Theory of Constraints

Skill level: Advanced

Description

Theory of constraints (TOC) represents an entire body of knowledge related to process interaction, capabilities, and the surrounding organizations. At its core, as Goldratt describes, it is an intuitive framework for managing based on continuous improvement.

In continuous improvement, the participants are faced with three fundamental questions:

  1. What to change
  2. What to change to
  3. How to cause the change

There are three basic measures to be used in the evaluation of a system:

  1. Throughput
  2. Inventory
  3. Operational expenses

Benefits

  • Very comprehensive approach
  • Causes people to evaluate the entire process
  • Is continuous – loops to the beginning if the process constraint changes

How to Use

  • Step 1.  Identify the process to be evaluated.
  • Step 2.  Identify all key steps.
  • Step 3.  Identify constraints.
  • Step 4.  Decide how to exploit the constraint.
  • Step 5.  Subordinate and synchronize everything else to the above decisions.
  • Step 6.  Elevate the performance of the constraint.
  • Step 7.  If in any of the steps above the constraint has shifted, go back to Step 1.

Relevant Definitions

Not Applicable

Example

A technician needs to repair a mechanical device, such as a bank teller machine, copier, or air conditioner.

  • Step 1.  The repair process will be evaluated.
  • Step 2.  Key steps include dispatch of the technician to the site, diagnosis of the machine issue, and repair. Being largely mechanical, in many or even most cases, a part will be required to repair the machine.
  • Step 3.  Part availability/requisition is a very well known constraint to the repair process. There are a great many reasons for this constraint, including but not limited to technician carrying capacity, number of different types of machines the technician repairs, inventory carrying cost, manufacturing lead time, ordering lead time, stocking levels, and reorder points.
  • Step 4.  Towards exploiting the constraint, a standardized diagnostic suitcase is created. (Possibly a brainstorming session would be used to identify the approach.) The case would include all critical parts enabling a technician to restore a machine to working condition.
  • Step 5.  Everything that “feeds” into this constraint must be subordinated and synchronized.
    • For example, the case upon return would be replenished synchronously so that it is available for the next call. Hence parts stocking and other tasks performed at the depot would be subordinated to refilling the diagnostic suitcase to ensure the constraint is optimized.
    • Further up the chain:
      • Engineering would be responsible for identifying the key components in the suitcase
      • Manufacturing would ensure a smooth flow of parts to ensure that there was no disruption in supply subordinating other manufacturing to these critical parts
      • Parts delivery would be prioritized to suitcase parts
      • Call intake would be synchronized to ensure the availability of a suitcase
      • Overall parts inventory level would be weighted to suitcase parts
      • All other processes that impact this constraint would need to use as a primary consideration the effect on this constraint.
      • Subordinating and synchronizing all related activities to the parts constraint will naturally lead to conflict within and across the organization. A good working knowledge of implementing change and overcoming resistance is important. Additionally, the optimization of this process could cause sub-optimization in other processes. Implementation must be evaluated at an organizational level as well as within the process.
  • Step 6. A good measurement to evaluate the parts constraint and ensure the goal is being met is percent “broken” repair calls, or the percentage of time the technician is unable to complete the repair process due to not having the critical part.
  • Step 7. Once the suitcase plan has been implemented, upon re-evaluation of the constraints something else may emerge as the primary bottleneck. For example, depending on geography, the technicians could find themselves driving back and forth to pick up replenished or different suitcases. This would need to be evaluated as a new constraint and optimized accordingly. This step embodies the continuous part of TOC.

 

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