What is the Theory of Constraints?

The Theory of Constraints (TOC) is a Tool that helps professionals Optimizing Industrial Processes.

  • It was invented by Eliyahu M. Goldratt in 1984.

 

It Focuses on what is preventing these Processes from being carried out Optimally.

  • Their Constraints.

 

To do so, it proposes 5 Steps:

  • Identify the Constraint.
  • Exploit the Constraint.
  • Subordinate Everything.
  • Improve the Constraint.
  • Repeat the Cycle.

Five Steps of the Theory of Constraints

  • 1. Identify: The First thing that must be done is to Identify the Main Constraint.
    • The single biggest Constraint in the Process.

 

  • 2. Exploit the Constraint: Decide How to Save money by knowing this limitation.
    • Not wasting money on useless measures or materials, for example.

 

  • 3. Subordinate Everything: Expand the consequences of this limitation to the entire Process.
    • If other Processes will be limited by this Constraints, save money there too.

 

  • 4. Improve the Constraint: Eliminating or Improving the Constraint.
    • Applying a Problem Solving method to attack its Root Cause.

 

  • 5. Repeat the Cycle: Find the next Constraint and Repeat the entire Process.
    • Repeat the whole process Continuously.

 

Theory of Constraints Template.

 

We’ll see them in detail with an Initial Example.

 

Let’s imagine that you have a Programming Business.

  • You earn money creating Websites.

 

90% of your Clients ask for Simple WordPress Sites.

But, 10% of them require Coding.

 

And Coding prevents you from being able to do more tasks.

  • Limiting your overall Work Capacity.

 

Let’s see what you can do so solve this issue:

Identify - First Step of the Theory of Constraints

 

How to identify Constraints:

  • Look at the Time and Resources required to complete each task.
  • Look at the Essential Tasks.
  • Look at what tasks need to be done before others.

 

Example

 

As we mentioned, you have a Programming Business.

  • You create Websites.

 

You know that if a Project requires you to Code you’ll have trouble meeting your Deadlines.

  • That is your Constraint.

Exploit - Second Step of the Theory of Constraints

 

The Best ways to Exploit Constraints are:

  • Saving Money from other useless over-tasks that can’t be Processed.
  • Conveying “Exclusivity” rather than “Lack of capacity”.

 

Example

 

As soon as you realize that Coding is damaging all your work dynamics, you decide to:

  • Let your customers know how long it takes to complete Coding tasks.
    • Sometimes your Clients request Coding works ignoring the time it takes.
  • Charge separately for Coding works.

Subordinate - Third Step of the Theory of Constraints

 

How to Subordinate the entire Process to its Constraint:

  • Limit the overall Process Speed to the Constraint Limitation.
  • Carry our the Constrain Process in the First or Last Place, when possible.
    • First if it is a Chain Process and Last if Tasks can be developed separately.

 

Example

 

When you can develop your tasks separately, you decide to:

  • Save Coding tasks for last.
  • Request flexible Deadlines for Coding.
  • Charge your Clients per task developed.

 

This way, you’ll be able to deliver everything you have done first to your Clients.

  • They will see that, what’s slowing you down is the coding part.

 

But, when you need to Code first to develop the rest of the tasks, you decide to:

  • Code first.
  • Develop the rest of the tasks once you are done Coding.
  • Charge your Clients per hour of work, not per task.

 

* Note that if this was a pure Industrial Chain Process, you couldn’t choose when to carry out the Task.

  • You should adjust the speed of the Entire Process to the Constraint.

What is the same as carrying out the Constraint Task in the First Place.

Improve - Third Step of the Theory of Constraints

 

The most common ways to Solve a Constraint are:

  • Separate the Constrain from the global Process, if Possible.
  • Look for external Support or Outsourcing.
  • Improve what is causing the Constraint, if there is any Issue or Limitation

 

Example

 

As you want to increase your work capacity, you decide to:

  • Prepare Templates that make things easier for you to Code.
  • Study the Coding knowledge you need the most.
    • You could develop this TOC 5 Steps with your Coding Knowledge.
  • Outsource certain Coding tasks.

