Theory of Constraints in Production

Constraints

The theory of constraints is a management concept that emphasizes that an organization is only as strong as its weakest link. Weaknesses, therefore, are constraints on organizational capability. In order to improve organizational performance, the weaknesses need to either be removed or strengthened (MindTools.com, 2016). While this theory has most commonly been applied to production, such as in overcoming bottlenecks or improving defect rates, it can also be applied to other practices.

Fiscal accountability can operate under this theory. In the typical organization, most people normally behave ethically, and with a high level of accountability. It only takes one or two people, however, to behave unethically, and the entire organization is undermined. Many cases of accounting fraud, for example, were perpetrated by only a few well-placed people. Thousands of good people worked at Enron, for example, but they were entirely undermined because the people running the company were criminals. When it comes to accountability, it only takes one or two problem individuals to undermine the entire organization.

The theory of constraints is commonly applied to operations as well. The process by which this theory is applied is as follows. First, the constrain must be identified. This will typically be done empirically, with analysis of critical data. Then, the constraint has to be understood. Efforts can then be made to overcome this constraint, such that its performance is improved (Lean Production 2016i). For example, if a constraint in a company's growth is gaining access to a key input, then the company either needs to improve its supply chain, or grow with another product. This process is essentially what Six Sigma does -- find something that can work better, look at how to make it work better, and thus reduce the constraint on product quality.

Bottlenecks are one factor that is considered. Bottlenecks in production are the places where production slows. For example, say a brewery has tanks to make 100,000 bottles every day. If the capacity of its bottling line is 80,000 bottles a day, that means that the bottling line is a constraint on the brewery's production. A solution would therefore be to get a newer, larger bottling line. There might be a bottleneck somewhere else at that point -- maybe the company would then need to hire more sales reps, for example -- but the point of the theory of constraints is to understand where the biggest constraints lie and then work to eliminate those constraints.

Another factor taken into consideration is the supply chain, which can be a weak link. The hypothetical brewery might have trouble getting certain hops, which could be a constraint on its ability to produce a popular beer. Toyota had problems with its supply chain after the tsunami in 2011, and had to halt production for several months. That was a case where the supply chain was completely broken, but a less extreme example would have seen it merely curtail its production. Such constraints can prevent a company from growing.