The theory of constraints (TOC) is an overall management philosophy introduced by Eliyahu M. Goldratt in his 1984 book titled The Goal, that is geared to help organizations continually achieve their goals. Only by increasing flow through the constraint the overall throughput can be increased.
Theory of constraints uses the five focusing steps process for continuous improvement:
- Identify the system’s constraint(s)
- Exploit the system’s constraint(s) (get the most out of the constraint)
- Subordinate all other resources to the constraint
- Elevate the system’s constraint(s) (e.g. buy a new machine)
- Warning! If in the previous steps a constraint has been broken, go back to step 1, but do not allow inertia to cause a system’s constraint.
In 2003 profesors V. Mabin and S. Balderstone of Wellington Victoria University (New Zealand) conducted analysis of 81 companies worldwide that have implemented TOC methods. You can find results in the table below:
|Measure||Mean improvement, %|
|Lead time||– 70 %|
|Cycle time||– 65 %|
|Inventory||– 49 %|
|Due date performance||+ 44 %|
|Throughput||+ 65 %|
|Revenue||+ 83 %|
|Profitability||+ 116 %|
* Mabin, V. J. and Balderstone, S. J. 2003. “The performance of the theory of constraints methodology: Analysis and discussion of successful TOC applications,” International Journal of Operations & Production Management 23:568–595.
You can download the full paper here.