The Theory of Constraints

Where should I improve first? Where should I focus? This question has caused people to lose sleep worrying about where to apply limited resources to make a significant improvement to their flow of products or services.

The good news is that there is an answer. Dr. Eliyahu M. Goldratt developed his Theory of Constraints and described it in his popular book, The Goal, by Eliyahu Goldratt and Jeff Cox. Goldratt later credited Toyota and Lean as his foundation for the Theory of Constraints.

To help organizations profitably succeed, the Theory of Constraints aims at increasing throughput, reducing inventory and reducing operating expenses.

We see constraints or bottlenecks in play daily in commuting to work.

Figure 1. A Traffic Jam is a Bottleneck or Constraint on the Flow of Cars on a Highway

To apply the Theory of Constraints to knowledge work, we also have to think of partially completed work inventory. Work in progress (WIP) is inventory in both manufacturing and knowledge work like software engineering. Just like manufacturing, in knowledge work excessive inventory is a expense, not an asset. Inventory is bad. Agile Kanban (as opposed to manufacturing kanban) is based on this idea too.

The Theory of Constraints is a way of identifying the main limiting constraint, or bottleneck, in a process and then systematically improving that constraint to increase throughput. This is the path to getting the most improvement for the least investment of resources.

Rather than flowing cars on a highway, the next Theory of Constraints example shows work items on a Jira board or other team board. The following image is from Hacker Noon.

Figure 2. A Software "Traffic Jam" or Bottleneck or Constraint

Why

The Theory of Constraints aims to help us answer five big questions:

"What needs to change first?" (the weakest link in the process 'chain')
"What should it be changed to? What is the To-Be state?"
"What actions will cause the change?"
"Did the change improve throughput, inventory or operating expenses?"
"What needs to change next?" (the next weakest link)

The Theory of Constraints also accounts for complex adaptive systems with many linked activities. It provides the following:

A way to identify and eliminate constraints
Thinking tools for problem solving (root cause analysis reality tree diagrams, 5 whys, etc.)
A way to prioritize improvement actions on one main constraint at a time
Compatibility with Lean and Agile
Reduction or elimination of bottlenecks resulting in less work in process (WIP)
Improvement of overall organizational profit, rather than sub-optimizing at a lower level

How

The Theory of Constraints consists of five steps:

Identify the constraint (or bottleneck)
Exploit. Improve what you can with what you’ve got aiming to increase the throughput of the constraint (Do better without additional investment)
Subordinate. Subordinate the rest of the process to the constraint or bottleneck. Don’t let other process steps go faster than the bottleneck.
Elevate. Do what you can to improve the constraint further.
Repeat. Look for the next bottleneck. Kaizen. Continual improvement.

Focus

Use Goldratt’s Theory of Constraints to focus Lean efforts on the priorities that matter to the business or enterprise.

There is no point to improving areas in a flow that are not the constraint because the bottleneck is the limiting factor on the flow of value to the customer in your value stream.

The following image is from Just Plan It, shows this well.

Figure 3. Improving the Constraint Improves Throughput, Not Improving Other Areas

Note the original constraint was improved, the flow widened, and then it was no longer the constraint. Another place in the value stream is the new constraint. Rinse and repeat.

I have used the Theory of Constraints successfully over a decade and strongly recommend it.

For more information, contact The Theory of Constraints Institute.

Updated on 23 Sep 2019