Evolving context of constraints

The context of constraints has been undergoing sweeping changes in the last few decades; the changes were contextually relevant and have been an essential part in the evolution of the theory of constraints (TOC’s) body of knowledge. A look at how it can be applied in the daily on goings at the shop floor.

A constraint in TOC’s perspective is the entity that limits the global performance (goal units) of the system. A company is akin to a system; therefore the constraint is the entity that limits the business performance (sales, profits, etc). Constraint(s) are not to be confused with mundane obstacles; on the contrary, it is highly strategic in nature, to the extent, that if we are able to extract more from the constraint, it directly elivers more money to the company. This is why constraints are termed as ‘leveraging points’ in TOC with a positive connotation.

Stability and growth – the key needs

Any organization has two very important needs for its continued existence – stability and growth. There has to be a conscious system and culture within the company to accomplish these needs on an ongoing manner. All the strategic steps that the company pursues must have its logical link to the above specified needs. However, in practice, it can be observed that many companies are pursuing strategies and supporting actions that are endangering at least one of the needs and thereby actions are in conflict with each other.

TOC advocates a simple yet robust process of ongoing improvement that eliminates conflict and enables companies to accomplish the needs of stability and growth together.

Process of ongoing improvements (POOGI)

  • identify the system’s constraint(s)
  • decide how to exploit (make the most out of) the constraint(s)
  • subordinate everything to the above decisions
  • elevate - find/invest in additional capacity or alternatives
  • if at any time in a previous step a constraint has been broken go back to Step 1

This above five step focus process can be well understood through a simple example of mechanical chain (interconnected through links).

The weakest link (identify the constraint) determines the strength of the chain and to improve the overall strength of the chain the weakest link needs to be further strengthened (2nd step of the five focusing steps), therefore all actions should be focused upon improving the performance of the weakest link. There can be only one constraint (vital few) in any given system and it is also essential that our actions ensure (by design) that the non constraint’s((trivial many) only job is to ensure that the constraint is effectively served and not in conflict with it. Application of the five focussing steps ensures that the constraint’s available capacity is fully exploited (capacity wastages are removed) before capacity enhancement is considered. Further capacity additions are always aligned with increased demand to ensure investments are less risky.

Internal constraints

When a production stage (resource/work centre) has its available capacity lesser than the demand imposed on it, there is an active internal constraint. The very first step would be to be aware of such active constraints. Constraints disrupt flow in the shop floor and causes work in process to pile up, elongates manufacturing lead time and delays shipments to customers. Applying the 2nd step of the five focusing steps, ensures that the constraint capacity is fully exploited (scheduling work orders with correct priority, ensuring bank of work orders before constraint to prevent starvation, ensuring that the constraint is working on the parts that have been verified for quality, planning for manpower during breaks etc) and many times the exploitation step alone releases significant amount of otherwise masked capacity. The core logic of drum buffer rope (DBR) revolves around controlling the rate at which work is released into the shop floor after aligning the constraint capacity to demand, initiating a shop floor culture that operates as per global priorities (in managing work orders) and putting in place a process that instills the process of ongoing improvement to analyses / improve the causes for deviation.

Customer is the king, market is the constraint

During the 1990’s and later, situation reversed from a supplier driven market to a customer driven market, as several suppliers entered the fray and customers started imposing stringent expectations. In order to secure ongoing business it was evident that merely offering good quality products at the right price were insufficient. It was clear that the companies were compelled to start focusing on how their association would add value to their customers business and started developing their internal capabilities to do it. Realigning the company strategies by basing market as the constraint was the way out.

Now re-applying the TOC’s five focussing steps, with market as the constraint, exploiting the constraint (2nd step of the five focussing steps) would mean that the company need to improve its new customer conversation rates (hit rates) and gaining more business share from existing customers. When competition is intense and are at par (in terms of offering the right product, at the right quality, at the right price, etc) gaining more business would be feasible only when the company is able to fulfil a very important need of its customer base and that too if the company can stem this capability by streamlining its own operations (core capability). By developing the internal capability to supply on time, by targeting the customers who are desperately in need of it and through effectively marketing the reliability offer (to the relevant customer base) can fetch the company significant additional ongoing business in such markets. It is very important to note that, by subordinating (3rd step of the five focussing steps) to the market constraint, not only the company needs to undergo several paradigm shifts across many functional silo’s relative to the approach of merely managing internal constraints (where the paradigm shifts needed are mostly within operations), but also gain the ability to induce paradigm shifts into the customer’s ways of evaluating suppliers (shift from the cost consideration to value consideration).

Different markets may have different needs and therefore identifying the decisive need and the ways to effectively capitalise upon them may vary based on circumstances. When convincing offers are made that fulfils significant need of the customer, the probability to secure more customer orders are high.

Management attention as the constraint

If we perceive organisations as a pyramid, top management sits right on top of this pyramid. Merely by listing the various tasks that the senior management needs to manage and oversee versus their available span of attention (capacity) would instantly qualify this to be an active constraint. The company’s performance is a direct derivative of where management is focussing upon and spending most of its energies. Management attention should be prudently put to use (exploitation) and focussed to process worthy while things that contributes to both stability and long term growth of the company. On the contrary, if we dissect the nature of tasks that consume the attention span of a typical management team, it would be hectically skewed towards managing the current operations (stability) rather than future growth. With TOC body of knowledge exponentially expanding in the recent decades, structured methods are now available to deal with management attention; being the most critical constraint, dealing with it automatically aligns the other forms (resource and market) of constraints. When the management realises where to put its focus and gains the knowhow of how to deal with market and resource constraints, sound business results are a sure shot outcome –stability and growth will get their due proportion of attention as well.