Theory of Constraints Assignment Help
The theory of constraints (TOC) is a management
paradigm. It views any manageable system as being limited in achieving more of its goals through a very small number of constraints. Always there is always one constraint, and TOC uses a focusing process to find the constraint and reorganize the rest of the organization around it. It adopts the common idiom which is, a chain is no stronger than its weakest link. It means that organizations, processes etc., are vulnerable because the weakest part or person can always break or damage them or at least adversely affect the outcome.
Eliyahu M. Goldratt in his 1984 book titled ‘The Goal’ introduced the theory of constraints (TOC) which is an overall management philosophy
. It is geared to help organizations continually accomplish their goals. With his book Critical Chain published 1997, Goldratt adapted the concept to project management
The underlying premise of the theory of constraints is that the organizations can be controlled and measured by variations on three measures: operational expense, inventory, and throughput. Inventory is all the money that the system has invested for purchasing things which it intends to sell. Throughput is the speed at which the system makes money through sales. The operational expense is all the money that the system spends to turn inventory into throughput.
Necessary conditions must first be met, before the goal itself can be reached. These typically include quality, safety, legal obligations, etc. For many businesses
, the goal itself is to make money. Though, for many non-profit businesses and organizations, making money is a necessary condition for pursuing the goal. Whether it is the necessary condition or the goal, understanding how to make sound financial decisions based on inventory, throughput and operating expense is a critical requirement.
The theory of constraints is based on the premise that the rate of goal achievement by a goal-oriented system is limited by at least one constraint. By increasing the flow through the constraint overall throughput be increased.
Assuming that the goal of a system has been articulated and its measurements defined, the steps are:
- Elevate the system’s constraints
- Identify the system's constraint(s).
- Subordinate everything else to the above decision(s).
- Decide how to exploit the system's constraint(s).
The goal of a commercial organization is to make more money now and in the future", and its measurements are provided by throughput accounting
as: inventory, throughput, and operating expenses.
The five focusing steps aim to ensure the ongoing improvement efforts that are centred on the organization's constraint. This is referred to as the process of ongoing improvement, in the TOC literature.
These focusing steps are the key steps to develop the specific applications which is mentioned below.
- The constraint is that particular thing that prevents the system from achieving its goal. The constraints can show up many ways, but a core principle within TOC is that there are not hundreds or tens of constraints. In any given system, there is at least one or only a few. Constraints can be external or internal to the system. An internal constraint is when the market demands more from the system than it can deliver. When this is the case, then the focus of the organization is on discovering the constraint and following the five focusing steps to open it up. An external constraint is said to exist when the system can produce more than the market bear. When this is the case, the organizations focus on the mechanism to create more demands for services and products.
Types of internal constraints:
: An unwritten or written policy prevents the system from making more
: The Lack of skilled people limits the system. Mental models that is held by people can cause behaviour that becomes a constraints.
: The way equipment is currently being used limits the ability of the system to produce more salable services.
In the Theory of Constraints, the concept of constraints is analogous to, but differs to the constraint that shows up in mathematical optimization
. The constraint is used as a focusing mechanism in TOC, for management of the system. The constraint is written into mathematical expressions in optimization, to limit the scope of the solution.
: organizations have many complications with people, policies, equipment’s etc. The limiting factor is the constraint that is stopping the organization from getting more throughput, even when nothing goes wrong.
Breaking a Constraint
: A constraint is said to break the constraint, if a constraint’s throughput capacity is eminent to the point, where it is no longer the system's limiting factor. The limiting factor is some other part of the system, or may be external to the system. This should not be confused with a breakdown.