Eliyahu M. Goldratt (1948 – ) is an Israel-born physicist turned business consultant, the originator of the theory of constraints (abbreviation: TOC). He claims that he applied the scientific method to resolving some permanent problems of organizations.
He is the author of several business novels:
* The Goal introduces TOC’s accounting and process improvement aspects; it is considered by some to be an important work on the topic of focused performance improvement. It was followed by:
* It\’s Not Luck, which applies TOC to the problem of adapting an organization to changes in its market,
* Critical Chain (book), describes the application TOC in project management called Critical Chain Theory, and
* Necessary But Not Sufficient, which makes Toc’s utility in problems outside manufacturing and other operations fields clear.
The Theory of Constraints:
(or TOC as it is called) is a one of the most profound developments in the practical aspect of making organizational decisions in situations in which constraints exist. The Theory of Constraints provides a practical framework for managing enterprises with a holistic and focused approach and does away with conflicts between local operating level decisions and global company objectives and goals.
A constraint is anything in an organization that limits it from moving toward or achieving its goal. Of course, this assumes that an appropriate goal has been defined. TOC recognizes two types of constraints that can exist in any business – the size notwithstanding. These are – physical constraints and non-physical constraints. A physical constraint is something like the physical capacity of a machine. A non-physical constraint might be something like demand for a product, a corporate procedure, or an individual’s paradigm for looking at the world.
TOC brings in the powerful ‘five focusing step’ methodology to identify the constraint in the company and systematically attack the associated problems. The result is dramatic improvements of throughput (or contribution) and customer order due date performance, and inventory reduction.
The steps in applying TOC are as follows:
- Identify the system’s constraints..
- Decide how to exploit the system’s constraints. Once it is decided how to manage the constraints within the system, how about the majority of the resources that are not constraints? The answer is to manage them so that they just provide what is needed to match the output of the constrained resources.
- Subordinate everything else to the above decision in Step 2. Since the constraints are keeping us from moving toward our goal, all the resources are applied that can assist in breaking them.
- Elevate the system’s constraints. If we continue to work toward breaking a constraint (also called elevating a constraint) at some point the constraint will no longer be a constraint. The constraint will be broken.
- If the constraint is broken, return to Step 1. When that happens, there will be another constraint, somewhere else in the system that is limiting progress to the goal.
The process must be reapplied, perhaps many times. It is very important not to let inertia become a constraint. Most constraints in organization are of their own making. They are the entrenched rules, policies, and procedures that have developed over time. Many times, when we finally break a constraint, we do not go back and review and change the rules and policies that caused the constraint initially. Most constraints in organizations today are policy constraints rather than physical constraints.
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