Question

R2.57: Theory of constraints is a problem-solving methodology that does which of the following?

A. Concentrates on the efficient link in the process

B. Focuses on the weakest link in the process

C. Is a means of rank-ordering processes based on their inherent difficulty

D. Focuses on the least resistance to change process

Answer 1

The Theory of Constraints is a methodology for identifying the most important limiting factor (i.e. constraint) that stands in the way of achieving a goal and then systematically improving that constraint until it is no longer the limiting factor. In manufacturing, the constraint is often referred to as a bottleneck.

The Theory of Constraints takes a scientific approach to improvement. It hypothesizes that every complex system, including manufacturing processes, consists of multiple linked activities, one of which acts as a constraint upon the entire system (i.e. the constraint activity is the “weakest link in the chain”).

So what is the ultimate goal of most manufacturing companies? To make a profit – both in the short term and in the long term. The Theory of Constraints provides a powerful set of tools for helping to achieve that goal, including:

• The Five Focusing Steps (a methodology for identifying and eliminating constraints)
• The Thinking Processes (tools for analyzing and resolving problems)
• Throughput Accounting (a method for measuring performance and guiding management decisions)

One of the appealing characteristics of the Theory of Constraints is that it inherently prioritizes improvement activities. The top priority is always the current constraint. In environments where there is an urgent need to improve, TOC offers a highly focused methodology for creating rapid improvement.

A successful Theory of Constraints implementation will have the following benefits:

• Increased profit (the primary goal of TOC for most companies)
• Fast improvement (a result of focusing all attention on one critical area – the system constraint)
• Improved capacity (optimizing the constraint enables more product to be manufactured)
• Reduced lead times (optimizing the constraint results in smoother and faster product flow)
• Reduced inventory (eliminating bottlenecks means there will be less work-in-process)

Step	Objective
Identify	Identify the current constraint (the single part of the process that limits the rate at which the goal is achieved).
Exploit	Make quick improvements to the throughput of the constraint using existing resources (i.e. make the most of what you have).
Subordinate	Review all other activities in the process to ensure that they are aligned with and truly support the needs of the constraint.
Elevate	If the constraint still exists (i.e. it has not moved), consider what further actions can be taken to eliminate it from being the constraint. Normally, actions are continued at this step until the constraint has been “broken” (until it has moved somewhere else). In some cases, capital investment may be required.
Repeat	The Five Focusing Steps are a continuous improvement cycle. Therefore, once a constraint is resolved the next constraint should immediately be addressed. This step is a reminder to never become complacent – aggressively improve the current constraint…and then immediately move on to the next constraint.

In addition, Throughput Accounting has four key derived measures: Net Profit, Return on Investment, Productivity, and Investment Turns.

Net Profit = Throughput − Operating Expenses

Return on Investment = Net Profit / Investment

Productivity = Throughput / Operating Expenses

Investment Turns = Throughput / Investment

Thanks