Theory of Constraints (TOC)

The theory of constraints (TOC) adopts the common idiom "A chain is no stronger than its weakest link" as a new management paradigm. This means that processes, organizations, etc., are vulnerable because the weakest person or part can always damage or break them or at least adversely affect the outcome.

Vector Study Approach
Vector Study, assumes every individual in an organization as a vector with certain direction and magnitude. The overal strength of an organization is the sum of all vectors in it. Every vector is important. However, weak vectors can influence organizational strength at certain degree. According to vector theory it is not possible to say "A chain is no stronger than its weakest link". Beacuse strong vectors can eliminate the unwanted effects of weak or harmfull vectors.

 

The analytic approach with TOC comes from the contention that any manageable system is limited in achieving more of its goals by a very small number of constraints, and that there is always at least one constraint. Hence the TOC process seeks to identify the constraint and restructure the rest of the organization around it, through the use of five focusing steps.

 

The five focusing steps of TOC

Theory of constraints is based on the premise that the rate of goal achievement by a goal-oriented system (i.e., the system's throughput) is limited by at least one constraint.

 

The argument by reductio ad absurdum is as follows: If there was nothing preventing a system from achieving higher throughput (i.e., more goal units in a unit of time), its throughput would be infinite, which is impossible in a real-life system. Only by increasing flow through the constraint can overall throughput be increased.

 

Assuming the goal of a system has been articulated and its measurements defined, the steps are:

 

– Identify the system's constraint(s) (that which prevents the organization from obtaining more of the goal in a unit of time)

 

– Decide how to exploit the system's constraint(s) (how to get the most out of the constraint)

 

– Subordinate everything else to above decision (align the whole system or organization to support the decision made above)

 

– Elevate the system's constraint(s) (make other major changes needed to break the constraint)

 

– Warning!!!! If in the previous steps a constraint has been broken, go back to step 1, but do not allow inertia to cause a system's constraint.

 

The goal of a commercial organization is: "Make money now and in the future", and its measurements are given by throughput accounting as: throughput, inventory, and operating expenses.

 

The five focusing steps aim to ensure ongoing improvement efforts are centered around the organization's constraint(s). In the TOC literature, this is referred to as the process of ongoing improvement (POOGI).

 

These focusing steps are the key steps to developing the specific applications mentioned below.

 

Reference:

http://en.wikipedia.org/wiki/Theory_of_Constraints