The Theory of Constraints and Integrated TOC, Lean, Six Sigma (ITLS) Approach

In his 1984 book The Goal, Dr. Eliyahu M. Goldratt in­troduced a management concept called the Theory of Constraints (TOC). An intuitive framework for organiza­tional management, the Theory of Constraints embraces the idea of continually improved performance and promotes a never-ending process of improvement. TOC requires the organization to have a clearly defined goal, and measure­ments to determine the impact of any improvement effort on the goal. TOC introduces “constraints” as the force working against the desired performance.³³

All business organizations have at least one goal, and whether stated or not, that is to make a profit today, this year, next year, and in the future. Ordinarily businesses measure their performance by net profit and return on investment (ROI). The TOC is founded on the premise that an organiza­tion’s performance against the goal can be determined and managed by the variations of three measures:

• Investment (money invested to be in the business)
• Operating expense (money spent converting investment to throughput)
• Throughput (money from sales)

The premise giving rise to the theory is that every organi­zation faces constraints, at least one of which limits the rate of goal achievement. Goldratt defines a constraint as “any­thing that limits an organization from achieving higher per­formance vis-a-vis its goal”³⁴ Organizations may have tens, or even hundreds of constraints fitting this description, but a core principal within the TOC is that only one, or just a few, really constrain performance. (Remember the Pareto Principle from Chapter 15.) The constraint may be internal to the organization, such as a machine that cannot produce ac­ceptable parts fast enough, employees who lack the necessary skills, or policies and procedures that are unsuitable for the process as implemented. The constraint may also be external, such as lack of customer demand for the product.

It must be noted here that constraints for the purpose of TOC never include breakdowns. Machines that are con­sidered capable of doing what is needed of them do not become constraints when they occasionally breakdown or go out of calibration or adjustment. This is consistent with TQM, which holds that repairing a broken machine cannot be considered an improvement, because it merely restores an earlier level of performance.

The TOC is intended to focus the attention and effort of the organization to the constraint within a value chain, and uses the following steps to do that: (1) identify the constraint, (2) decide how to exploit the constraint, (3) subordinate and synchronize everything else to the decisions in Steps 1 and 2, (4) elevate the performance of the constraint, and (5) go back to Step 1 if in any of the steps the constraint has shifted.³⁵

The authors have some difficulty with the Theory of Constraints as a standalone system for continual improve­ment, although many organizations have used TOC as such with good results. As a consequence of the EXPLOIT and SUBORDINATE steps, it is often necessary to utilize buffers. These buffers hold materials or work-in-progress to prevent shutting down production whenever a constraining func­tion cannot keep up with demand. Should the constraint fall behind in its output to the next link of the value-chain, the materials or work-in-process stored in the buffer is used to allow the next link to continue operation. This tactic has been proven to be a major deterrent to continual improve­ment, because having those buffers available hides problems that should be solved. Therefore, rather than being elimi­nated once and for all, the same problems keep recurring.

As it turns out, the people who are facing the issues every day on the firing line of the business world have found that better results are achieved by using the Theory of Constraints methodology concurrently with Lean and Six Sigma than by using any of the three systems by itself or in pairs. The inte­grated TOC, Lean, Six Sigma (iTLS) model: (1) focuses on the few critical elements that limit performance, (2) elimi­nates waste using Lean tools, and (3) reduces undesirable variability using Six Sigma tools.³⁶

The iTLS model approaches improvement projects in three successive phases.

1. Apply TOC to focus on processes where changes are necessary.
2. Apply Lean to remove waste from the processes.
3. Apply Six Sigma tools to control process performance and variability.

Should your organization be using Lean, Six Sigma, or Lean Six Sigma, you might do well to consider the addition of TOC

Source: Goetsch David L., Davis Stanley B. (2016), Quality Management for organizational excellence introduction to total Quality, Pearson; 8th edition.