| The Theory
of Constraints (TOC) propounded by Eliahu Goldratt is an overall
management philosophy that has its basis in the manufacturing
environment. It recognizes that organizations exist to achieve
a goal. In TOC, a factor that limits a company's ability to
achieve more of its goal is referred to as a constraint, and
it is imperative that businesses identify and manage these
constraints. TOC concentrates on an organisation's scarce
resources in improving the performance of the true constraint,
and therefore the bottom line of the organization. Goldratt
uses a chain analogy to help illustrate why this is an effective
way to get immediate results. A manufacturing company can
be thought of as a chain of dependent events that are linked
together like a chain. The activities that go on in one "link"
are dependent upon the activities that occur in the preceding
"link". TOC says that management needs to find the
weakest link in the chain since "a chain is only as strong
as its weakest link". Thus, a company should focus on
"chain strength" by working to strengthen the weakest
link - the constraint.
Process of ongoing Improvement
To manage constraints, a five-step Process of ongoing improvement
is proposed -
- Identify - In order to manage a constraint, it is essential
to identify it.
- Exploit - Focus on how to get more value within the existing
limitations, by focussing on the weaknesses within the constraint.
- Subordinate - If our goal is to achieve the target, which
would be seriously affected by the identified constraint,
subordinate all other goals and initiatives to this single
goal of overcoming this constraint. Eliminate or reduce
queing at the non-constraint resource/s by reducing resources
applied there.
- Elevate - If, after fully exploiting this process, it
still cannot produce enough value to satisfy
the set goal, find other ways to meet it (like increasing
capacity).
- Review and go back to Step 1.
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