Repeat - Third Step of the Theory of Constraints

 

What should you do once you have solved one Constraint?:

  • Write down what you learned so you won’t have that Problem again.
  • Look for the second most important Constraint and Tackle it.

 

Example

 

Once you have Improved your Coding Skills and outsourced the most tedious tasks:

  • You realize that now, it is Graphic Design what is slowing down you.

 

You then decide to start this cycle again.

Now we will share some Real Examples that will make you understand this Tool much better:

Theory of Constraints Examples

We have chosen 3 examples of different types of Companies that use the TOC Successfully.

  • We could give you lots of examples, but these 3, perfectly exemplify How this Method can be Used.

 

Let’s see what we can learn:

Car Manufacturer - Theory of Constraints example

 

In Car Manufacturing, Constraints are very well studied and identified every day.

 

What do Car Manufacturers do with them?

 

Identify:

  • There are Teams of Engineers that Focus on Finding and Improving Constraints.
    • Process Engineers.

 

Exploit:

  • The Process Line uses bottlenecks to Store Cars before them.
    • This way, they can solve small defects, skipped operations, etc.
      • And, the Manufacturing Process improves its flexibility.
  • Also, the Process don’t Perform more Operations than this bottleneck can handle.
    • Saving time and money.

 

Subordinate:

  • The entire Process speed is marked by the Slowest station.
    • The “Production Control” Department is in charge of it.

 

Improve:

  • As mentioned before, there are different Teams of Engineers Focused on it.
    • In fact, there are lots of Process Engineers.
      • 2 or 3 teams per plant (Body, Paintshop, Assembly).

 

Repeating the Cycle:

  • The Constraints are updated and checked weekly (sometimes even daily).
    • Each department Focus on its biggest Constraint.
      • That is why we say Constraints, in plural.

 

* In fact, I worked as a Process Engineer for a large Automobile Company, many years ago.

  • The quality controls and Improvement Processes were exhaustive.
    • And, the TOC was everywhere.

Louis Vuitton Bags - Theory of Constraints example

 

This example will be a little less technical.

 

We’re sure you’ve heard about Louis Vuitton.

  • They manufacture Luxury Products. From bags to Clothes and Perfumes.

 

Lately, Louis Vuitton has started increasing its personalization offering.

 

Why?

Well, we guess that they are trying to Exploit their biggest Constraint:

  • The time they need to make their Handmade Bags.

 

How do they Exploit this Constraint?

  • Maybe (we can’t know for sure) they can Customize the Bag while they are creating it.

With no time added to the Process.

 

Then, they can charge extra money for it, but their Manufacturing capacity remains intact.

  • Although they need to pay someone to create those customization, of course.

 

We say Exploit rather than Improve because their Manufacturing Capacity has not increased.

  • They surely don’t want to, as they are a Luxury Brand.

French Fries - Theory of Constraints example

 

Have you ever prepared French Fries?

Of course you have.

 

If you think about it, the process is tedious, and not very fast:

  • You have to peel the potatoes.
  • Clean them with water (if you want them not to become dark).
  • Dry them.
  • Fry and Salt them.

 

It is not the most difficult dish you can prepare, but it takes time.

 

Now, think about Fast Food Restaurants.

Generally, they have the best Fries, and they pride themselves on it.

 

How do they do it?

 

Well, they Improved their Constraint.

  • They don’t prepare your Fries. They constantly prepare Fries for Everybody.

 

They solved their Constraint by Mass-Producing them and having them always ready and hot.

 

Think about how long it would take McDonald’s to fry each serving only when asked.

  • It would be a Nightmare.

Summarizing

The Theory of Constraints is a Tool that helps professionals Optimizing Industrial Processes.

  • It Focuses on what is preventing these Processes from being carried out Optimally.

 

To do so, it proposes 5 Steps:

  • Identify: Identify the Main Constraint.
  • Exploit: Decide How to Save money by knowing this limitation.
  • Subordinate: Expand the consequences of this limitation to the entire Process.
  • Improve: Eliminating or Improving the Constraint.
  • Repeat: Find the next Constraint and Repeat the entire Process.

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