Theory of Constraints
Key Concept – Explanation
The theory of constraints was founded by Eliyahu M. Goldratt and is usually vital for managing and elevating organizational performance. Theory of constraints is a philosophy of management and improvement which claims that all systems within an organization experience at least one limiting factor which hinders the existence of infinite production process (Gupta, 2010). The theory is based on the fact that any complex system is similar to a chain, which has a weakest link, which acts as a limiting factor to the ability of the system to meet its strategic goals.
Constraints influence operations within the organization regardless of whether they are acknowledged or not. This theory identifies the factors that lead to constraints and provide measures on the best approach to resolving these constraints. According to this philosophy of management, an organization has to identify the constraint within the whole system in order to be in a better position to attain any form of significant improvement. This theory has problem solving and management enhancement tools known as the thinking process which identifies what to adjust, the best way to adjust and how to execute the change process (Gupta, 2010).
My interest in the topic is brought on by the fact that I want to have a clear and concise understanding of this theory and understand how it can be applied in real world business. I want to know how this theory of management can be used in identifying bottle necks that hinder an organization from optimizing its strategy in order to attain its goals. Consequently, I want to understand the key steps that can be undertaken when applying this theory These include techniques applied in identifying the constraints, how to manage these constraints, criteria of evaluating organizations performance, and how to start over.
Comparison
In module 5 Discussion Board 3 Thread I have studied that the theory of constraints is a systematic way of analyzing the process flows by identifying the constraints in the organization’s operation and balancing the work within the system. This is similar to what I have found in my research. The theory of constraints is also known as the constraints analysis. This is a systematic and iterative approach to the managerial practices which is focused on adapting business operations so as to efficiently cope with constraints that act as a barrier to the achievement of key objectives (Birkin, et al, 2007).The theory of constraints closely relates with other management philosophies, since it focuses on consistent elevation of organization performance and attributed to the magnificent revolution of business in Japan. This is because this theory introduces effective concepts that can be employed in the continuous improvement process.
During my research, I have found that the theory of constraint emphasizes on the most critical issues in the company and how these constraints affect the system. This theory allows the company to utilize its constraints in order to leverage its system (Marton, &Paulová, 2010). This is similar to what I have studied in the module; consequently, constraints have a direct negative impact on the organization’s profitability and process flow (these two factors are the platform for theory of management philosophy). There are five procedures involved in applying the theory of constraint in improving organization’s process period this includes: identifying the system constraints, deciding on how to exploit the constraints, subordinate everything else to the constraints, elevate the system constricts, and breaking the constraint (Zhang et al 2012). This is similar to what I have learnt in the course module and what I have found in research
During my research, I also found that there are various differences between my findings and what I learnt in the module concerning the procedures involved in implementing the theory of constraints in contrast to what I have mentioned above. In the module I studied that there are five procedures involved in implementing this process and this includes identifying the constraints, exploiting the constraints, subordinating all else to the constraints, elevating the constraints and repeating the previous steps when a constraint is broken . However, in my research I have found that there are four steps involved, firstly there is identification of the constraint by spotting the weak links in the operation, secondly there is management the constraint; this involves implementation of minor adjustment necessary to increase efficiency in areas that bring solutions to the problem. Finally there is evaluating performance which involves reviewing how the system is responding to limitation (Webber & Wallace, 2007)
Consequently, during my research I have found some information was not identified in the module. I have found that the theory of constraints is different from traditional cost accounting and margin contribution in approaches employed in problem solving and decision making (Linhares, 2009). The approach of theory of constraints does not necessarily maximize profits and use resources since it tends to have a unit focus on the system and process flow.
Article Summary
Gupta,A. , Bhardwaj, A. & Kanda, A.(2010). Theory of Constraints Based Approach to Effective Change Management. Vivechan journal 1(1) pp40-48. Retrieved from http://ijrimsec.com/assoc_art/volume2/EVPaper(05).pdf
Currently there are elevated levels of competition in the business environment. Business organizations are employing to adopt adaptive practices in order to adjust to the nature of the reality in the business world and bring successful changes in their business. The theory of constraints is a very vital approach in improving the performance of companies since it is capable of identifying and eliminating the major problems that hinder the organizations from achieving its strategic goals.
There are three steps involved in the inspiration of execution of improvement process in accordance to the theory of constraints. This includes what to change: that is the constraints that call for attention in the organization; secondly, there is what to change to: this is the next step involved in trying to find a solution to the problem; thirdly, these are how to course change: this is the best way to execute the change process.
The thinking process is the best tool that is used to execute the change process. However, the thinking process is composed of various tools which include the current reality tree, the evaporation cloud that is the conflict resolution diagram, future reality tree, pre requisite tree and transition tree. However there are various layers which pose resistance to the change process; therefore, a company needs to come up with a strategic plan to overcome this resistance.
Application
The theory of constraint has been applied in a wide range of industries, such as automotive, computers, telecommunication, retail industry, and many others ranging from large global business to small local businesses. For example, the Kent Moore cabinets of Bryan, Texas employed this concept in the early 90s to solve employee turnover problems that was created seasonally. Major sales and production were experienced in spring when the construction companies were active. This was not the case in winter since the company experienced diminished levels of sale. This forced the company to lay off some employees, which were hard to be retrieved during the peak season.
