Using the Theory of Constraints

Question 1: What are the thinking processes of the theory of constraints (TOC)? Answer 1: The thinking processes are a set of tools used to diagnose problems, innovate a solution, and create an implementation plan. The thinking processes employ a focused and rigorous cause and effect logic to solve a problem. The thinking processes are part of the TOC (Goldratt, 1990). The thinking processes are used with the purpose of assisting the improvement effort by determining what to change, what to change to, and how to cause the change. The most common of the thinking processes tools that are used in the context of the TOC and their basic functions are as follows: Current reality tree (root cause analysis) Evaporating or conflict cloud (conflict resolution) Future reality tree (solution testing) Negative branch reservations (negative side-effect mitigation) Prerequisite tree (reaching an ambitious target) Transition tree (fail-safe action planning) Question 2: How does the Theory of Constraints compare with Six Sigma? Answer 2: Both the TOC and the Six Sigma methodologies serve the same ultimate goal of resolving a problem. The Six Sigma methodology uses the define, measure, analyze, improve, and control (DMAIC) approach (Husby, 2007). Comparatively, the TOC uses a five-step process: 1. Identify the constraint 2. Exploit 3. Subordinate all else to the constraint 4. Elevate the constraint 5. Go back to Step 1 In the execution of those methodologies, the TOC is logic-based while Six Sigma is data-based. TOC creates robust processes with the intent to exploit the current variation while Six Sigma works to minimize variation. TOC, through the application of its identified tools, employs root cause analysis 1

while Six Sigma uses the more traditional quality tools. TOC focuses on providing maximum customer value in terms of the constraint working at the level of the chain while Six Sigma pursues the adherence or exceeding of customer specifications by working at the local link of the systems chain. Question 3: What is the drum-buffer-rope (D-B-R) system? Answer 3: The drum-buffer-rope system is named after its three core components and is an essential part of the TOC. The drum-buffer-rope system works in conjunction with the TOC buffer management approach. The drum-buffer-rope system is a finite scheduling system that facilitates the balancing of the flow throughout the total process. In the drum-buffer system, the drum represents the constraint, also known as the weakest link. The drum also sets the pace or schedule for the constraint. The buffer in the drum-buffer-rope system stands for the material release duration, and its purpose is to protect the material flow to the constraint from interruptions or prevent material shortages. The rope portion of the drum-buffer-rope system represents the release timing or the schedule to release raw materials to the work area. The primary goal of the rope is to make sure that all other operations are subordinate to the constraint. Question 4: What are the different plant types used in the TOC? Answer 4: In the TOC, four different plant types are commonly used, with the alphabet letter illustrating the shape of each type of plant. The four basic plant layouts are the I-plant, A-plant, V-plant, and T-plant. All of these plants represent the common core configurations of most of the plant operations today. Although there can be different plants that use varying combinations of these configurations, the four will be the basic elements for these plants. Of the four types of plants, the I-plant is the most simple layout. The I-plant layout is a single profile setup in which all products follow the same repetitive process and sequence as they move from raw materials to final product. Typically, the slowest operation is the constraint or bottleneck in an I-Plant. The A-Plant illustrates multiple components or materials at the start of the process, with a convergence resulting in the final product. Typical constraints in an A-plant involve the synchronization of the material as they flow through to the final product. Opposite to the A-plant, the V-plant layout starts with single to few inputs, with the dominant feature being divergent in nature. 2

These types of plants use a variety of paths to produce a variety of products. The typical constraint in a V-plant usually involves issues of synchronization. The T-plant layout begins with a limited number of basic products that become a multitude of final products. The T-plant is, in some ways, similar to a postponement strategy. As the T-plant contains features of both the A-plant and the V-plant, it typically has constraints involving both synchronization and allocation. Question 5: Why does TOC subordinate all other process to the constraint? Answer 5: In the TOC, the constraint is identified as the weakest link in the overall system related to the ability of the system to generate more money (Hein, 1998). What makes the TOC different from other methodologies is its focus on the impact of the constraint. Focusing on the constraint allows continuous improvement to do its work to reduce or improve the constraint. Typically, organizations pursue improving many items simultaneously; however, the system will not improve until the weakest link or constraint is improved. When organizations work on many problems at the same time, the allocation of resources among those issues comes to the forefront. As the competing problem solvers procure resources, that activity can steal resources and focus from the improvement of the bottleneck or constraint. One must remember, improvement at nonconstraint operations do not improve the overall system (Hein, 1998). Question 6: How is the TOC used to facilitate and foster continuous improvement? Answer 6:The TOC borrows from many of W. Edwards Deming s management philosophies. The TOC focuses on the firm s most important issues. These issues can originate from product quality, product cost, product engineering, materials procurement, production planning, or even marketing. No area of the business is exempt from the TOC philosophy. The TOC has much in common with alternative methodologies. It facilitates and fosters employee involvement and empowerment, requires education for all employees throughout the organization, requires the establishment of clear and concise metrics, and promotes the quest for fewer suppliers and reduced inventories. The TOC also promotes the system s overall goals rather than promoting local, more parochial goals. 3

