The Five Focusing Steps, Theory of Constraints (TOC)

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Table of Contents

Introduction
The problem
Theory of Constraints (TOC)
Measurements
The Five Focusing Steps
Drum Buffer Rope System
Implications of the TOC
Conclusion
References

Introduction

From Goldratt and Cox’s book, The Goal: a Process of Ongoing Improvement, I realized that it is possible for the management of an organization to get everything done, but nothing seems to increase the level of output of their production whether in the manufacturing industry, projects, business, or even personal lives. During such situations, managers develop a false sense of productivity by looking at individual levels of production but unfortunately, productivity is only evaluated in an entire organization (Boyd and Mahesh 350). Eliyahu Goldratt suggested the Theory of Constraint (TOC) around 20 years ago to solve the problem of workflow breakdown and accounting practices in manufacturing industries.

The problem

If an organization is suffering from the challenges listed above, the highest probability is that there is a constraint in its workflow or a limiting factor in its thinking process. According to Eliyahu, there are only one or a few constraints at any particular time in an organization and if worked on the overall performance of the organization will improve (34). Constraints are also referred to as bottlenecks because of the limiting factor of the neck of a bottle to the amount of a liquid that will come out of the mouth of a bottle despite its size.

According to Goldratt, I realized that organizations could only produce as much as their constraints can produce and in fact, the maximum speed of the process is the speed of the slowest operation in the workflow. I consider an example of a food production facility where I assume that the oven can only take a specific number of loaves at a time. According to TOC, I note that the oven is identified as the constraint in this case because no matter how fast the dough is made or more workers are hired, the oven’s capacity will not increase. Until someone identifies and puts effort to increase the oven capacity, the productivity of the factory remains at the mercy of the oven (Coughlan and Darlington 14).

There are two types of constraints involved, which include internal and external constraints. The internal constraints happen to an organization when the system cannot be able to meet the market demands. A goodexam iss ple a case where the equipment used limits the overall production. Moreover, an organization can fail to employ enough skilled people to improve productivity, which underscores internal constraints. External constraints on the other hand occur when the system produces more than the market can handle and the solution lies with the organization marketing its products further or more to expand demand for its products (Pagels and Watrous 302).

Theory of Constraints (TOC)

Goldratt came up with this theory by observing that every organization has one goal of earning a profit presently and in the future while at the same time increasing the cash flow and Return on Investment (ROI) (Goldratt and Cox 21). However, that attainment of the goal is slowed down by the or few constraint(s). He observes that any improvements whether in terms of the machine or the policy must address the constraints.

Measurements

From my previous studies, the conventional methods of measurement are net profit, efficiency, utilization, return on investment, and sometimes cash flow. However, I noted with great interest that in measuring the level of achievement an organization has made towards its goal, Goldratt makes a paradigm shift from these conventional methods and uses three measurements elements namely, Throughput (T), Inventory (I), and Operational Expense (OE). Throughput (T) is an “element used to represent the rate used by a system to generate money in terms of sales instead of production” (Goldratt and Cox 60). Inventory (I) is the total money used to purchase goods or services intended for resale. Operational expenses (OE) represent the money spent in the process of converting inventory into throughput. All three measures work together to accomplish the organization’s goal. In the theory of constraints, I noted that the whole process was looked at like a chain where the overall strength of the chain is evaluated and instead of cutting each link, the weak links are helped. The weak links in a chain represent the bottlenecks.

The Five Focusing Steps

The Theory of Constraint states that throughput in the system can only be increased by increasing flow in the system through the constraint. Before looking at the five steps, the most basic step should be an articulation of the organization’s goal, considered the hardest step. Surprisingly, a small number of people are aware of the organization’s goal, and sometimes there is no agreement or priority in the flow of the goals.

I observed that Goldratt insisted on the system being analyzed as a whole in opposition to partial analysis. The first set in the theory involves identification of the constraint in the system, which means looking at the most strained resource or policy preventing the organization from reaching the goal. The stressed resources can be spotted in the system by looking for the point where work in progress has piled while the other resources downstream after the constraints are idle. The second step involves exploiting the constraint to get the most out of the constrained resource. I noted that the bottleneck is prioritized by removing all non-productive work, and ensuring that it is never idle. All other processes are subordinates to the previous decision by letting the bottleneck determine the rhythm (Goldratt and Cox 307).

