The Theory of Constraints is a business philosophy first put forward in 1984 by Dr. Eliyahu M. Goldratt. In his novel The Goal, Goldratt suggests that productivity in any system is hampered by limitations or bottlenecks slowing down a few key processes. Goldratt refers to these choke points as constraints, from which he derives the name of his theory, and he states that every system has at least one constraint limiting its maximum capacity. His Theory of Constraints offers a five-step procedure designed to improve efficiency, productivity and profitability by managing or circumventing these constraints, thereby increasing the capacity of the entire system.
Goldratt’s Theory of Constraints takes a logic-based approach to problem solving and relies on measurable data to determine goals. The three measurements that attract his focus are throughput — usually defined in terms of sales, operating expense and inventory. He suggests that by following his five-step process, throughput can increase while operating expense and inventory decline, making the entire operation more profitable.
Implementation of the Theory of Constraints is a fairly straightforward process. The first step is of course to identify a single constraint, ideally the most restrictive bottleneck in the entire system. Next, in a process Goldratt calls “exploiting the constraint,” the activities of the chosen constraining element are examined, with special attention given to dedicating that element to maximum efficiency focused entirely on a single primary function, thus ensuring that efforts relating to the constraint are on task and not wasted on any nonessential activity.
In the next step, focus shifts away from the constraint to the activities and processes being delayed, or non-constraint resources. Rather than slowing these elements to match the pace of the constraint, down time from these other resources is subordinated to help overcome the constraint’s limitations. Under this system, elements previously left idle would shift to a secondary task, which helps reduce the constraint’s restriction. So, for instance, warehouse crews waiting for finished product might help with manufacturing or packaging to speed production.
After this subordination is accomplished, it must be determined if productivity has been increased sufficiently. If not, more drastic changes might be required to elevate the constraint’s capacity. Once the bottleneck is overcome and it no longer slows the rest of the system, it is no longer a constraint. The final step in using the Theory of Constraints is to return to the first step and identify a new constraint.