints implementation will have the following benefits:

• Fast Improvement: a result of focusing all attention on one critical area; the system constraint.
• Increased Profit: the primary goal of TOC for most companies.
• Improved Capacity: optimizing the constraint enables more product to be manufactured.
• Reduced Inventory: eliminating bottlenecks means there will be less work-in-process.
• Reduced Lead Times: optimizing the constraint results in smoother and faster product flow.