So as to find a solution to this problem, the company employed the theory of constraints which identified their greatest constraint as being seasonal. By the use of throughput analysis, the company discovered that it could exploit its profits and manage worker turn over by keeping a full staff during the year and consequently offered builders a 20 percent discount to buy cabinets during this winter. The theory of constraints was successful since the company managed to cover additional labor costs during the year by use of revenue generated in this period and also increasing the revenue with more than two thirds within two years.
In the current corporate world, the majority of large organizations have sought to combine the concepts of theory of constraints with more advanced cost accounting methods, referred to as activity based management, in order to analyze production costs during the process flow
Annotated Bibliography
Birkin, F., Polesie,T. & Lewis, L. (2007). A new business model for sustainable development:
An exploratory study using the theory of constraints in nordic Organizations. Journal of Business Strategy and Environment. 189(5), 277-290. Retrieved from http://onlinelibrary.wiley.com.ezproxy.lib.uts.edu.au/doi/10.1002/bse.581/pdf
This article looks at how large companies have adopted and incorporated the theory of constraints as a new business model in both their environmental and social aspects of performance. The article further discusses how the theory of constraints has been employed by business organizations in order to structure and evaluate sustainable development. According to this article, the theory of constraints has been utilized to bring corporate change by making slight modifications so as to evaluate and analyze far reaching problems and establishing new business models. This paper finally discusses how Nordic organizations have employed theory constraints management tools in order to achieve a sustainable development.
Marton, M. &Paulová, I(2010). Applying the theory of constraints in the course of process
improvement. Journal of Materials Science and Technology. 18(29), 71-76 retrieved from
http://versita.metapress.com.ezproxy.lib.uts.edu.au/content/m270181k10787615/fulltext.pdf
This article describes the theory of constraints as an approach of logic and systematic thinking or a structured technique that is similar to the PDCA learning loop. The paper further describes this theory as a framework which is all about evaluating and analyzing the cause and effect. The framework is also used as a tool for verification of basic assumption and investigation of alternatives and process improvements. This article further outlines the objectives of this theory, which are to optimize the levels of efficiency in the organization through elevation of the levels of profitability, output quality and the strategic objectives. The paper finally concludes by discussing the application of the theory during the process of improvement.
Linhares, A.(2009). Theory of constraints and combinational complexity of product mix
decision. International Journal of Production Economics. 121(1) 121-129 retrieved from
http://www.sciencedirect.com.ezproxy.lib.uts.edu.au/science/article/pii/S0925527309001364
This article describes the theory of constraints as a framework that suggests that the production process is a process determined by a single bottle neck. It such situation the product mix is used in the selection of products based on the ration of their throughput for every constraint utilized. This article also identifies several factors that go against the theory of constraints. This paper also focuses on the challenges encountered when selecting the optimum product mix with the combination of theory of constraints approach, which is regarded as the improvement over the traditional practices. Finally, the paper acknowledges the theory of constraints as a remarkable success operations philosophy.
Zhang, Z .Guo, B. & Xiang, G.(2012). The review project management based on the theory of
constraints and critical chain. Journal of Applied Mechanics and Material. 34(24), 174-177 retrieved from http://www.scientific.net.ezproxy.lib.uts.edu.au/AMM.174-177.3424
This paper highlights the merits and the limitations of the critical chains project management scheduling technique. It further illustrates how the theory of constraints can be applied in project management through a process known as the critical chain project management. The article goes further to illustrate how critical chain project management works during the planning execution of project management. Consequently, the assumptions and principles of critical chain framework and indications are illustrated and how increased techniques of critical chain are being used in the current corporate world. The article also compares the critical chain technique with other techniques such as the critical path technique, program evolution and review method, and the ganntt chart technique.
Webber, L. Wallace, M(2007). Quality Control for Dummies. New Jersey: John Wiley & Sons.
Retrieved from: http://books.google.co.ke/books?id=9BWkxto2fcEC&printsec=frontcover&dq=Quality+Control+for+Dummies&source=bl&ots=UQpLuATFX1&sig=AmY0u6BDyUhC8M0sOUgDzdHYZas&hl=sw&sa=X&ei=du1OUMenA4WWhQfi74GYCA&ved=0CCwQ6AEwAA#v=onepage&q=Quality%20Control%20for%20Dummies&f=false
This article talks about the best practices that are important in the quality control initiative and how managers can use these practices to maximize productivity among various teams to maximize productivity within a business organization. It further illustrates how the theory of constraints is one of the most critical elements in ensuring that organizations attain their strategic goals. The books outline various guides that can help management improve their quality of productivity through simple and cost effective techniques such as the theory of constraints. The book also covers various options that are available in the current corporate world and also produces so advanced techniques that help in implementation of quality control techniques.
Gupta,A. , Bhardwaj, A. & Kanda, A.(2010). Theory of Constraints Based Approach to Effective Change Management. Vivechan journal 1(1) pp40-48. Retrieved from http://ijrimsec.com/assoc_art/volume2/EVPaper(05).pdf
This article discusses how business organizations are striving to adapt to the reality in the rapidly changing competitive business environment. It further discusses how the theory of constraint is a very fundamental technique that an organization can employ in order to elevate its performance levels. The article also illustrates how this technique can be applied in identification and elimination of constraints so as to attain higher levels of success. The paper also outlines various layers of resistance to change during the improvement process and how to manage the resistance.
