Theory of constraints -toc, Operation Management

Theory of constraints -TOC

The theory of constraints was first proposed in 1986 by Dr Eliyahu M. Goldratt in his widely read book The Goal. The theory of constraints is the practical results of Eli Goldratt's work on 'how to think'. It is about thinking processes and their applications. TOC is a verifiable philosophy. By knowing how to think, we can better understand the world around us; by better understanding we can improve.

This book is interesting as it was not written as a text book or a collection of papers on a topic but as a narrative. It is a story of a production manager facing severe problems at work who is visited by a helpful consultant (referred to as Jonah) who has him question his ingrained views of best practice. In this discussion Jonah suggests that any system must have at least one constraint otherwise it would generate an infinite amount of output and that constraints generally determine the pace of an organisation's ability to achieve its goal which is profit. However, by identifying constraints, organisations cannot create an infinite amount of output. Goldratt emphasises that constraints pose a significant threat to the wellbeing of an organisation and must be addressed. He suggests that constraints may be physical resources such as labour availability or skills, machines, capital or time but may also be organisational policies or guiding principles or rate of innovation. Constraints may be inside or outside an organisation.

By identifying our constraints we possess the ability to examine what stops us from achieving our goal. Goldratt suggests that many organisations do not state their goals in sufficiently clear terms to allow constraints to be identified. This lack of focus creates a broad front for management to operate which in turn allows broad goals to be defined and all resources to be seen as constraints to some degree.

Generally management 'optimise' the performance of all resources available as each is seen as an asset whereas Goldratt argues that not all assets or activity affect the constraint(s). More than that, though, TOC challenges us to define a goal and re-examine all of our actions and measurements based on how well or how poorly they serve it.

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