3.3 Theory of Constraints

EIN 6935 /4933LEAN Six Sigma

Instructor: Christos Nicolaou

3.3 THEORY OF CONSTRAINTS

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Learning Objectives• Eliyahu M. Goldratt• The “Goal”

– The concept of constraint– The Theory of Constraints

• The TOC Improvement Process

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Eliyahu M. Goldratt (1948 - 2011)• He was an Israel-born physicist

turned business consultant• He was the originator of the

theory of constraints (TOC).• He claimed that he applied the

scientific method to resolving some permanent problems of organizations.

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The “Goal” of a Company is..

… to make money

The TOC explains that the three ways for a company to make money are to:

increase throughput reduce inventory and reduce operating expenses

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Focused Improvement• The concept of constraint is the basis for

Goldratt's process of focused improvement• Eliyahu M. Goldratt maintained that any

business system has– at least one constraint, otherwise its performance

would be infinite – very few constraints, otherwise it would be

unstable and cease to exist • Constraints are physical or systemic limits on

capacity (such as equipment, people, new product development, "the market")

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TOC Example• A chain has 6 links, each link capable of holding a

maximum weight of 8, 7,7, 4, 8 and 7, 8 tons respectively• The maximum weight the chain can hold is clearly 4 tons

– the limit imposed by the weakest link• In this case, all 6 links have limits to their strength, but

the 4th link is the constraint because it is the greatest restriction on the system

A Chain Is As Strong As Its Weakest Link

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TOC Concept

Moreover…We Need To Consider The

Chain As A Whole…And Not The

Individual Links A process is no faster than its smallest bottleneck Effort spent fixing any process other than the

constraint will not impact system overall efficiency Variation (in production and material transfer times)

prevents the operation of a balanced factory at 100 percent capacity

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The TOC Improvement Process

1. Identify the constraint2. Exploit it (get the most out of the constraint)3. Subordinate everything else (align the whole system

or organization to support the decision made above)

4. Elevate the constraint (make other major changes needed to break the constraint)

5. Go back to step 1 and DO NOT ALLOW INERTIA TO BECOME A CONSTRAINT

To improve the performance of that same value-chain, continue:

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The ultimate GOAL …

And By Understanding That Seemingly Complex Cause And Effect Occurs Via

These Dependencies

The Keys To Gaining Control And Moving Our System In The Desired Direction

Improve Systems By Recognizing That Dependency,

Variation, And Finite Capacity Exist In These Systems

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What is TOC - Eli Goldratt

www.toc.co.uk

http://www.youtube.com/watch?v=dtjTVwd8x-4&feature=related

This is a quick excerpt from Eli's recent web cast. This was the introductory session for the first web cast on the Theory Of Constraints (TOC) Process for project Management Critical Chain Project Management (CCPM).

~ 4 mins

QUESTIONS