Key Points

• The Theory of Constraints is one of the most widely used workplace methodologies.
• Some of the world’s largest corporate names have adopted this concept.
• Names like Boeing, Mazda, and Tata Steel are all excellent examples of companies that have improved their bottom line as a result of this work.

If you’re looking for a management philosophy that will help your organization identify any factors preventing you from achieving a goal, it’s likely based on the theory of constraints. The goal is to identify any factor that is limiting a company’s ability to achieve its goal and then make the necessary changes until it is no longer a roadblock. 

While in most cases, the goal is likely profit and/or revenue, companies worldwide have also focused on other objectives. The good news is that the theory of constraints isn’t new, and it’s been around for a while. Using a five-step process, there is an opportunity to identify the constraint and then work through the Theory’s system until it’s gone for good. 

The Five Focusing Steps

If you want to truly understand the theory of constraints, the bare minimum is to be familiar with the Five Focusing Steps. 

Identify

The first step is to identify the current constraint, which is the part of any system that is likely a weak link. It’s important to remember that this constraint doesn’t have to be physical, either, such as a manufacturing problem. Instead, it can also be policy-related or something happening in the C-Suite. 

Exploit

In the case of an exploit, you will examine the possibilities for eliminating any constraints. The hope is that you can do so using existing resources, otherwise known as making the most of what you already have available. 

Subordinate

The goal in the subordinate step is to ensure that everyone is aligned and supportive of the need to eliminate the constraint. Additionally, a discussion is necessary at this stage to ensure that the change does not negatively impact other aspects of the organization. This could mean that one constraint drops while another rises simultaneously. 

Elevate

If the constraint still exists when you take each step 4, elevate, an organization has to consider what else is possible. These actions are generally undertaken until the constraint is met or broken; however, if there is a need for increased investment to effect a change, this is the step where that discussion will take place. 

Repeat

In this step, you are essentially repeating step one, as the Theory of Constraints is a continuous improvement cycle. As soon as one constraint is eliminated, you move on immediately to the next one, and then the next, and so on. The goal is to never allow any organization or team to be complacent in its goals of achieving the best possible success. 

Case Studies

Boeing

The name Boeing doesn’t need any introduction as one of the world’s best-known aerospace manufacturers. In the 1990s, Boeing was experiencing a bottleneck in aircraft production, particularly around the 737 production line. The impact of this bottleneck was delayed deliveries and a larger number of aircraft that were still a work-in-progress than would otherwise be typical.

Boeing utilized the Theory of Constraint and identified that the issue they were facing was related to a wiring installation process. This process was both time-sensitive and slow, which caused it to drag down the entire assembly line. The line had to wait for the aircraft to complete this step before moving on to the next one. 

To exploit this, Boeing reorganized its entire wiring process. The company standardized tasks and would pre-assemble wiring outside of its main production line. This reduced the actual building time. In addition, the company is also looking to reschedule any other steps in the building process that did not have constraints, so the wiring station was not left wanting for more parts.

As another step, Boeing looked at how to bring in additional resources, including automated wiring tools. This increased the overall capacity of the wiring station alongside human hands, leading to more production. All of this work resulted in a reduction of production time by as much as 50%, and work-in-progress inventory was also reduced by the same amount. 

Tata Steel

Tata Steel, one of the world’s largest steel producers, is based in India and is a subsidiary of the Tata Group. What the company discovered was that one of its Indian plants was experiencing a bottleneck at the blast furnace. This issue limited overnight production, resulting in a decrease in output across the board. 

The first thing Tata did was identify that the blast furnace was indeed the cause of the constraint. The constraint was caused by the furnace’s fixed capacity and frequent maintenance downtimes. This meant Tata had to look for an alternative solution, which meant it had to improve raw material quality and, more importantly, reduce the number of times the machine needed maintenance.

Ultimately, downstream processes for steel manufacturing, such as rolling and finishing, were synced up to match the output the furnace could handle. This meant that any excess inventory was reduced, a separate but strong bonus of this constraint work.

Additionally, Tata focused on upgrading its furnace technology and instituting a policy to predict when the machine would require maintenance. As a result, the company saw a 20% increase in production and a 15% increase in inventory cost. 

Mazda

Mazda has previously credited the theory of constraint with saving its business. Specifically, Mr. Mitsuo Hitomi, a Mazda executive, stated that the company had been facing a financial loss for several years. The company needed to focus on being more innovative, fuel-efficient, and creating its SKYACTIV technology. 

Unfortunately, the company recognized that its product cycles were too long and that it was spending too much. As a result, the company identified that the speed of their product development cycle was the issue. He learned that engineering decisions were creating costly project delays and leading to bottlenecks. This was especially true in the powertrain division, which was attempting to launch SKYACTIV. 

Mazda would adopt the Critical Chain Project Management theory of constraint methodology beginning in 2007. This would help them better focus by identifying the critical tasks they needed to address and reducing the amount of multitasking taking place.

The car company also found that it could rework non-critical tasks, such as secondary designs, by rescheduling when they took place in the development process. This means more time for the development of SKYACTIV. Mazda also invests in CCPM training for its team and improved cross-functional coordination.

At a 2013 Theory of Constraints conference, Mr. Hitomi discussed and praised the effectiveness of the methodology, stating that it likely saved the company. By the time 2013 arrived, the company was on track to earn a profit, breaking its losing streak. 

Dr. Reddy’s

Dr. Reddy’s, an Indian multinational pharmaceutical company, experienced setbacks in 2016 with its production policy. The policy, which had been implemented 10 years earlier, focused on minimizing stockouts by pooling production capacity across products. The challenge is that it has led to increased production costs, rising inventory levels, and costs, as well as affecting the overall supply chain.

To turn everything around, the company looked to rework Replenish to Consumption, which led to inefficient resource allocation. The company also had to navigate how its SKUs all competed for the same production resources, resulting in an inventory imbalance. 

The company identified constant changes in production, which increased costs and led to delays. As a result, Dr. Reddy’s optimized its existing system by focusing on the highest-demand products in its lineup. To reach this point, it required a shift in focus away from its low-priority SKUs and an identification of actual demand patterns from customers to refine its product lineup.

Senior Vice President Puvvala Yugandhar proposed a shift in the company’s policy. The recommendation was to segregate production policy on product types and use demand estimates to update production levels. The ultimate takeaway was to stabilize inventory, while also identifying the following constraint that could be leveraged to improve the bottom line. 

Other Useful Tools and Concepts

If you want to learn more about the Theory of Constraints, you can start by reading more about how it helps set project priorities. Additionally, you can build up your skill level even more by learning all about the theory of constraint and learn how to better focus on Lean Six Sigma efforts.

If you are interested in learning more about case studies, consider reading this article on the successful implementation of Hoshin Kanri in global organizations. Alternatively, you can turn your attention to something else, such as learning about how distributed Scrum teams collaborate remotely. 

Conclusion 

There is no question that the Theory of Constraint is quite successful. Companies, both large and small, have demonstrated that this methodology can help reduce bottlenecks and is one of the best ways to increase the bottom line.