
Organizations are Complex
Organizations are a complex web of people, equipment, methods, materials
and measures. This detail complexity is bad enough. Then add to it the dynamic
complexity of changing customers, suppliers, workforce, regulations, etc.
and you have a picture of the challenge faced by today's management team.
Traditional Management Methods
Traditionally, management has divided the organization into smaller, more
manageable pieces. The objective is to maximize the performance of each part.
The global improvement is assumed to be equal to the sum of the local improvements. Right?
The Theory of Constraints
No, wrong! TOC claims that a change to most of the variables in an organization
will have only a small impact on the global performance - on the bottom line.
By trying to improve everything everywhere, the risk is that nothing will be improved that really counts. Why? Because if only a few key variables in any system influence overall system performance at any given time, trying to improve most of the system will be counterproductive.
Theory of Constraints provides a set of holistic processes and rules, all based on a systems approach that exploits the inherent simplicity within complex systems through focusing on the few variables – called Constraints - as a way to synchronize the parts to achieve ongoing improvement in the performance of the system as a whole.
Goldratt likens systems to chains, or to networks of chains. Like a chain, a system is only as strong as its weakest link.
An interesting phenomenon about chains is that strengthening any link except the weakest one does not improve the strength of the whole chain. Strengthening the weakest link produces an immediate increase in the strength of the whole chain — but only up to the level of the next weakest link.
Similarly, in business systems, it is usually the capacity of one element that determines the overall performance of the business, and striving to improve any aspect of the system other than that constraint won’t do anything.
The TOC Process. Steps
A company must first know its goal and the necessary conditions for achievement. Then it has to follow the “Process Of Ongoing Improvement (POOGI)” to identify, exploit and perhaps elevate the Constraint(s) in a continuous way:
- Identify (choose) the system’s constraint.
- Decide how to exploit the system’s constraint.
- Subordinate everything else to the above decision.
- (Evaluate various alternatives to) Elevate the system’s constraint.
- If the constraint is broken go back to step 1, but do not allow inertia to cause the system’s constraint.
The Main Types of Constraints of a Commercial System
- Capacity Constraint: A resource which cannot provide timely capacity as demanded by the system.
- Market Constraint: The amount of customers’ orders is not sufficient to sustain the required growth of the system.
- Time Constraint: The response time of the system to the requirement of the market is too long to the extent that it jeopardizes the system’s ability to meet its current commitment to its customers as well as the ability of winning new business.
TOC Solution Areas
- Operation (production) management - Make to Order (MTO) environment and Make to Availability (MTA)
- Project Management - CCPM - Critical Chain Project Management
- Distribution & Supply Chain Management - DTA - Distribute to Availability
- Finance & Measurements - Throughput Accounting
- Sales Management
- Marketing – Development of Market Offers
- Managing People - Management Tools (MT)
- Strategy & Tactics – How to develop a company-wide improvement plan
- Thinking Processes – Everything within a system is connected by cause and effect relationships. Identification of the causes leads us to the core problem/contradiction/conflict and this is the level for sustainable solutions. The use of cause and effect relationships helps us to structure our thinking, log our analysis and understand the suggested solution for any problem. The TOC - thinking processes provides a set of tools in doing so.
Useful resources about the Theory of Constraints
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Forum - Theory of Constraints
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Discussions about Theory of Constraints.
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Quote by Eliyahu Goldratt
An expert is not someone that gives you the answer, it is someone that asks you the right question. (...)
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Impediments Analysis?
What is impediments analysis? Any help, please? Editor: An inpediment is something that impedes; a hindrance or obstr (...)
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The Dice Game by Goldrat
I am using Goldrat's dice game in my classes. It is very helpful for the students to understand variation and the 6 side (...)
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Theory of Constraints in Mining
Hi All, I am currently pursuing a project on the application of TOC in Underground Coal Mining in Australia. I am lookin (...)
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Neural Network In SCM?
Hi, (how) can the concept of Neural Networks be applied in the world of Supply Chain for managing the flow of orders bet (...)
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Best Practices - Theory of Constraints
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Here you find the most valuable discussions from the past.
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Current Reality Tree
A useful tool that Goldratt uses to identify bottlenecks is the Current Reality Tree (CRT).
Similar to a , a current r (...)
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Expert Tips - Theory of Constraints
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Here you will find advices by experts.
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Dealing with Changing Constraints
Theory of Constraints (...)
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What are Constraints?
Theory of Constraints
Scientific Approach (...)
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Constraints in the Business World
Practical Examples of Constraints (...)
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Three Dimensions of the Theory of Constraints (TOC)
Teaching the Theory of Constraints (...)
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Drum-Buffer-Rope Methodology and Time Buffers
Buffer Management (...)
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Time Buffers in Theory of Constraints
TOC Approach to Variability (...)
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Buffer Management in Theory of Constraints
TOC Approach to Variability (...)
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3 Potential Categories of (Root) Causes
Root Cause Analysis, Ishikawa, 8D, TOC (...)
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How to tackle Constraints?
Practical Tools from Theory of Constraints (...)
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Theory of Constraints Key Indicators
Reaching The Final Goal (...)
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Inventory
Estimate Investiments (...)
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Throughput Accounting
TOC Controlling System (...)
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Throughput Concept
Estimate Profits (...)
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What is an Accurate Finance System in the TOC Perspective?
Finance (...)
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Resources - Theory of Constraints
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Here you find powerpoint presentations, micro-learning videos and further information sources.
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Introduction to Goldratt's Theory of Constraints
Theory of Constraints, TOC, Just-in-time, Drum-Buffer-Rope, Shop Floor, Decision Making (...)
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Theory of Constraints 101
TOC, Theory of Constraints, Eliyahu Goldratt, Focus on the Bottleneck (...)
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Theory of Constraints vs. ABC
Compare TOC and ABC (...)
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Supply Chain Collaboration
SCC, Theory of Constraints (...)
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TOC Reference Sheet
TOC Reference Guide (...)
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Distribution TOC way
Managing Distribution According to TOC Principles (...)
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Compare with Theory of Constraints:
Root Cause Analysis |
8D Problem Solving
| Gantt Chart |
Analogical Strategic
Reasoning |
Pyramid Principle | Brainstorming
| Kepner-Tregoe Matrix
| Crisis Management
| Game Theory |
Real Options |
Dialectical Inquiry |
Delphi Method |
Six Thinking Hats
| Plausibility Theory
| Mind Mapping
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Leadership |
Marketing |
Program & Project Management
| Strategy |
Supply Chain & Quality
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