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HOW THE THEORY OF CONSTRAINTS CAN BOOST YOUR BUSINESS

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.

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