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Theory of Constraints

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The Theory of Constraints (TOC) is one of the simplest, most powerful supply chain concepts. The basic idea is that every process is limited by some kind of constraint. (Think of the saying “A chain is only as strong as its weakest link.”) TOC is about tuning an entire supply chain to run at the same pace as the slowest step in the process.

There are many examples of how constraints control all the processes around us. In the world of auto racing, there are times when you need to limit the speed at which cars travel around the track, so you send out a pace car that no one is allowed to pass. When you’re draining a bathtub, the rate at which water flows out is constrained by the size of your drain. In other words, the most restrictive step in a process is the one that constrains the entire system. TOC helps you focus improvement efforts on the constraints because that is where you can have the greatest effect on the supply chain.

After you find the constraint, you have two choices:

 Slow all the other steps so that they run at the same speed as the constraining step. This option prevents the buildup of inventory between the steps in your process.

 Improve the constraint so that the entire system moves faster. As you continue to improve the constraint (perhaps by using Six Sigma), eventually, the constraint is no longer the slowest step in your process and stops being a constraint. Some other step becomes the constraint that’s limiting your process, and the cycle starts again.

Suppose that you have a supply chain that involves several steps. Your customers, at the end of the supply chain, want to buy 1,000 widgets each month. But you can deliver only 750. How do you find the problems and fix them so that you can increase the capacity of your supply chain and sell your customers the products they want?

Because of TOC, you know that the entire process is limited by a single constraint — in this case, the slowest step in the process. Instead of trying to fix everything, you need to start by figuring out which step is slowing the rest of the system.

After you find the constraint, you can slow all the other steps so that the entire system is running at the same speed — in this case, tuning each step to produce only 750 widgets per month. That way, you won’t have inventory building up in between the steps of your process. But you also won’t be meeting all of your customer’s needs.

Alternatively, you can improve the constraint, allowing the entire supply chain to move faster. As you continue to make improvements, the constraint no longer limits the process. At that point, some other step has become the constraint. Then you need to shift your focus to the new constraint.

TOC was made popular by a novel called The Goal, by Eliyahu M. Goldratt (North River Press, 2014). Herbie was one of the characters in the book, and his name has since been adopted in TOC to describe the constraining step in any process. Although looking for a constraint may sound obvious, the problem is that constraints are often hard to find. When a constraint is at the beginning of a process (like a pace car) or at the end of a process (like a bath drain) then the process is probably stable. When a constraint occurs in the middle of a process, the constraint can cause chaos. For example, a machine in the middle of an assembly line that breaks down might be a Herbie. But until you look at it from the perspective of TOC, people might not see how the starts and stops of that one machine actually cause inefficiencies throughout the whole supply chain and lower the company’s overall capacity.

Supply Chain Management For Dummies

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