Theory Of Contraints

The theory of constraints was developed by Eliyahu M. Goldratt in the mid-1980's and make popular in his book 'The Goal' and is a process which is focused on improving the output of an operation by identifying what we call the limiting factor.
Every process or operation has a constraint in it, if's it a production line it may be that machine 2 is slower than all the others or produces a lower quality than the others, by focusing the improvements on the constraint you increase the output of
the entire operation and hence increase profitability since you actually manage to increase output.

The process works in 5 steps shown in the diagram opposite, also called the 5 focusing steps. The loop is continual you have to keep working to improve the assorted constraints within the process using a variety of tools.
It's not news that when you have a bottleneck in your process you have a problem, backlogs build up, sales don't go out on time, customers get frustrated and cash flow starts to suffer. Identifying your bottlenecks and understanding the value of them then is important, so why don't more people pay attention to them? 
Moreover, why isn't more time & money spent on fixing them? Could it be that you are valuing them in the wrong way?
The diagram opposite gives you a bit of an idea, the theoretical output of this process should be 5 units per hour but it's only achieving 4, so what's the big deal?..


Perceived Value of a Bottleneck

Most companies look at Machine 3 and say well, it costs us $250 per hour to run that machine (this is machine rates/labour rates/overheads etc). So if the additional time to run it is 2.5hrs then the additional 'cost' of the bottleneck is 2.5 x $250 which is $625, that's what I have available to spend to improve it. But that's wrong!

You may also look and say OK well we have $150 of material in each unit that is now tied up in WIP so that's 10 x $150 so that's another $1500 to play with. Nope, still wrong, incidentally this is actually the value of your inventory you are talking about here as Work In Process is Inventory.

Let us Help Improve Your Throughput

With our help, you will start to understand the real value of a bottleneck to your operation and the true value of Work In Progress and Inventory on your bottom line and how it actually slows down your ability to respond to customer demands.

How it Works

The steps are simple..


Define Your Business Goal

Decide what your goal is and then tell us what you need to achieve.


Agree The Outcomes

After asking some questions we'll give you a proposal based on our understanding of your needs.



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