!!Goldratt's Theory of Constraints
! Contents
* Introduction
* Thinking Process
* Thinking Tools
* Measures
* Application Projects
* References
* Discussion
! Introduction
Goldratt's Theory of Constraints (TOC) is based on a very simple premise - any system will have a constraint (the weakest link) and the performance of the system will be defined by the performance of that constraint. Any change efforts which are focussed on any part of the system other than the constraint are unlikely to improve the global performance of the system (or company)
The theory looks at how to approach changing to systems, tools to help the thinking and measures to check success.
! Thinking Process - the Five Focussing Steps
# Identify the constraint
# Exploit the constraint (i.e. get the most out of what is already there)
# Subordinate everything else (i.e. change the rest of the system to allow the constraint to operate at maximum effectiveness)
# Elevate the constraint (i.e do whatever we need to eliminate that constraint)
# Start again - beware of inertia!
! Thinking Tools
* CurrentRealityTree
* ConflictResolutionDiagram
* FutureRealityTree
* PreRequisiteTree
* TransitionTree
Alongside the five thinking tools there is also a set of guidelines on how to check the quality of the thinking - CategoriesOfLegitimateReservation
! Measures and Throughput Accounting
TOC identifies global three measures to identify the success of change initiatives. These are defined for a commercial enterprise but with some thought can be adapted to any circumstance.
: Throughput (T): The rate at which the entire system generates money through sales (products or services)
: Inventory (I): All the money the system invests in things it intends to sell
: Operating Expense (OE): All the money the system spends turning Inventory into Throughput
Improvement initiatives should aim to increase Throughput (T) , reduce Inventory (I) , reduce Operating Expense (OE) or some combination of all three. Goldratt makes the point that there is a limit to how far I or OE can be reduced (zero!) but T is potentially infinite...
! Application Projects
* OvercomingOrganisationalDefences
! References
! Books
Eliyahu Goldratt has set out his "Theory of Constraints" approach to transforming businesses in books such as
* [http://www.amazon.co.uk/exec/obidos/ASIN/0566074184/ref%3Dase%5Ffivegocrazyinmid∞ "The Goal"]
* [http://www.amazon.co.uk/exec/obidos/ASIN/0566076276/ref%3Dase%5Ffivegocrazyinmid∞ "It's Not Luck"]
* [http://www.amazon.co.uk/exec/obidos/ASIN/0566080389/ref%3Dase%5Ffivegocrazyinmid∞ "Critical Chain"]
* [http://www.amazon.co.uk/exec/obidos/ASIN/0884271706/ref%3Dase%5Ffivegocrazyinmid∞ "Necessary But Not Sufficient"]

Other useful books include:
* [http://www.amazon.co.uk/exec/obidos/ASIN/0873893700/ref%3Dase%5Ffivegocrazyinmid∞ "Goldratt's Theory of Constraints - A Systems Approach to Continuous Improvement"] by H. William Dettmer - a very practical guide to applying the five thinking tools
* [http://www.amazon.co.uk/exec/obidos/ASIN/1574441957/ref%3Dase%5Ffivegocrazyinmid∞ "Project Management in The Fast Lane"] by Robert C Newbold - the application of TOC to project management - the Critical Chain approach.
!Websites
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CategoryConstraints