Theory of constraints

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Theory of constraints (TOC) is a body of knowledge on the effective management of (mainly business) organizations, as systems. The author is Eliyahu M. Goldratt, with many others contributing to the body of knowledge.

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The thinking process (TP)

The thinking processes are generic tools to help people walk through a buy-in process. They are also useful tools for any kind of human interactions. The buy-in process has the following steps (see levels of resistance):

Gain agreement on the problem
Gain agreement on the direction for a solution
Gain agreement that the solution solves the problem
Agree to overcome any potential negative ramifications
Agree to overcome any obstacles to implementation

The thinking process, as codified by Goldratt and others:

Current Reality Tree (CRT, similar to the current state map used by many organizations) - evaluates the network of cause-effect relations between the undesirable effects (UDE's, also known as gap elements) and helps to pinpoint the root cause(s) of most of the undesirable effects.
Evaporating Cloud (conflict resolution diagram or CRD) - solves conflicts that usually perpetuate the causes for an undesirable situation.
Core Conflict Cloud (CCC) - A combination of conflict clouds based several UDE's. Looking for deeper conflicts that create the undesirable effects.
Future Reality Tree (FRT, similar to a future state map) - Once some actions (injections) are chosen (not necessarily detailed) to solve the root cause(s) uncovered in the CRT and to resolve the conflict in the CRD the FRT shows the future states of the system and helps to identify possible negative outcomes of the changes (Negative Branches) and to prune them before implementing the changes.
Negative Branch Reservations (NBR) - Identify potential negative ramifications of any action (such as an injection, or a half-baked idea). The goal of the NBR is to understand the causal path between the action and negative ramifications so that they negative effect can be "trimmed."
Prerequisite Tree (PRT) - states that all of the intermediate objectives necessary to carry out an action chosen and the obstacles that will be overcome in the process.
Transition Tree (TT) - describes in detail the action that will lead to the fulfilment of a plan to implement chances (outlined on a PRT or not).
Strategy & Tactics (S&T) - the overall project plan and metrics that will lead to a successful implementation and the ongoing loop through POOGI.

Some observers note that these processes are not fundamentally very different from some other management change models such as PDCA "Plan-Do-Check-Act" (which is quite often now displayed as PDSA for Plan-Do-Study-Act as 'checking' merely indicates it's been looked at where 'studying' fosters a proactive approach) or "Survey-Assess-Decide-Implement-Evaluate", but the way they can be used is clearer and more straightforward, more on this can be seen on Goldratt's Theory of Constraints - A Systems Approach to Continuous Improvement by William Dettmer ISBN 0-87389-370-0.

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Throughput Accounting

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Application-specific TOC solutions

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Operations

Within manufacturing operations and operations management, the solution seeks to pull materials through the system, rather than push them into the system.

Drum-Buffer-Rope

A fundamental principle of "Synchronous Manufacturing" can be illustrated by the example of an auditorium with one exit. If the people are instructed to leave the auditorium, the rate at which people can walk through the door is the same, regardless of the number of people in the auditorium. The particulars of the doorway set the rate (#/time) at which people can exit. The capacity of a factory to produce a certain number of products in a certain period of time is likened to the number of people who can walk through the doorway in a given period of time. The inventory of materials in process is like the number of people in the auditorium.

The realization that the inventory on hand is not simply related to the factory output is one of the most basic and important underpinnings of SM.

For reference, you can read Chapter 37 of "The Goal", where DBR is summarized.

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Supply Chain / Logistics

The solution for supply chain is to move to a replenishment model, rather than a forecast model.

TOC-Distribution
TOC-VMI

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Finance and Accounting

Use throughput accounting with T, OE, and I to make decisions.

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Project Management

Critical Chain Project Management

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Marketing and Sales

While originally focused on manufacturing and logistics, TOC has expanded lately into sales management. First data shows that the sales system is massively constrained and TOC offers significant opportunity to increase enterprise throughput = sales results

Solution for Sales

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The Six Necessary and Sufficient Questions relating to Technology

What is the real power of the technology?
What limitation does it diminish?
What old rules helped accommodate the limitation?
What are the new rules that should be used now?
In light of the change in rules, what changes are required to the technology?
How to cause the change (the new win/win business model)?

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Development and practice

TOC has been initiated by Eliyahu M. Goldratt and is being actively developed by a loosely coupled community of practitioners around the world. TOC is sometimes referred to as "Constraint Management".

The TOC International Certification Organization maintains a variety of TOC certifications.

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References

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Novels

Eliyahu M. Goldratt and Jeff Cox. The Goal: A Process of Ongoing Improvement. ISBN 0884270610
Eliyahu M. Goldratt. It's Not Luck. ISBN 0884271153
Eliyahu M. Goldratt. Critical Chain. ISBN 0884271536
Eliyahu M. Goldratt, Eli Schragenheim and Carol A. Ptak. Necessary But Not Sufficient. ISBN 0884271706
Richard Klapholz and Alex Klarman The Cash Machine - Using The Theory of Constraints for Sales Management ISBN 0884271773
Ray Immelman. Great Boss-Dead Boss. ISBN 0974036919

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