Theory of Constraints Step 1: Identifying the Constraint

In our blogs we mentioned the Theory of Constraints (TOC) several times. In short, it is an organizational change methodology with focused improvement of the organizational goal. The main idea of TOC is that every organization, or complex system, must have at least one constraint. If there was no constraint, then the organization would be able to generate unlimited goal units.  “A constraint” is a factor that limits or constrains the organization from achieving more goal units. The goal of most “for profit” companies is to make a profit, provide a secure environment for employees, and satisfy the market. Theory of Constraints provides an essential set of tools that help to achieve the defined goal.

The Five Focusing Steps

The essential part of the TOC is called “The Five Focusing Steps”, where the key word is “FOCUS”. These steps are the cornerstone of the Theory of Constraints with its goal to grow profits through sales on the one hand, and control costs and eliminate waste – on the other. Speaking in terms of the TOC, this step by step methodology starts with identifying the constraint.

Step 1: Identifying the constraint

Identifying the constraint sounds like a simple first step. However, if it was a simple step, why are most organizations unsuccessful when trying to identify it? To answer this question, we must refer to the teaching of Dr. W. Edwards Deming.  He clearly articulated that attempting to improve a process that is not stable will result in the process becoming more unstable. Taiichi Ohno took the teachings of Deming and applied the concepts to a system and developed the Toyota Production System.

Dr. Eli Goldratt then applied the concepts of Physics to human based systems and developed the Theory of Constraints.  Going back to Dr. Deming, the element that most organizations don’t understand when attempting to identify the constraint is that in order to properly identify the constraint, the system must be stable. Attempting to identify the constraint in a system that is unstable is a guaranteed way not to identify the constraint properly. Deming stated that stability is achieved when no special cause (assignable cause) variation exist, and all the variation in the system is from inherent variation (common cause).

How to identify special cause variation?

So how does that apply to an organization on how to identify special cause variation? To help understand this, we have identified a list of special cause variation that we typically see in companies that are contributing to the instability.  First is a list of special cause variation that is easy to identify, which includes:

• late deliveries from suppliers or sub-contractors,
• quality issues,
• unplanned process downtime, and
• employees calling off or not showing up for work.

The second list of special cause variation is not easy to identify, and these are typically the cause of most of the organizations’ instability.  Included in this list are:

• processing easy work at the expense of the harder work,
• jamming rush orders into the system without consideration the rest of the orders in the system,
• batching work to be “efficient”,
• pulling jobs ahead and batching to “save” setups,
• increasing the order size “just-in-case”,
• creating daily expediting lists and forcing resources to changeover and work on the newest “hot list”, and
• jumping from one task to another before completing the first task, which is known as bad multi-tasking.

If you want to achieve stability and properly identify the system’s constraint, then your first step must be – eliminate the special causes in the first list from effecting the output of the system, and STOP doing the things in the second list. Easy, right?  Not so easy. If it was easy, you would have done that already and would have identified the constraint.

In our next blog we will discuss the second step in detail, determining how to exploit the constraint.