Last Updated on 21 September 2023
The Theory of Constraints (TOC) is the idea that the main limiter on the speed of a system is the weakest element, with other issues having relatively smaller effect. The method is then to tackle this weakest element to improve it as much as possible. It was first introduced by Eliyahu Goldratt in 1984.
Constraint is the weakest link in the chain. It is the issue that is most holding back your system, limiting the throughput.
Why do we use TOC?
It is very helpful to use Theory of Constraints in our projects, as it stops us from focusing on the wrong things.
An example
Say you have three processes in a line:
- A makes 300 units an hour
- B makes 450 units an hour
- C makes 900 units an hour
You know of a project that will cost $50,000 but will upgrade Process B to 600 units an hour.
Should you do it?
If we look at it through the lens of theory of constraint. How many products can we make per hour? 300. Process B is not the current constraint in the system, Process A is.
If you upgrade process B to 600 units an hour, they will be making units at twice the speed of Process A. Instead of the current situation where they spend 1/3 of their time waiting for Process A, they will spend half their time waiting. All you are managing to achieve is increasing the waste.
Aim all your efforts at improving Process A. If it overtakes Process B in output, then the project may become worth it.
Advantages of TOC
- It helps us to identify what is our main priority for improvement
- Stops you wasting resources upgrading issues that aren’t the bottleneck and so won’t improve output
- Gives you a framework to follow for bottleneck removal
- Allows you to prioritize your improvements
What are the main types?
It’s easier to identify the issue when you know what you’re looking for. Some of the main types of TOC are:
- Physical – you may be limited by the machinery, space available or the environment in which you’re operating.
- Policy – there might rules from laws or regulations that are in the way of maximizing your output.
- Paradigm – policy in the organization or current ways of thinking that need to be overcome to improve the system.
- Market – if you’re making 500 units a month and the market needs to buy 500 units a month, there is no advantage to increasing your output to 600 units a month. You may need to look to increasing demand or finding new markets for your product.
How do you perform Theory of Constraints?
There are 5 steps to performing TOC, which are known as the ‘Five Focusing Steps’:
- Identify: What is holding back your system?
- Exploit: What can you do to improve it without new resources?
- Subordinate: Can you reallocate resources from over-resourced areas?
- Elevate: Are there new resources available for improvement?
- Repeat: There should now be a new bottleneck; find it and repeat the process
I’ll break these out to a step by step guide to identifying and remove your constraint:
1. Identify
Work out what is the current constraint that is holding back your system. This step is largely information gathering, after which the constraint should be clear. If it isn’t obvious, look at the ‘main types’ section above.
Find out how many units each of the processes in your line can produce, and find out the market for your product from the sales team.
2. Exploit
Use the resources that are currently available to improve the process, such as through Kaizen. Kaizen is where you find lots of small improvements over time that add up to a significant improvement.
If you can’t see what is possible, you may need to use brainstorming or lean tools such as spaghetti diagrams to improve this.
3. Subordinate
Make sure that the other processes and activities are supporting that constraint. You can move resources to or take work away from that section, even if it disadvantages other areas. These will have spare capacity compared to the slow process, so you can slow them down without affecting the total production.
4. Elevate
If your problem still exists, you can take more drastic solutions, which may take new investment. Examples are upgrading the machinery or adding a second parallel machine that operates at the same time.
5. Repeat
Once you have improved your constraint so that it is working faster and no longer the bottleneck, there will be a new ‘weakest link’ holding back production. Return to step 1 to relieve that constraint.
Theory of constraints example
It’s always easier to see how something works with an example. For this example we’ll have a company making toy trucks that has three steps:
- Painting – paint the different sections of the truck
- Assembly – Attach the wheels and other features e.g. mirrors
- Shipping – Put the trucks in individual boxes, put 20 trucks to a box, seal, wrap and put in shipment boxes.
The process is currently able to produce 2,000 per day.
1: Identify
First of all you need to find what is holding back your system. Time the different processes and talk to your sales team:
- Painting can process 5,000 units per day
- Assembly can process 6,000 units per day
- Shipping can process 2,000 units per day
- The sales team is confident they can sell 10,000 units per day, but are lacking stock
The constraint in the current system is shipping, whose 2,000 limit is holding things back.
2: Exploit
Now that we’ve got our constraint, we can use Kaizen and lean tools to improve the system.
We’ve done a spaghetti diagram which found that shipping staff keep having to go half way across the factory to get boxes. Moving them closer can increase our output to 2,300 units per day.
Looking at the effect of paradigm issues (issues in approach), we’ve found that shipping is held up that they need to get authorization before making any shipments to check the customer is not on stop. Performing this check when the order is taken instead increases our output to 2,500 units per day
We’ve now run out of exploit
3: Subordinate
Shipping is still the system constraint (slowest process), so we go to the subordinate step.
Painting has 5 operatives each able to paint 1,000 units per day. We can move one of these operatives to shipping and still have 4,000 units output in painting. This increases shipping to 3,000 units per day.
Assembly is currently the fastest line, so they can afford to be slowed down. We move the putting the trucks in the individual boxes from being a shipping job to being an assembly job. Assembly can now produce 5,500 units a day, shipping now 3,300.
4: Elevate
Shipping is still a constraint. We create a value stream map of the shipping process to find out what is the issue. A huge amount of time is taken up by the wrapping step, as it is done by hand and frequently goes wrong.
A $500 investment gets us a box wrapping station, increasing the shipping output to 4,500 a day. Shipping is now no longer the slowest process so we have removed our constraint.
5: Repeat
Our new step 1 is identify:
- Painting can process 4,000 units per day
- Assembly can process 5,500 units per day
- Shipping can process 4,500 units per day
- The sales team is confident they can sell 10,000 units per day, but are lacking stock
The project so far has been a success, increasing output from the 2,000 units a day to 4,000 – a 100% increase in output from a $500 investment.
Painting is now the constraint on the system only able to produce 4,000 units a day, so we now repeat the process, focusing on our new weakest link.
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