The Theory of Constraints

To constrain or not to constrain?

For my Value Chain Integration class in Fall 2024. Medium does not superscript so superscripts have been replaced with numbers in parenthesis.

Theory of Constraints

The Theory of Constraints (TOC) was introduced by Dr. Eliyahu M. Goldratt in the fictional novel, The Goal. The essence of the theory is that physical constraints (capacity of a physical resource) and non-physical constraints (environmental or organizational) limit the throughput of a process (1). To increase throughput, all bottleneck workstations and activities must by maximized. Non-bottleneck phases are ok to idle, or accumulate, as the bottlenecks are where the limits of the process are realized. A process is only as efficient as its tightest bottleneck (1). There are many applications of this theory, but the theory is not applicable to all constraint situations. In this case study I will discuss applicable use and non-applicable use.

The theory is practiced in many planning types of activities, including project management. Risk aversion and budget compliance are central constraint themes. The project management software company, Asana, has provided a guide to the TOC within project management (2). They go further into the theory and discuss removing constraints, bottlenecks, through The 5 Focusing Steps. Step 1 is to identify the constraint, step 2 is to exploit the constraint (maximize the bottleneck), step 3 is to subordinate everything to the constraint (put the constraint on a pedestal and allocate less important resources to continuously fix the constraint), step 4 is alleviating the constraint (optionally bring in resources to completely remove the constraint), step 5 is to repeat as needed (2). These steps will ideally maximize the throughput by maximizing the bottleneck.

An example of Asana’s project management approach may be allocating an already established team, who are not skilled in a particular task, but the labor is needed for a short-term project. This task would be a bottleneck in the throughput of the whole project. To complete the project on time, this task and team may be given added attention from management, senior employees, or other resources, so that the team always has a guide to the unskilled task at hand. This added support would be sustained through the lifetime of the short-term project. If the project were long-term, then the team may need to be replaced by a more skilled team, up-skilled, or the task may need to be automated to alleviate the bottleneck.

An argument in favor of constraints is to consider other types of constraints than risk and budget — to zoom out from planning and look more at strategy. Outcomes and time are two strategic constraints that support innovation and competition for a future-thinking company (3).

By focusing on outcomes, a company can think more freely. Outlining what is not allowed versus what is allowed, can give people creative freedom and prevent getting bogged down with assumptions on how to get to the goal. By broadening the playing field for people to think, genuinely big and new ideas can come to fruition (3).

Time constraints allow for deadlines of goals. Effective time constraints are in the form of reasonable timelines, sprints, etc. The timing structure needs to be appropriate for the outcome and not just timed with financial calendars (3). Dividing timelines into sprints can prove to be effective as well as breaking up big timelines into milestones, to track success and feasibility. Setting deadlines allows for teams to be reasonable in what can be accomplished, “What can we reasonably do in a 2-week sprint?”

Toyota’s chief engineer, Ichiro Suzuki, designed the Lexus line by creating two conflicting outcomes — faster, lighter, and more fuel efficient than other luxury vehicles. The team stripped their ideas of heavy fast engines and luxury as excess. They then developed the first-of-its-kind, 120 pounds lighter, aluminum engine, and other features that set Lexus apart in its debut (3).

The COVID-19 pandemic created the need for a vaccine. The outcome was clear, a treatment for a virus that was quickly taking out humanity; the time constraint was to have the vaccine as fast as possible. The two constraints of outcome and time, allowed for a quick and innovative throughput that saved countless lives (3).

The Theory of Constraints is an applicable theory in many tangible planning scenarios. Where physical and non-physical constraints directly impact a process or project, maximizing (or alleviating) bottlenecks to maximize throughput gets the immediate job done. Dependent on the goal, embracing constraints like outcomes and time can give a company a more future-focused perspective and enhance innovation and competition. Constraint can be something that needs to be managed or something that creates possibility, relative to the matters at hand.

References

1. Collier, D. A., & Evans, J. R. (2021). Chapter 11: Process Analysis and Resource Utilization. In Operations and Supply Chain Management (2E ed., pp. 310–314). chapter, Cengage.

2. Martins, J. (2024, January 24). The beginner’s guide to the theory of constraints. Asana. https://asana.com/resources/theory-of-constraints

3. Murray, F., & Johnson, E. (2021, April 5). Innovation starts with defining the right constraints. Harvard Business Review. https://hbr.org/2021/04/innovation-starts-with-defining-the-right-constraints