The Theory of Constraints is an organizational change method that is focussed on profit improvement. The essential concept of TOC is that every organization must have at least one constraint. A constraint is any factor that limits the organization from getting more of whatever it strives for, which is usually profit. The Goal focuses on constraints as bottleneck processes in a job-shop manufacturing organization. However, many non-manufacturing constraints exist, such as market demand, or a sales department’s ability to translate market demand into orders.
The Five Steps of the Theory of Constraints
- Identify the System Constraint
The part of a system that constitutes its weakest link can be either physical or a policy.
- Decide How to Exploit the Constraint
Goldratt instructs the change agent to obtain as much capability as possible from a constraining component, without undergoing expensive changes or upgrades.
An example is to reduce or eliminate the downtime of bottleneck operations.
- Subordinate Everything Else
The non-constraint components of the system must be adjusted to a "setting" that will enable the constraint to operate at maximum effectiveness. Once this has been done, the overall system is evaluated to determine if the constraint has shifted to another component. If the constraint has been eliminated, the change agent jumps to step five.
- Elevate the Constraint
"Elevating" the constraint refers to taking whatever action is necessary to eliminate the constraint. This step is only considered if steps two and three have not been successful. Major changes to the existing system are considered at this step.
- Return to Step One, But Beware of "Inertia"
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