BizWORX | One Company, Many Solutions

Theory of Constraints: Constraints Explained

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.
theory of constraints
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.


Recent Posts

Leave A Comment