Theory of constraints
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The Theory of Constraints is a methodology created by Eli Goldratt that identifies the most limiting factor, or constraint, that prevents a system from achieving higher performance. The theory states that all systems have at least one constraint. It focuses on improving profitability by first identifying the constraint, then exploiting it to maximize throughput while subordinating other processes. The five steps are: 1) identify the constraint, 2) exploit the constraint, 3) subordinate everything else to the constraint, 4) elevate the performance of the constraint, and 5) repeat the process as new constraints emerge. The goal is to continually strengthen the weakest link in the system.
Theory of constraints
- 1. THEORY OF CONSTRAINTS Prepared By: MONZALES, MARIBEL T.
- 2. THEORY OF CONSTRAINTS • It was created by Dr Eli Goldratt and was published in his 1984 book "The Goal." • A methodology for identifying the most important limiting factor. • An organizational change method that is focussed on profit improvement. • The theory says that every system, no matter how well it performs, has at least one constraint that limits its performance – this is the system's "weakest link.
- 4. CONCEPT OF CONSTRAINTS Big Question! Is there something that is constraining your project from reaching its GOALS?
- 5. SYSTEMS AS CHAINS Assume a system to be a chain with a goal of transmitting force from A to be.
- 6. SYSTEMS AS CHAINS WEAKEST LINK The link at which the system fails.
- 7. STRENGTHENING THE CHAIN Where should we focus our efforts?
- 8. THROUGHPUT, INVENTORY &OPERATING EXPENSE Goldratt created a simple relationship chart between three system-level measurements: throughput, inventory & operating expense.
- 9. Given Goldratt’s three dimensions, organizations have three different options for system improvement: increasing THROUGHPUT, reducing INVENTORY or reducing OPERATING EXPENSE.
- 10. The potential for increasing THROUGHPUT tend to be much higher than the potential for decreasing INVENTORY AND OPERATING EXPENSE. Therefore, a basic model for system improvements focuses on increasing THROUGHPUT and making reduction of INVENTORY and OPERATING EXPENSE a secondary priority , as shown below.
- 11. THEORY OF CONSTRAINTS EXAMPLES: Machine/equipment Manpower Resources Process No overtime Insufficient materials Insufficient demand
- 13. APPLYING THE THEORY Step 1: Identify the Constraint The first step is to identify your weakest link – this is the factor that's holding you back the most. INTERNAL Process Constraints -Machine -Equipment Policy Constraints -No overtime EXTERNAL Material Constraints -Insufficient Materials Market Constraints -Insufficient Demand
- 14. APPLYING THE THEORY As a numerical example , consider the operation producing product in the figure. QUESTION: Which process has the constraints? PROCESS 1 Capacity= 5 per hour PROCESS 3 Capacity= 4 per hour PROCESS 4 Capacity= 9 per hour PROCESS 2 Capacity= 7 per hour CONSTRAINT INPUTS OUTPUTS
- 15. APPLYING THE THEORY Step 2: Exploit the constraints Find methods to maximize the utilization of the constraints towards productive throughput. For example, in many operations all processes are shut down during lunchtime or during breaks. If a process is a constraint, the operation should consider rotating lunch periods so that the constraint is never allowed to be idle.
- 16. DECIDE HOW TO EXPLOIT THE CONSTRAINTS QUESTION: WHAT CAN WE DO TO GET THE MOST OUT OF THIS CONSTRAINTS WITHOUT COMMITTING TO POTENTIALLY EXPENSIVE CHANGES? INPUTS OUTPUTS
- 17. APPLYING THE THEORY Step 3: Subordinate and synchronize to the constraints “SUBORDINATE EVERYTHING TO THE CONSTRAINTS” OUTPUTSINPUTS
- 18. APPLYING THE THEORY “SUBORDINATE EVERYTHING TO THE CONSTRAINTS” PROCESS3 Capacity= 6 per hour Capacity Increased at Process 3 OUTPUTS INPUTS
- 19. APPLYING THE THEORY Step 4: Elevate the performance of constraint “ELEVATING” the constraint means we take whatever action is required to eliminate the constraint.
- 20. APPLYING THE THEORY Step 5: Repeat the process PROCESS 1 Capacity= 5 per hour PROCESS 2 Capacity= 7 per hour PROCESS 3 Capacity= 6 per hour PROCESS 4 Capacity= 9 per hour THE CONSTRAINT
- 21. APPLYING THE THEORY Step 5: Repeat the process Go back to step 1, but beware of inertia.
- 22. THANK YOU!