Wednesday, January 11, 2017

The Theory of Constraints and a Process of Continuous Improvement

Paths to Productivity
The Theory of Constraints developed by Eliyahu Goldratt in his 1984 book entitled The Goal highlights how organizations are limited by a small number of constraints.  These constraints can add up and impact profit margins by slowing everything else down. The organization can be defined by its weakest link. To improve performance means removing these bottlenecks and ensuring efficiency and proper flow throughout the organization.

Bottlenecks can be physical, financial or informational. Manufacturing facilities have spots where products and resources are congested. Likewise, organizations that rely heavily on intellectual capital could have informational bottlenecks that limit task completion. Financial constraints can also impact both types of organizations when capital is not available to finish projects as needed. 

Research helps uncover these bottlenecks and find solutions that improve the overall flow of physical, financial or informational resources. A process of continuous improvement is implemented in a way that leads to greater analysis, discovery, improvement and review that creates higher levels of organizational performance. A continuous process is often beneficial in this regard. 

The Five-Step Continuous Improvement Process:

The Five-Step Continuous Improvement Process is based on finding the constraints in the system
(Goldratt, 1984, p. 297).
1. Identify the system's bottlenecks.
2. Decide how to exploit (get the most from) the bottlenecks.
3. Subordinate everything else to the above decision (make the bottleneck the
4. Elevate the systems bottlenecks (find a way around the bottlenecks).
5. If, in a previous step, a bottleneck has been broken go back to step 1.

Goldratt, E. (1984). The goal. Croton-on-Hudson, New York: North River Press, Inc.

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