The goal of applying the theory of constraints, or TOC, is to increase profit by increasing the company’s throughput. Throughput is the rate at which a company can produce and deliver a product or service to their customers. It is essentially the speed of production. To meet this goal, there are three objectives that the company must adhere to, and those are:
- Maximizing throughput
- Minimizing inventory
- Minimizing operating expenses
If any of these objectives are not met, then the overarching goal of meeting company throughput standards will fail.
Now, how to go about these objectives is another matter that must be discussed. Use the five focusing steps of the theory of constraints to alleviate throughput inhibitors such as bottlenecks. The first is to identify the existing constraints. Those can include anything from:
- Physical constraints such as equipment problems, material shortages, or lack of employees.
- Policy constraints meaning the way people work such as company procedures, government regulations, etc.
- Paradigm constraints meaning established habits that may not be seen as problems to those who have followed them for so long.
- Market constraints meaning when production exceeds the rate of sales.
Once the constraints have been identified, the next four steps in this process include:
- Deciding how to exploit the constraint – Use existing resources to make quick improvements.
- Subordinating all other activities – Make sure all other activities are aligned with the needs of the constraint.
- Elevating the performance of the constraint – If the constraint still exists with those new adjustments, keep trying new ones until the issue has been solved.
- Repeating the process – This is a cyclical process. Once a constraint has been fixed, there will be another and another. There is always room for improvement which means that this is a long-term activity rather than a “only perform it when needed” activity.
The theory of constraints is an extremely valuable tool when it comes to facility efficiency and continuous improvement. Consider implementing it into your process.
Similar Glossary Terms
- Queuing Theory
- Inventory Control
- CTQ Tree
- Voice of Customer (VOC)
- Six Sigma Defined
- Continuous Improvement
- Robotic Process Automation (RPA)
- Hoshin Kanri