Business Management ABCs

Theory of Constraints – How Does it Work?

In today’s competitive pressure, businesses have to confront customer satisfaction, shareholders’ expectation, constant pressure to keep costs under control and various other pressures. Thus, it has become essential for businesses to undergo various continuous improvements to achieve satisfying expectation and be triumphant in their respective domains. Theory of constraints has become an efficacious means to keep moving on even in troubled times. We are here to see how the Theory of Constraints works and helps us in making improvements

The theory of Constraint is based on the assumption that there are certain factors that prevent the organizations from achieving their goals. These factors are said to be the constraints that prevent the business from getting enhanced and accomplished. TOC aims at identifying the constraints and terminating them. ToC deliberately asks what needs an improvement, what kind of improvement is needed, and finally how can this improvement be made.

1) What needs an improvement? – This can also be stated as the process of identifying the constraint or the real factor which is preventing the organization from achieving its goal. We can understand this with the example of a tire that has an unidentified puncture. You keep filling and refilling the tire with air but the air escapes from the tire from some punctured point about which you have no idea. Similarly when we do not exactly know why our organization is unable to perform satisfyingly, we can hardly solve the problem and even if we try solving out the problem it doesn’t work. It happens because we are not focusing on the real problem. Thus it is necessary to find out the real problem or the constraint.

2) What kind of improvement is needed? – After the identification of the actual problem ToC aims at finding a simple but effective solution to curb it. In other words, after finding what to improve, we now find what kind of improvement will be best suited. Let’s understand this with the help of above example. Having discovered the point of puncture, we now need to find the best possible way to fix the puncture. Similarly, the Theory of constraint now develops simple and practical solution.

3) How can this improvement be made? – Since every constraint is unique so the improvement needed will also have to be unique and thus the method involved in making this improvement will also have to be unique or different in accordance with the constraint. Let’s say that the point of puncture is unique then the method of fixing the puncture will have to be unique. Likewise, the constraint found in the system is unique so the method of improvement or the implementation of the solution will also have to be unique.

If you find the Theory of Constraints a propitious concept of management and look forward to adopt it, you must be well acquainted with the nuts and bolts of the Theory of Constraints