THE GOAL: INTRODUCING THE THEORY OF CONSTRAINTS
...ex, this was termed ‘bottlenecks’, the areas where production was the slowest. By analyzing all of the problems the system experiences, the goal of this step is to identify the root that causes them all. It is not a process of prioritizing the bad effects but instead looking for the reason they occur. This analysis includes prioritization, so that just the constraints that really limit system progress toward the goal are identified (Sytsma 1). As Alex began to improve the constraints found within his organization, it became necessary to take other steps. Eventually it became apparent that this theory of decision making was leading to a process of five focusing steps for continuous improvement. It is important to note that although the constraints first identified in The Goal were physical, the conclusion of the book explains how these constraints may also be managerial. For companies that employ skilled workers, and for many service organizations, the constraint is often the time of one or a few key employees (Bushong and Talbott 53). Generally, organizations have few physical constraints but may have many managerial constraints in the form of policies, procedures, rules, and methods. In more recent publications, Goldratt has developed a technique called a Current Reality Tree to identify policy constraints (Rahman 336). It is important to identify such constraints since they also an impact on the goal of the organization. Step Two: Decide How to Exploit the Constraints Once the system’s constraints have been identified, the next step is to decide how to exploit the system’s constraints. If the constraint is physical, the objective is to increase the constraint’s efficiency as much as possible. The goal is to increase the capacity of the constraint to make it equal to demand. Hours of operation for the constraint are vitally important as throughput for the entire system is affected by the loss of an hour at a constraint. In Alex’s plant, manpower was redistributed in order to keep the constraint operational around the clock with no breaks. Quality control was shifted to a preceding step so that time was not wasted by the constraint working on defective parts. Other effective improvements may include shifting workload to a non-bottleneck or offloading in order to increase the capacity of the constraint resource. Fundamental to this step is the understanding that the level of utilization on a non-bottleneck is not determined by its own potential but by the other constraint in the system. Cost accounting rules dictate that capacity should be balanced with demand, but this is an erroneous conclusion. It is the flow that must be balanced with demand. Non-constraints should be managed so that they provide just what is needed to match the output of the constrained resources. Letting them supply more output than is needed moves no closer to the goal. A managerial constraint should not be exploited but eliminated (Rahman 337). These policy constraints should be replaced with policies that will support increased throughput. Step Three: Subordinate and Synchronize Everything Else to the Above Decision The third step of the five step process involved in implementing the Theory of Constraints reasoning is to subordinate everything else to the decision in Step Two. Since it is the constraints that hinder progress toward the goal, all of the resources possible should be applied toward improving the output of the constraint. In practically all cases, their limiting impact can be reduced or eliminated (Systsma 1). In order to achieve this, every other non-constraining component of the system must be adjusted to support the maximum effectiveness of the constraint. Synchronization of all resources with the constraint provides the most effective manner of resource utilization. Non-constraint resources contain productive capacity that allows them to support the constraint throughput. They also contain idle capacity which is needed to protect against system disruptions. Some of their capacity is not available to increase throughput because of the limitations of the constraint. If non-constraint resources are used beyond their productive capacity to support the constraint, they do not improve throughput but rather increase unnecessary inventory (Rahman 338). Step Four: Elevate the System’s Constraints The next step in the process of improvement is to elevate the system’s constraints. Improvement efforts must be focused at improving the performance of the constraints. As their performance improves, the potential of non-constraint resources can be better realized, leading to improvements in overall system performance (Rahman 338). Step Five: If in the above steps the constraint has shifted, go back to Step One. Do not allow INERTIA to become the system’s constraint! Continual efforts at elevating a constraint will at some point result in the elimination of the constraint. Eventually, the system will encounter a new constraint. This leads to the final step: When the constraint is eliminated, or broken, return to Step One. It is very important not to let inertia become a constraint (Sytsma 2). Implementing the Theory of Constraints is a continuous process; it is imperative that constraints be constantly evaluated. There is no policy or solution that is appropriate for all time or in every situation. This last step is vitally important; failure to implement it may lead an organization to fail (Rahman 338). Step Five is also a crucial step for policy constraints. As the business environment constantly changes, business policy has to be refined in order to take account of those changes. Most policy constraints in organizations are of their own making. Rules, policies, and procedures develop over time and with time, may become a constraint. Most constraints in organizations are policy constraints rather than physical constraints (Sytsma 3). APPLICATIONS Implementing the Theory of Constraints eliminates much of cost accounting. The application of cost accounting principles, primarily the allocation of costs in order to make decisions at the local level, leads to poor management decisions at the department as well as in the upper levels of the organization. The Theory of Constraints as introduced in The Goal shows a clear improvement of production scheduling and improved manufacturing. The revolutionary concept, however, is applicable to any process in any organization. It is adaptable to universities, hospitals, service providers, government entities, organizations and businesses of all types. The logic resulting from the Theory of Constraints can attack a variety of process problems within organizations. It can be applied to identify what factors are limiting an organization from achieving its goals, helping to develop solutions to these problems, and implementing solutions. It is useful for individuals to apply these steps to their individual paradigm for looking at the world. BUSINESS SYSTEM PERSPECTIVE From a business system perspective, the Theory of Constraints emphasizes change process implemented at three levels. These are the mindset of the organization, the measures that drive the organization, and the methods employed within the organization (Gupta 649). Mindset The Theory of Constraints assumes that every business has the primary goal of