Key Points

• There is something to be said for identifying bottlenecks and eliminating them.
• Every business should be doing whatever it can to figure out how to maximize profits.
• The hope is that a business can utilize this methodology to enhance its customer delivery.

In every business, something’s always a little off or not running as smoothly as it could. It doesn’t matter if you are selling keychains or cars. There is almost always a bottleneck happening somewhere. Maybe it’s slowing people down or eating into profits, but chances are, it’s causing more problems than you need.

The Theory of Constraints has become one of the go-to methods for helping businesses spot and fix bottlenecks. It looks at how all of the different parts of a company work together and helps teams figure out where things are getting stuck, so these same issues don’t keep popping up.

What Is the Theory of Constraints? 

Building on the simple definition above, with the goal of almost every company on Earth to make a profit, they need to find ways to ensure they are focused on doing exactly this. To do so, businesses must identify areas where they are wasting money and determine how to be more efficient with every dollar spent. 

Enter the Theory of Constraints, which seeks to identify any system or area that is currently a bottleneck and then eliminate it so it’s no longer a limiting factor. In the Theory of Constraints model, any constraint is a bottleneck, so these terms are interchangeable. 

To address any issues a company may encounter, it can generally rely on the Five Focusing Steps, which form the backbone of the Theory of Constraints methodology. All of this is credited to Dr. Eliyahu Goldratt, who introduced the Theory of Constraints in his 1984 novel, “The Goal.” TOC has continued to evolve, and it is now one of the largest business management practices in the world. 

What Kind of Bottlenecks Can Exist? 

With an understanding of what the Theory of Constraints is, it’s time to take a look at what kind of bottlenecks can exist.

First, you have the physical constraint, which is generally something that can be drilled down to as a material shortage, not enough people, or insufficient warehouse space to store everything. This one is relatively straightforward and also easy to resolve. 

A policy bottleneck is going to be a little more complicated, as it’s generally focused on how people work. This might involve a government regulation that needs to be adhered to or details about how overtime policies work. Policy bottlenecks can be either informal or formal, but they typically relate to a specific way of working. 

If you have a paradigm constraint (bottleneck), then you have something that is entrenched in the way people work or behave. This might involve keeping manufacturing machines running continuously during a shift to maintain production, even if there is no space available in the warehouse. This idea generally stems from the reality that it’s cheaper to continue manufacturing than to shut down a machine, send people home, etc. 

The final possibility is a market constraint, which companies often experience when production levels exceed sales volume. Whether it’s due to a slow time of year, lower overall demand, or a competitor has introduced a better product, this constraint is likely to be an external factor in the marketplace. 

The Five Focusing Steps

At the heart of the Theory of Constraints are the Five Focusing Steps, and everything else spins out from here. 

Identify the Constraint

You are going to start everything off by looking to identify exactly what the constraint is, as you can’t make any improvements to something you are not aware of. What can you look at, potentially on a manufacturing floor, that is a single point of contention that is limiting whatever the goal of a company is? This goal could be a healthier bottom line or delivering X number of products to customers or clients every month. 

Exploit the Constraint

With the second step, you will exploit the constraint, which is a short way of saying that you want to make the most of the constraint without undertaking any expensive fixes. This means that the bottleneck is a person who is the only one who can make approval decisions on a manufacturing floor; have them prioritize tasks so that delays are reduced. 

Subordinate the Constraint

The third of the Five Focusing Steps asks you to subordinate everything to the constraint. This means that you will allocate all available resources to support the constraint. If you need to adjust team members or reassign team responsibilities, this is the step where those directives would be implemented. 

Elevate the Constraint

At the fourth step, if you are still finding that the constraint is limiting performance and it remains a bottleneck, it’s here that you need to look for a longer-term solution. This might involve adding a second machine to a manufacturing floor or hiring additional staff to assist. 

Repeat the Process

As soon as the constraint is resolved and the bottleneck is gone, it’s time to do it all over again. The most important aspect of the Theory of Constraints is continuous improvement, which means continually refining the process and moving from one bottleneck to the next. 

Busting the Bottlenecks

Let’s take a look at an example of what busting a bottleneck might look like. If you have three steps, and the first step allows for the production of 10 units per hour, and the third step also allows for the production of 10 units per hour, you might think that the second step also allows for the production of 10 units per hour. 

The challenge is that the second step only allows for five units per hour, which means that you now have to limit all three steps to just 10 per hour, even though steps one and three can handle more. If you try to improve the efficiency of steps 1 and 3, you won’t solve anything because the issue is really with step 2.

What this now means is that you have idle steps 1 and 3 for a predetermined period of time because they must match the timing of the second step. In this case, the only viable solution is to determine how to enhance the capacity of the second step to increase its production to 10 units per hour. If you don’t, the result is that you have an extra 100% of inventory just waiting to be sold, if it can be produced. 

This ties closely to the fourth step of the Five Focusing Steps of the Theory of Constraints in that you need to elevate the performance of the bottleneck. In other words, you have to “break” the constraint that is affecting step number two. Whether this means adding more equipment or hiring additional staff, it’s an absolute necessity to complete the task and increase overall inventory levels. 

Other Useful Tools and Concepts

Are you looking to read even more about the Theory of Constraints, as it’s your new favorite topic? The good news is that there is plenty of information available for you, including a deeper dive into how the Theory of Constraints can improve your business process. Better yet, start with a beginner’s guide to the Theory of Constraints so you have all of the basics covered before taking the next step. 

When you are done with the Theory of Constraints and you can call yourself an expert in this methodology, it’s time to move on to something else. How about learning more about a Lean culture that is built to last? As soon as you finish reading this scorcher, try another read about the hidden costs of neglecting process improvement, which is also full of insights.

Conclusion 

While the bottom line of Theory of Constraints is to work until you don’t have any more constraints in your business, this isn’t likely to ever be the case. Instead, it’s a continuous improvement process that never stops, because you can always improve to deliver a bigger bottom line and a better experience for your customers.