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The Theory of Constraints (TOC) is an overall management philosophy that has its basis in the manufacturing environment. It was developed by Dr. E. M. Goldratt. TOC recognizes that organizations exist to achieve a goal. Using the TOC philosophy enables the managers of a system to achieve more of the goal that the system is designed to produce. If, for example, the goal of a business is to make money now and in the future, it is suggested that TOC will enable the managers of the company to do so. A factor that limits a company’s ability to achieve more of its goal is referred to as a "constraint." Businesses need to identify and manage constraints. It may be relatively easy intellectually to recognize that an organization must have a constraint, but it may be quite another thing to positively identify it. In situations when the constraint can be easily identified, the five steps Process of On-Going Improvement provides the steps necessary to deal with the constraint. In situations when the constraint is not as easily identified, the Thinking Processes provides the tools necessary to identify the core problem or core conflict and the tools needed to deal with it effectively. The Process of On-Going Improvement and the Thinking Processes are summarized below. TOC, then, is a management philosophy that focuses the organizations scarce resources on improving the performance of the true constraint, and therefore the bottom line of the organization. Goldratt uses a chain analogy to help illustrate why this is an effective way to get immediate results. A manufacturing company can be thought of as a chain of dependent events that are linked together like a chain. The activities that go on in one "link" are dependent upon the activities that occur in the preceding "link." TOC says that management needs to find the weak link in the chain since "a chain is only as strong as its weakest link." Thus, a company should focus on "chain strength" (not link weight) by working to strengthen the weakest link – the constraint! The concept of the Critical Chain is presented below.3 Process of On-Going Improvement2 To manage constraints (rather than be managed by them), Goldratt proposes a five-step Process of On-Going Improvement. The steps in this process are: Identify: In order to manage a constraint, it is first necessary to identify it. Exploit: Focus on how to get more production within the existing capacity limitations. Subordinate: Prevent the materials needed next from waiting in a queue at a non-constraint resource. Elevate: If, after fully exploiting this process, it still cannot produce enough products to meet market demand, find other ways to increase capacity. Go back to Step 1. Thinking Processes5 In order to continually identify the constraints, TOC provides a theoretical framework and the tools to do so. There are five Thinking Process tools that allow executives to identify what to change in the organization, what to change it into, and how to implement the change.
Approximate Word count = 1923
Approximate Pages = 7.7
(250 words per page double spaced)
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