Mazda does it, Ford does it, Intel does it: They all use the Theory of Constraints. In fact, Mazda was able to overcome a crisis in 2007 by applying this theory. Haven't heard of it before? Don't worry, we're here to reveal what the Theory of Constraints is and how you can use it!
What Is the "Theory of Constraints"?
The Theory of Constraints, also known as the Constraint Theory, was formulated by Israeli physicist and management consultant Eliyahu Moshe Goldratt. It is a proven concept for optimizing processes and improving the overall performance of a value chain.
According to the theory, the overall success of a value chain is determined by a single element - the bottleneck. In other words, a chain is only as strong as its weakest link.
Video: Theory of Constraints (EN Sub) – Masterplan Shorts
Why Should You Know the Theory of Constraints?
A bottleneck can have serious consequences. If it is not resolved, an entire value chain can come to a halt. Let's consider an example to illustrate this:
Imagine you work in a software company with sales, production, and project management teams. In this scenario, there is a shortage of personnel in the production department, which leads to a bottleneck.
When sales closes a deal, it is passed on to production. However, due to the already fully utilized production capacity, the bottleneck puts even more pressure on production.
Sales follows the unwritten law of the business world: "Stay busy." So they start new projects, which are also forwarded to production. Meanwhile, project management is waiting for production and starts new projects of its own.
The consequence of this bottleneck is an overload on all teams. Production cannot cope with the workload, while sales and project management are unable to handle new projects and yet continue to start new ones. The entire system suffers from this chain reaction.
What Can You Do to Address Bottlenecks?
The Theory of Constraints provides a proven method for identifying and resolving bottlenecks. Here are four steps to help you:
Step 1: Identify the Bottleneck
Analyze your value chain and identify the subprocess or team that is hindering the flow. This bottleneck is the critical point that limits your productivity.
Step 2: Subordinate all other Processes to the Bottleneck
To effectively utilize the bottleneck, all other teams and processes should reduce their work to the extent required to fully utilize the bottleneck at 100%, but not beyond.
This means that individual subsystems or teams may temporarily work less efficiently. However, the focus is on optimizing the entire system, not individual parts.
Step 3: Expand the Bottleneck if it still Exists
If the bottleneck continues to impede productivity, it may be necessary to find additional workforce or provide additional machines to increase capacity.
Step 4: Start again from Step 1
Even if you have successfully eliminated a bottleneck, it doesn't mean that other bottlenecks cannot occur. Repeat the process regularly to identify and resolve new bottlenecks.
Conclusion: Working more Effectively with the Theory of Constraints
The Theory of Constraints offers a proven approach to identifying and eliminating bottlenecks in processes. By identifying bottlenecks, subordinating them to other processes, expanding the bottleneck, and repeating the cycle, you can build an efficient value chain and optimize the overall system.
Use this theory to successfully implement bottleneck management in your company!
Finally, we would like to emphasize that the Theory of Constraints is not only applicable to software companies but can be effectively utilized in many industries.
Understand your value chain, identify bottlenecks, and continuously work towards eliminating them to optimize your processes and achieve long-term success.