Theory of constraints

From Academic Kids

Theory of constraints (TOC) is a body of knowledge on the effective management of (mainly business) organizations, as systems.

TOC consists of:

  1. some basic concepts and principles,
  2. the five thinking processes, and
  3. their applications to various domains, such as:
Contents

Basic concepts

All real-world systems have at least one constraint; otherwise they would be capable of infinite throughput, which is clearly impossible.

TOC claims that a real-world system with more than three constraints is extremely unlikely. This claim is based on linear programming models, which are capable of solving optimization problems for systems with many hundreds of constraints. Researchers found that all but a few such solutions were so unstable that they would be completely impractical amid the noise of a real-world system. The stability had a strong correlation to the number of constraints in the problem; the more constraints, the less stability. TOC practitioners claim that in practice three constraints is the realistic maximum.

A major implication of this is that managing a complex system or organization can be made both simpler and more effective, by providing managers with a few specific areas on which to focus -- maximizing performance in the areas of key constraints, or "elevating" the constraint (making it less constraining).

Five thinking processes

As codified by Goldratt, the five thinking processes are:

  • the current reality tree (similar to the current state map used by many organizations)
  • the evaporating cloud (conflict resolution diagram)
  • the future reality tree (similar to a future state map)
  • prequisite tree
  • transition tree

Some observers note that these processes are not fundamentally very different from some other management change models such as "Plan-Do-Check-Adjust" or "Survey-Assess-Decide-Implement-Evaluate".

Development and practice

TOC has been initiated by Eliyahu M. Goldratt and is being actively developed by a loosely coupled community of practitioners around the world. TOC is sometimes referred to as "Constraint Management".

Synchronous manufacturing

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Project management

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Throughput accounting

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Sales management

While originally focused on manufacturing and logistics TOC has expanded lately into sales management. First data shows that the sales system is massively constrained and TOC offers significant opportunity to increase enterprise throughput = sales results (see http://www.sales-system-management.ch/Sales-System-Management.htm)...

See also

Books

External links

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