Through using and following the TOC methodologies and ensuring the return to Step 1, continuous improvement can be instituted to overcome whatever constraints the company has, be they physical or bottlenecks. The TOC can continuously improve the status of the constraint, regardless of whether it is a capacity constraint, a market constraint, a policy constraint, a logistical constraint, or a behavioral constraint. Question 7: What is the evaporating cloud? Answer 7: The evaporating cloud, also referred to as the conflict cloud or conflict resolution diagram, is just that a conflict resolution tool that is a construct of logic usable by an individual or a team. The evaporating cloud concept is based on the premise that all entities of a conflict are indeed correct in their thinking and share common goals. The logic of the evaporating cloud is that in any system created for a common cause, there is no real conflict only unexamined assumptions. Conflicts in these systems usually originate or are caused by local goals rather than system-wide goals. The evaporating cloud provides a methodology for a clear and concise statement of the perceived conflict, as well as a path for raising and examining those assumptions. The evaporating cloud defines a resolution as when a destination is reached that is beneficial for all entities. Question 8: What are the appropriate metrics or measurements for the TOC? Answer 8: In Goldratt and Cox's book, The Goal, A Process of Ongoing Improvement (1984), it is suggested that the objective of a company is to make money now and in the future. To maximize the profit of a company, it is critical to create a set of measurements that permit the company to monitor its performance as it relates to its stated goal. The TOC approaches business in a different way. Rather than use the traditional metrics employed by companies, which rely on cost structures, the TOC's power instead comes from the measurement of throughput. Rather than cutting costs as a means to profit, the TOC suggests that a better way is to increase throughput while keeping costs relatively the same. Goldratt (1990) goes on to espouse three core metric categories: Throughput: the speed at which a system makes more money through sales. 4

Inventory: the company s monetary investment in things the company plans to sell. Operating Expense: the money expended to transform inventory into throughput. Goldratt (1990), like Henry Ford in his books Today and Tomorrow (1926) and My Life and Work (1922), suggests companies that embrace throughput as the key driver of the business obviously seek to improve throughput first and next reduce inventory. TOC uses a strategy of reducing inventory as a way to expedite response time. It views inventory as a negative to operating capital and customer satisfaction efforts, not as an asset as in most traditional firms. The last resort for companies implementing the TOC is the reduction of operating expenses (typically reductions to the workforce achieved through layoffs or firings). This can be an endless spiral that ultimately leads to the demise of the firm. The TOC suggests that organizations have been measuring the wrong things and traditional accounting systems are fatally flawed. The result of this flawed approach is that organizations have been forced to address symptoms rather than the root causes of the various issues at hand. Companies that focus on improving throughput first, reducing inventory second, and lastly reducing operating expenses are companies that focus on key root causes. In contrast, many companies trying to save money or reduce costs resort to laying off employees in down times. A TOC-focused company hesitates or refuses layoffs as an option, instead seeking other, nondemoralizing alternatives. Question 9: How do TOC and material requirements planning (MRP) compare in scheduling techniques? Answer 9: Both the TOC and MRP use scheduling techniques as a core function. Each have their own logic and characteristics. The TOC is best applied where the product mix is stable, but it can be effective in either a job shop or a continuous flow process environment. Comparatively, MRP functions best in a job shop manufacturing environment. The most obvious distinction between the TOC and MRP is that the TOC focuses on a single bottleneck or constraint, and the MRP system focuses on multiple floating bottlenecks. MRP is based on a reverse flow scheduling strategy that is focused on ensuring an adequate material supply while the TOC uses a mixed flow scheduling strategy with emphasis on constraint capacity. Other characteristics of MRP are that data requirements include all 5

process and product data, and the system operates on the premise that it is authorized to produce to a work order. TOC requires data only on the bottleneck and is authorized only to work on the constraint schedule (Bolander & Taylor, 2000). Question 10: How does TOC foster systems thinking? Answer 10: The TOC is based on the systems thinking philosophy. Systems thinking requires a global view of the company and is based on the philosophy that the whole is more than the sum of its parts. Users of system thinking also recognize that that these parts have relationships with each other. Taking on a systems-thinking perspective is harder than it may sound. It can be difficult for management to avoid focusing on individual priorities (Mabin & Balderstone, 2003). While TOC has many characteristics that foster systems thinking, two key components in particular help provide that focus: Step zero is to articulate the overall company goal or objective. Without senior management guidance, priorities cannot be established as the TOC process is executed. All other process must be subordinate to the constraint. This action ensures that all resources are available to improve the identified constraint. References Bolander, S. F., & Taylor, S. G. (2000). Scheduling techniques: A comparison of logic. Production and Inventory Management Journal, 41(1), 1 6. Ford, H. (1922). My life and work. Garden City, NY: Doubleday. Ford, H. (1926). Today and tomorrow. Garden City, NY: Doubleday. Goldratt, E. M., & Cox, J. (1984). The goal: A process of ongoing improvement. Great Barrington, MA: North River Press. Goldratt, E. M. (1990). Theory of constraints. Great Barrington, MA: North River Press. 6

Hein, K. (1998, May). Continuous improvement using the theory of constraints [Electronic version]. Annual Quality Congress, 52, 969 974. Husby, P. (2007). Competition or Compliment: Six Sigma and TOC. Material Handling Management, 62(10), 51 56. Mabin, V. J., & Balderstone, S. J. (2003). The performance of the theory of constraints methodology Analysis and discussion of successful TOC applications. International Journal of Operations & Production Management, 23(5/6), 568 596 7