September 4th, 2011
The Theory of Constraints and the Six Sigma approaches are two of the most popular and most widely-accepted and practiced management paradigms. Some principles of the TOC run parallel to some of the basic tenets of Six Sigma. First, both paradigms believe that root causes of problems in the company or organization should be understood with a logical and rational approach. Second, both paradigms highlight the crucial role of top-line performance to the overall growth and progress of the company. Third, both paradigms uphold the value of the customers. Thus, the customer is indeed king. Last, both paradigms aim for stability in the performance of the system and clarity for improvement.
However, there are also several principles of each of the two paradigms that can be compared and contrasted with the other’s basic principles.
- 1. Focus. The Six Sigma method focuses on the smallest divisions and components of a company or organization. It focuses on the growth and development of smaller divisions. On the other hand, the Theory of Constraints focuses only on the most critical issues and on the entire organization. The Six Sigma believes that efficient smaller divisions will translate into a more efficient company. However, the TOC believes that a company made up of efficient and effective smaller departments may not even be effective and efficient as a group.
- 2. Method. Six Sigma uses a quantitative method and data-based philosophy in solving the company’s problems. TOC advocates a qualitative analysis and logic-based tools in dealing with critical issues.
- 3. Perception of Variation. Six Sigma aims to reduce variations and extraneous variables. TOC takes into considerations the individual differences and other potential variations. It will make the market healthier.
September 3rd, 2011
A holistic management philosophy popularized by Dr. Eliyahu Goldratt, the theory of constraints believes in the inherent simplicity of complex systems. According to this perspective, an organization may be made up of a lot of components and divisions but only a few or one factor can have a strong impact on the overall status of the organization. This factor, known as the constraint, serves as a hindrance to the group’s achievement of its goal.
The theory of constraints helps organizations and institutions to identify critical issues that hamper the organization’s growth. By identifying these critical points, organizations can take necessary steps and use these constraints to propel to greater heights. Thus, the theory translates impediments into profits and growth. These constraints include product quality, product cost, product engineering effectiveness, materials procurement, production planning and control and marketing.
The theory of constraints drives organizations to focus on the optimum efficiency of the organization. The optimum efficiency of the smaller units and divisions should come secondary. The theory of constraints operates using a five-step process. First, the organization needs to identify its constraints. Next, you need to think over and develop a plan on how you can exploit the identified constraints. Third, you need to place all the components of managing your organization subordinate to the constraints. Fourth, you need to place the identified constraints higher than everything else in terms of level of priority. Once you have broken the constraints, you should repeat the five-step process.
The theory of constraints also shares a couple of parallel or similar principles with other management philosophies. In TOC, continuous improvement is emphasized. Employees should be actively involved and empowered. Educating the entire organization is necessary. You have to transform and build a new organizational culture. TOC’s quality measurements are also clearly defined and established. By focusing on organizational goals over departmental goals, TOC helps eradicate barriers and divisiveness.
August 14th, 2011
DIFFERENT TYPES OF CONSTRAINTS
According to the theory of constraints by Dr. Eliyahu Goldratt, an Israeli physicist, constraints are specific variables or factors that affect the performance of an organization or company. These constraints block a company from achieving optimum efficiency and limit the company’s ability from improving its output.
Constraints usually take different forms. These variations include capacity constraint, market constraint, policy constraint, logistical constraint and behavioral constraint.
Capacity Constraint. The first type, capacity constraint, exists when the demand outstrips supply. Capacity constraint indicates that the system cannot supply the amount of output needed to meet the demands of the market. Some capacity constraints include personnel hiring and manning guidelines. The market constraint is the exact opposite of capacity constraint.
Market Constraint. Market constraint indicates that the company has the capacity to produce more than what is needed by the market. In short, the supply outstrips the demand. There are more than enough products to meet the demand of the market. Examples of market constraints are pricing schemes and commission policies.
Policy Constraint. Policy constraints are policies or regulations imposed or implemented that can limit the potential of a company to develop and grow. This type includes ‘no overtime’ policies.
Logistical or Physical Constraint. Logistical or physical constraints are probably the easiest to explain and illustrate. A company experiences logistical or physical constraints when a particular mechanical resource cannot meet the demands expected of it. Logistical or physical constraint indicates that particular equipment cannot produce what it should be producing.
Behavioral Constraint. Behavioral constraint refers to the lack of capacity in the human resources to produce the output that is expected from the team.
The theory of constraints emphasizes that focus should be given to these constraints instead of on other insignificant factors.
September 29th, 2010
Over-production is a type of waste. It has many different incarnations, but they all end up with a company spending money on something that generates no profit. Oftentimes, there are very small parts of your business flow that generate this waste and they can be tough to identify. In some cases, they may seem so small that their impact on your profitability is disproportionate, at first glance. Objective analysis of a business’s workflow, however, quite often reveals them to have very significant impacts. Read More »
August 8th, 2010
I’m not sure if you’ve heard of the analogy of the burning platform, but in essence it is the case for action. Don’t wait until the fire is a blazing until you take action. Often times businesses wait until it’s too late until they find that sense of urgency to take action. A downturn in the economy, a lost proposal or client, winning a large contact with no contingency plan; whatever your burning platform might be, I encourage you to continuously develop and execute a strategy that’s forward-looking. Read More »
May 5th, 2010
People always dispute the various improvement methodologies, and what one they should deploy in their organization. Rather than sticking to one methodology I tend to focus on what outcome(s) I am seeking and select the right tool(s) to achieve the desired end result. Regardless if it’s Lean, Six Sigma, TQM, MBO, Theory of Constraints, it all comes down to continually improving your business each and every day. Read More »