In a dynamic environment where the product mix and customer requirements are continuously changing, it is critical to quickly identify what is constraining the enterprise from being responsive and from delivering ever increasing value at a reasonable cost to customers.
Mark Woeppel from Pinnacle Strategies has written a great overview of the Theory of Constraints.
For the uninitiated, the Theory of Constraints (TOC) is a commonsense way to understand a system (including business processes and projects). TOC maintains that the throughput of every system is limited by at least one constraint. A constraint is anything that prevents the system from achieving more of its goal. Only by increasing flow through the constraint can overall throughput be increased. These constraints are the leverage points in the system.
The primary goal of the Theory of Constraints is to guide management toward where and how they should focus their resources to leverage the best return on investment.
The primary principle of TOC is to focus on the weakest point of the process, the constraint limiting throughput, and leverage all improvement efforts on the constraint.
In typical business processes and projects, the weakest link is a constrained resource that limits the throughput of an organization.
Here are visualizations of some of the concepts described by Mark:
Constraints and Leverage Points
Archimedes once said, “Give me a lever long enough and a place to stand and I will move the earth.”
Eliyahu Goldratt, the father of ToC, believed that every system contained leverage points - critical places where force could be applied and do the most good. (“Force,” in this case being an illustrative, not a literal term.) In other words, changes at these leverage points would deliver a positive (or negative) effect on overall system performance considerably out of proportion to the magnitude of the change eort.
Goldratt referred to these leverage points as constraints, because inaction at these locations prevented the system from realizing better performance in relation to its goal.
To increase the throughput of the system, therefore, one must deal with the things that currently limit it. In other words, the constraints are also leverage points.