making more money now as well as in the future without violating certain necessary conditions. Two such conditions are providing a satisfying work environment to employees and providing satisfaction to the market. This mindset stipulates that the organization should devote its energy to promoting initiatives such as exploring new markets and introducing new products. This has been popularly termed as “throughput world thinking” (Gupta 649). These initiatives utilize available resources instead of expending energy to reduce costs or save money. This mindset also emphasizes that the management focus on high leverage points in order to ensure the financial success of the organization as a whole (Gupta 649). Measures The measures that drive an organization are also affected by the Theory of Constraints measurement system. Decisions are evaluated by their effectiveness in helping to achieve the primary goal. The global operational measures of throughput, inventory and operating expenses determine the extent to which the organization is accomplishing the goal. These operational measures are financial in nature in that they can be translated to conventional measures such as net profit and return-on-investment. They are easy to apply at any level of an organization and they ensure that local decisions are aligned with the profit goal of an organization. Of the three measures, throughput is viewed as having the greatest effect on profitability. Such ‘throughput world thinking’ stands in sharp contrast to ‘cost world thinking’ which emphasizes reducing costs via operating expenses and inventory (Gupta 649). Methods In addition to the mindset and measurement system, the third aspect of the Theory of Constraints is the decision making methodology designed to continuously improve any organization. This theory states that every business system has at least one constraint, and at most very few. A constraint is defined as any specific area, aspect, or process that limits the business performance. These limitations must be evaluated from a customer, competitive, and profit point of view. Constraints can be physical but they can also be managerial. The five focusing steps discussed above are designed to manage constraints and continuously improve an organization. Inherent in this five step process is the drum-buffer-rope and buffer management systems which are used to develop the constraint’s schedule and manage buffer inventories within an organization. These techniques are alluded to in The Goal and briefly mentioned by name in the epilogue, but were further developed in later publications. These techniques enable managers to translate what they learned from The Goal into workable procedures for their businesses. Drum-buffer-rope is the generalized technique used to manage resources in order to maximize throughput. The drum is the rate or pace of production set by the system’s constraint. The buffers establish the protection against uncertainty so that they system can maximize throughput. The rope is a communication process from the constraint to the operation that checks or limits material released into the system in order to support the constraint. Buffers can be time or material and are designed to support throughput and due date performance. Buffers can be maintained at the constraint, convergent points, divergent points, and shipping points (Gupta 651). Buffer management is a process in which all expediting in a shop is driven by what is scheduled to be in the constraint, shipping, and assembly buffers. By expediting material into the buffers, the system avoids idleness at the constraint and missed customer due dates. In addition, this process identifies the causes of items missing from the buffer and the frequency of these occurrences is used to prioritize improvement activities (Gupta 651). ONGOING IMPROVEMENT PROCESS PERSPECTIVE The final page of the novel brings Alex to condense all he has learned from the implementation of the five process steps to three simple questions. These questions can be viewed from the perspective of an ongoing improvement process. The Theory of Constraints encourages an organization to ask three fundamental questions concerning change in order to accelerate the improvement process. These questions are (1) What to change? This question is designed to identify the weakest link, i.e. the constraint(s). Next, ask (2) What to change to? In other words, once the weakest link is identified, what practical and effective solutions are proposed to strengthen the constraint? Finally, ask (3) How to cause the change? This question leads to effective implementation of the solutions. The ability to ask and answer these three questions is the fundamental ability that must be possessed by a manager (Goldratt 337). The ability to answer these questions is equivalent to being able to focus on the core problem even in a very complex environment. It requires being able to construct and check solutions that solve all negative effects without creating new ones. Above all, an effective manager must be able to cause such changes smoothly, without creating resistance but instead instilling enthusiasm in the team. It is with this definition of effective management that The Goal concludes, leaving Alex to face the challenges of his promotion by implementing his new paradigm of the Theory of Constraints (Goldratt 337). THINKING PROCESSES Based upon the foundation set forth in The Goal, Goldratt and his associates have developed a set of techniques known as the thinking processes in order to address the answers to the three questions that must be posed. The characters in The Goal illustrate this thinking process but the component parts are not labeled as such in the book; the labels were identified in later publications. The thinking process begins with an identification of a set of undesirable effect (UDEs), i.e. the symptoms of a system to be improved. A current reality tree connects various UDEs systematically by following the effect-cause-effect diagramming principles. This is designed to diagnose the core problem in the system that needs to be changed. The evaporating cloud (EC) verbalizes the inherent conflict, surfaces the assumptions and provides a mechanism to come up with ideas which can be used to resolve the core problem. The future reality tree (FRT) takes the ideas from EC and ensures the new reality created would resolve the UDEs without creating any new UDEs. The prerequisite tree (PrT) identifies obstacles to implementations of new ideas and the intermediate objectives designed to overcome the obstacles. The transition tree (TrT) is the final step used to create a step-by-step implementation plan. These tools of the thinking processes can be used as a set of integrated tools to address the specific phase of change management process. They can also be used as stand alone tools to address specific aspects of the problem (Gupta 651). The body of knowledge and the analytical tools such as the Thinking Processes come from experience in the “accurate” or “hard sciences.” These sciences are based on rigorous cause-and-effect logic. PROBLEM SOLVING Taken as a whole, the Theory of Constraints is a philosophy of management and improvement that provides an integrated problem-solving methodology. This methodology addresses the construction of solutions as well as the need f...