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Wednesday, February 17, 2010

The Theory of Constraints (TOC)

The Theory of Constraints (TOC) is a management philosophy emphasizing on the continuous improvement of a system. It was the brainstorm of Eliyahu M. Goldratt, which he introduced in his book, The Goal. The Theory of Constraints (TOC) suggests that every system is made up of a ‘chain’ of processes – one process following another and most processes being dependant on other processes. To have a significant improvement in this system, Goldratt suggests that the process which is slowing down this system the most must be identified and the whole system must be managed with it in mind. He explained this slower process with similitude to the weakest link in a chain and named it the ‘constraint’ of that system. He also argued that there is usually only one particular phase of a system that is hindering it from achieving its goal.
Dr. Eliyahu M. Goldratt is internationally recognized as the leader of development in the area of new business management concepts and systems, and he acts as an educator to many of the world's leading corporations. His infamous Theory of Constraints (TOC) has revolutionized the way companies think and work. Obtaining his Bachelor of Science degree from Tel-Aviv University, and then his Master of Science and Doctorate of Philosophy degree from Bar-Ilan University, Goldratt went on begin his pioneering work in manufacturing management. He currently holds patents in many other areas, ranging from medical devices to temperature sensors. Dr. Goldratt is a highly frequent contributor to internationally reputed industrial and scientific journals and has lectured extensively in companies and at universities in Britain, continental Europe and the USA. In fact, The publicity and leadership behind his ideas have been held primilarily by him (but have been ventured upon by other renowned scholars, whose names will folly shortly), mostly through a series of books, seminars and workshops.

Dr. Goldratt’s book The Goal (in which he introduced his Theory of constraints) is the story of a harried plant manager (aiming to improve his plant performance) who is motivated by his peer to ‘think out of the box’ to achieve his goal and the result of his thinking. It contains an important message for all managers in industry and has been described as must-read to be to recommended to your associates in the industry, even to your bosses - but definitely not to your competitors. The Fortune magazine has described the author as a ‘guru to the industry’, while BusinessWeek accolades him with the title of ‘genius’. In fact, the book has also been highly praised by the business community. Here is what some of them had to say:

'The Goal is a must for every manager.' Works Management.

'To anybody who is open to a fresh perspective, or who is looking for a guide to a difficult destination, The Goal is a must read … It clears away traditional clutter and points the way towards identifying goals and most importantly, achieving them. Overall, this makes compelling reading.' Financial Management, June 2001.

''"I'd say that our use of The Goal as a practical development tool has already saved us hundred of thousands of pounds as a company, and there's more to come"' William Alden, Managing Director, Alden Group as reported in Career Compass Supplement, January 2004.
So, now that we know that the Theory of Constraints does in fact have some international significance, how do we actually implement it in our working systems?
Unsurprisingly enough, the answer to this question has been delivered by Goldratt himself. He has suggested several ‘Focusing Steps’ and ‘Thinking Processes’ in order to effectively implement the Theory of Constraints.
Goldbratt suggest that the fundamental questions which must be answered are:
• What to change,
• What to change to,
• How to cause that change.
Very simply speaking, Goldbratt asks us to identify the problems in the system, find solutions to the identified problems, and then to construct action plans based on these solutions in order to improve overall performance in the system.
However, as the English saying goes “Its easier said than done”, answering these questions can be an extensively painstaking process. Goldbratt identifies five ‘Focusing Steps’ in order to implement these above mentioned strategies. They are:
• Identify the system’s constraint,
• Exploit these constraints,
• Subordinate all other processes,
• Elevate the constraint,
• If any constraints have been broken, repeat from step 1.
These focusing steps are often preceded by the simple-yet-vital step of actually identifying the goal of the system. It must be noted that these ‘focusing steps’ are simply an answer to the above mentioned questions. We focus on making sure that the constraint is acting in a unique way so as to inhibit the system. Additionally, the solution mentioned above is further emphasized here as a decision made order to beneficially alter the otherwise malignant impact of the constraint, and then ensuring that all the other processes of the system are redefined with this decision in mind. Subsequently, if the decision is taken and it removes the constraint it was targeted at, the focusing steps are re-employed to scavenge and eliminate any side-effects of the decision made or any pre-existing but smaller constraints (previously hidden under the effect of the larger rooted-out constraint).
In addition to these ‘focusing steps’, Goldbratt and many others who have entered this field, have identified a step-by-step ‘thinking process’ in which manager can work out different questions by mapping a tree (sort of an arrow diagram with each step/obstacle shown). In short, these ‘thinking processes’ are the utensils which the administrator or manager of a system can use in order to initiate and execute a project or to root out a constraint in the system.
In particular, these ‘thinking processes’ highlight certain issues which must be dealt with before any workable solution can be effectively applied:
1. Gain agreement on the problem
2. gain agreement on the direction for a solution
3. gain agreement that solution solves the problem
4. agree to overcome any potential negative ramifications
5. agree to overcome any obstacles to implementation

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