Key Points

• The Theory of Constraints is one of the more popular process methodologies.
• There are five focusing steps necessary to make this process work.
• At the end of the last step, you can start all over again with a different bottleneck.

The next time you are on the hunt for a process improvement methodology that looks explicitly for bottlenecks, the answer is the Theory of Constraints. This system enables organizations to achieve both their financial goals and their consumer goals by keeping their entire supply chain moving. The Theory of Constraints is often associated with the analogy “no chain is stronger than its weakest link.” 

When organizations implement the Theory of Constraints, they do so for a multitude of reasons. First and foremost is to have better control over their options. The second reason is to reduce inventory that takes up space in a warehouse, which isn’t selling and therefore isn’t generating a profit. The goal is to enhance each system’s output, drive profits, and increase overall company efficiency. 

What Is the Theory of Constraints? 

In its most basic terms, the Theory of Constraints is a problem-solving methodology that seeks to eliminate bottlenecks within an organization. While it’s most often associated with supply chains, such as the manufacturing of aircraft, it can also apply at a corporate level.

One prime example is imagining that you are working on a critical product launch and experiencing frequent delays. The Theory of Constraints will be applied to identify the biggest constraint causing these delays. 

With the identification of the bottleneck, you then apply the five steps that this process is known for and correct whatever needs correcting to eliminate all the reasons for a delay. 

The Five Steps

As part of the Theory of Constraints, a five-step process methodology is associated with this approach. Within these steps, which can be applied at any organizational level, they should be done with as much buy-in as possible. It won’t be long after initiating the five steps in a silo that an organization quickly learns that there are only marginal benefits to doing so. 

1. Identifying the Constraint

The very first step of the five steps associated with the Theory of Constraints is to identify the constraint. This may seem straightforward, but it can be more complex than it sounds. The key is to identify the part of any system that is limiting an organization’s ability to achieve its goal. It doesn’t matter whether this goal is related to production, manufacturing, or another corporate process. This is where the weakest link in the chain fits best, as you need to identify the weakest link.

This could be seeing late deliveries from a supplier or unplanned maintenance on machines in the supply chain. It could be as simple as employees not showing up for work when they are supposed to. However, it could also be something less obvious. In many organizations, work can be batched to save time, but this often results in creating a bottleneck. Identifying this batched work would be an easy constraint to remove. 

The best way to focus on this step is to map the process flow and measure throughput at each step. Tools like process mapping or data analysis are great resources to help confirm the constraint. 

2. Exploiting the Constraint

Once the constraint has been identified, the next step is to determine how to leverage it. The second step, the definition of “exploit,” in this sense, is to maximize productivity at the constraint. Said differently, you may want to ensure that the constraint is being utilized to its full potential.

To clarify what this means, you can utilize the Theory of Constraints in this step to minimize any additional investment needs. In other words, if your issue is employees not showing up for work, consider pulling employees from another part of the company to fill in. They are already on the payroll and may even be familiar with whatever process or equipment you are trying to maximize.

Once again, you can view this step as an opportunity to ensure that a constraint is never idle during operational hours. Any moment of downtime reduces system throughput, driving additional inefficiencies.

The goal here is to ensure that any constraint has all the necessary inputs it needs to succeed. Whether this is information, labor, or materials, you want to see everything you can. 

3. Subordinating Everything to the Constraint

With the subordination step, the goal is to focus on the non-constrained process. The hope is that any non-constraint process follows a traditional path of having at least some level of excess capacity. It is this excess that allows for the full utilization of the constraint itself.

To clarify, there are two types of non-constraint resources to consider. First, there are the upstream resources, which directly feed into the constraint. Second, you have downstream resources, which are the resources that are consuming the outputs of the constraint. The goal here is to allow the upstream resources to have everything they need so there is plenty of available material, labor, etc. for constraint when needed. 

In simpler terms, the goal of step 3 in the Theory of Constraints is to redirect all non-constraint resources (such as labor and equipment) to support the constraint. Whether this involves quality checks, maintenance, or setup, these resources will help alleviate any remaining constraints.

If subordination sounds like a counterintuitive step, that’s okay, you aren’t alone in this thinking. Remember that it’s essential to communicate the purpose of subordination to key stakeholders, as it may require some cultural or organizational adjustments. 

4. Elevate the Constraint

Once the productivity level at the constraint itself has been maximized, any resources that are addressing the constraint must be expanded. The goal here is to increase the system’s throughput. The challenge is that this point does, in fact, require additional investment, something you may have been trying to avoid in the previous three steps.

The hope is that once you have reached this point, throughput is, at least in theory, as high as it can be without adding any more resources to the system. This is the easiest way to describe step four, as it involves adding more resources to the system. Some might say this is an optional step if you aren’t finding success throwing more resources at the constraint as you would in steps 2 and 3. 

The challenge is that you must conduct a cost-benefit analysis and weigh both the long-term and short-term costs of adding more resources beyond what is already available. Any instance of adding equipment, staff, or expanding a facility is likely to have a greater impact on the bottom line.

If a system becomes stabilized and the constraint is reduced in previous steps, it’s largely okay to move right past step four. However, you must do so carefully to avoid ending up back at step one without proper planning. This would then require redoing the entire five-step process. 

5. Repeat the Steps

In this step, the fifth of five steps, you will look back to see if the constraint is still broken. If so, you will repeat the process. If the original constraint is fixed, you can move on to the next constraint and so on.

The hope is that when you reach the fifth step, your constraint will have been alleviated. If so, congratulations! The bottleneck is now gone, and your system has a higher throughput than it did before the first step. Unfortunately, another constraint is likely to exist, so you will be repeating this process again, just for something else.

The hope is that you can prevent inertia itself from becoming the constraint. This means that if you are working in a situation where there is resistance to change, nothing you can do will eliminate the bottleneck. So long as there is a desire across the organization to eliminate a bottleneck, you’re in a good place. 

Other Useful Tools and Concepts

If you want to learn more about the Theory of Constraints, you can read up on some case studies where it has proven to be highly successful. You can also learn more about how the Theory of Constraints helps set different project priorities. 

If you would like to learn more about a different topic, we recommend exploring design thinking in practice. It’s exciting to learn about and understand how brands, especially leading ones, are innovating in today’s world. 

Conclusion 

At the end of the day, the Theory of Constraints is mostly straightforward and not as hard to implement as other process methodologies. Yes, it will require buy-in from leadership, and multiple stakeholders need to buy in. However, the result is that you will find a company in a much better financial position, with fewer unnecessary bottlenecks.