Developed by Israeli business consultant and author Eli Goldratt, the Theory of Constraints (TOC) focuses on improving workflow efficiency by providing a framework for identifying and eliminating constraints in a process.
Goldratt defined a constraint as anything within a process that impedes increased throughput, which is the process of turning inventory into finished product. An increased throughput means more profits, which TOC identifies as having more impact on profitability than reducing inventory or cutting operating expenses.
TOC looks at a project or process as the culmination of a chain of many small tasks. The theory focuses on finding the weakest link in that chain of tasks and addressing constraints that prevent accomplishing the task efficiently. Constraints can come in many forms, including issues with suppliers, materials, equipment and employees.
The Five Focusing Steps
In 1984, Goldratt decided the best method to explain his business theory was to write a novel in which the main character used TOC to improve operations. The result, “The Goal,” follows a new manager as he attempts to turn around operations at a failing plant. He has only 90 days to do so or corporate headquarters will shut the plant down.
The book includes The Five Focusing Steps for TOC.
- Identify: Find what is causing system constraints
- Exploit: Use existing resources to make quick improvements to the constraint
- Subordinate: Review other processes to assess their impact on the constraint
- Elevate: If the constraint still exists, consider further actions to remove it as a constraint
- Repeat: Once one constraint is solved, move on immediately to the next one in a cycle of continuous process improvement
Goldratt’s Theory of Constraints builds on the concept that a chain is only as strong as its weakest link. In business operations where each process involves a series of steps, the slowest step controls the pace of the whole flow of the process. By identifying and improving steps that slow or constrain a system, businesses can increase throughput and reap the benefits of higher profits.