The constraint gets elevated by investing resources and time to improve the performance of the constraint to increase their output and thus the overall output. The last step is the result of the previous steps and it means that instead of getting into a comfort zone, other constraints are addressed and taken through the same process again. Finally, if there is no way of improving the system, the solution might be to overhaul the whole system.

According to Goldratt and Cox, good managers need to look at several things to be able to manage the reactors of under-achievements in their organizations (337). I am of the opinion that it is important to look at the system and establish exactly what needs to change in the system for it helps to identify the constraints. Next, the manager should decide on what new system or change should be adopted. Finally, I recommend that the manager should design how to cause the change without much harm on the other constraints.

Drum Buffer Rope System

I noted with great interest the use of buffer in Goldratt’s approach. Buffers are applied in the Theory of Constraints to represent the caution provided to the bottleneck against variations that might result to reduced productivity. They are as result of exploitation and subordination steps in the focusing steps and are usually placed either before the bottleneck to ensure it does not starve or downstream after the constraint to prevent failure ensuring the constraint’s output is always processed. Unlike the Kanban system where if “one work center breaks down longer than the buffer allows, the entire system waits until the work center is restored, the TOC work is never at danger unless the constraint malfunctions or breaks down” (Goldratt and Cox 61).

I inferred that in the Drum Buffer Rope (DBR) system, the drum is a representation of the speed of the constraint that regulates the system; the buffer represents an allotment of materials or time as discussed above while the rope is the demand signal that pulls new materials into the system. The rope may also represent the scheduled staggered release of materials that should be in line with the drum’s schedule (Smith 34). My observation is that the DBR system helps to avoid overproduction since it is a pull system, while buffers minimize inventory and transportation is reduced since ‘unbuilt materials’ don’t move.

Implications of the TOC

I observe that the TOC system has effects on the overall production in an organization. The upstream operations are obligated to provide only what the constraint can process effectively, the downstream operations receive the bottleneck’s production only and it is mandatory for the bottleneck to operate at maximum capacity otherwise no increase in overall output. However, I noted some the advantages of TOC to include reduction in accumulated inventory and enhanced communication between respective departments. I also noted that this system affects negatively the non-constrained resources and diverts concentration from other resources that may be constraints in the future (Lubitsh, Doyle, and Valentine 116).

Conclusion

My opinion is that the Theory of Constraints is a tool of financial management and not a financial tool as some may assume. These means it cannot be used to either determine the inventory values or allocate overhead to inventory. However, it has greatly contributed to improve management of not only manufacturing firms as originally intended, but it has also received huge application in project management, supply chain/distribution, marketing and sales. Moreover, it has helped in using the available resources more effectively resulting to improvement of the overall production. I can therefore strongly recommend the theory to any organization in any sector especially where their productivity has been reduced by a known bottleneck.

References

Boyd, Lynn, and Mahesh, Gupta. “Constraints management: What is the theory?” International Journal of Operations & Production Management 24.34 (2004): 350-51.

Coughlan, Pamela, and Darlington, John. “As fast as the slowest operation: The theory Of constraints.” Management Accounting 71.6 (1993): 11-16.

Goldratt, Eliyahu, and Cox, Jeff. The goal: a Process of Ongoing Improvement. Great Barrington, North River Press, 2004.

Lubitsh, Guy, Doyle, Christine, and Valentine, John. “The impact of theory of constraints (TOC) in an NHS trust.” The Journal of Management Development 24.1 (2005): 114-117.

Pegels, Carl, and Watrous, Craig, “Application of the theory of constraints to a Bottleneck operation in a manufacturing plant.” Journal of Manufacturing Technology Management 16.3 (2005): 302-304.

Smith, Frank. “A little TOC goes a long way.” MSI 21.8 (2003): 34-38.

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