Theory of Constraints
Understanding the theory of constraints is detrimental to the business. It is a methodology for identifying the most important limiting factor that stands in the way of achieving a goal and then systematically improving that constraint until it is no longer the limiting factor. Typically, we call the constraint a bottleneck.
Limiting Factor = Constraint = Bottleneck
The Theory of Constraints takes a scientific approach to improvement. It helps you understand what makes money in your business and how to support that task to make more money.
Managing Systems:
If you have a process with a different capacity at the individual process step the most capacity the whole process line can output is as much as the weakest link.
Machine A - Machine B - Machine C - Machine D - Machine E
12 7 5 6 15
This means that if Machines A - E above are different process steps within an assembly line the most output this line can generate is 5. This is because no matter how many materials Machine C has can only produce 5 items, Machine B can build up and have more than 7 but the inventory will stack up at Machine C due to the capacity constraint on our assembly line.
The theory of constraints helps us understand how we can identify and support the constraint so we can produce more and make more money.
Step 1: Identify - What is the weakest link?
Step 2: Exploit - How can I use what I already have to support the weak link?
Step 3: Support - Feed the constraint, and do not send unwanted inventory through the system.
Step 4: Squeeze - Get more of the constraint by capital or regulatory solutions.
Step 5: Repeat - See if the constraint moves with this extra capacity. If it does move start over or increase other areas to get it to move back.
Remember:
1. An hour lost at a bottleneck is an hour lost for the total system.
2. Any loss here is critical and irreversible.
3. An hour saved at a non-bottleneck is just a mirage.
4. The flow remains dependent on the bottleneck. An hour earned on a non-bottleneck does not benefit the system’s throughput but will only increase the inventory.
