Theory of Constraint (TOC) is the knowledge of understanding the constraint that is coming in way of what you wish to achieve. By this definition the moment you open the constraint you should see improvement in what you have been trying to achieve.
I started my journey of learning about TOC in 1990 when I joined P&G as GM manufacturing in India. ‘The Goal’ written by Dr. Goldratt had already become a compulsory reading for plant managers around the world in P&G and I was told to read it too because plant managers were a part of my team. During the previous 5 years, P&G in USA had applied TOC thinking in their distribution operations of Soaps and Laundry business with unbelievable benefits in reduction of cash in working capital and improvement in product availability.
During my stay with P&G we were faced with a situation of over bullish demand projections in Laundry business in India. The production facility at Bhopal was unable to support it with their then current capability and would have needed 24 million USD new investments. I had been posted in Japan at that time and was asked to check if TOC thinking could be applied to release new capacity from the existing facility. During my visit to Bhopal plant we worked on the capacity diagram to check where was the Constraint. Broadly it was a three-part system of ‘Material preparation’, ‘Mixing’ and ‘Packing’. ‘Mixing’capacity was lower than the other two operations. Thus ‘Mixing’ was identified as Constraint. The design capacity was 350 units per month but never they had achieved above 299 units. We also realized that the capacity of ‘Mixing’ was being wasted in many set ups as directed by the ‘Packing’ department based on the demand. Following the ‘5 focusing steps’ process of TOC thinking we knew that we should exploit all the available capacity of constraint and subordinate every other unit to the needs of constraint. A policy decision was taken to make the master plan of production for ‘Mixing’ instead of ‘Packing’ that had much higher capacity. With in 7 days of this policy intervention we could realize a 15% improvement in production output rate! We were able to run the plant at design capacity soon after the policy change.
One of the basic tools of thinking in TOC way is ‘5 focusing steps’. These have been well described in the book ‘the Goal’ and also could be learnt from description at this link – http://www.tocinstitute.org/five-focusing-steps.html
These steps enable the organization to install POOGI viz. ‘Process Of On Going Improvement’ (a TOC term). These steps are –
Identify the Constraint – least capacity section in production flow
Exploit the Constraint – avoid wasting the capacity of Constraint
Subordinate every thing else to needs of the Constraint
Elevate the Constraint – add more capacity at the constraint
Go back to step 1
Knowledge of TOC has continuously grown since the publication of ‘the Goal’ in 1985 and it reached a major milestone with ‘Goldratt Satellite Program’ in 1999 that announced how to apply TOC thinking across the whole organization. Over 200 books on TOC are now available and almost every bit of TOC knowledge is on the Internet.
Traditional management process in organizations is directing the leaders to ensure every resource is well utilized to avoid waste in the system. This is a good idea but has inherent problems. It leads to capacity balancing in different parts of the system that in turn makes the constraint invisible because it starts shifting continuously whenever some part is temporarily down. End result is loss of capacity across the system and fire fighting for delivering the flow through it.
Companies will do very well by ensuring that their production process is not capacity balanced and has a well-defined constraint. Generally the most expensive asset resource that would need substantial money to add further capacity is chosen as constraint. Capacity of other stations is increased to ensure that the constraint is neither starved nor blocked. The capacity of a system is actually is the capacity of its constraint resource. Seeking efficiency as a measure at non-constraint locations is counter-productive.
The author Pradeep Kumar is Mentor, Coach and Consultant for CEOs and Business owners. He is MD of China Subsidiary of Arete Business Consultants and is a partner with HBC consulting in China. He uses Theory of Constraints (TOC) thinking to enable clients visualize the immense possibilities for themselves and their businesses. Pradeep has been in current role of mentoring and coaching since 2006. Previously he was group COO of Singapore multinational TCL for 4 years. And prior to that his 12-year stint with P&G as Associate Director included experience in Japan for 9 years. Currently Pradeep lives in Shanghai and is an active Rotarian and Golfer. He received the top Rotary recognition of “Service Above Self” from Rotary International President in 2013.
