Theory of Constraints

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If you are in the management business, especially in the industrial sector, you are quite familiar with Total Quality Management - or TQM. But only a few of you might have heard of this theory, which is on the one hand a neccessary tool for TQM, but on the other hand - according to some critics - the death of TQM!

In my points of view, TQM and the Theory of Constraints (TOC) can be applied simultaneously very well as I have observed an integration of this model into a plant.
The Theory of Constraints is not a substitute for process improvement tools you might already be using. Rather, it's an adjunct a "power booster"-- that can make those other tools much more effective. TOC's strength lies in the fact that it addresses the performance of the system as a whole and its dependencies. It's not an isolated process tool.

Here I will give basic points of understandig this concept and hope you will benefit from it as I had. For more information I strongly recommend to read Eliyahu M. Goldratt's books.

Traditionally, businesses have operated on the basis of two assumptions. The first of these is that it's possible to subdivide the system improve each part independently, then "glue" the improved parts back together with the expectation of overall system improvement. The second is that maximizing the performance of each part of the system will result in maximum system performance. Eliyahu M. Goldratt, an Israeli physicist, has suggested that these assumptions are flawed. In reality, Goldratt contends, systems behave more like chains: one weakest link determines how well the entire chain can perform. Goldratt calls this link the system constraint. There might be many weak links in a chain the definition of "weak" always depends on some arbitrary standard. But there is only one weakest link: the one that will break first when excessive demand is placed upon it. This is the essence of the Theory of Constraints.

According to Goldratt, no matter what ills the system might be suffering, repairing the weakest link the constraint offers the only promise of immediate improvement that can be observed at the system level. Conversely, if the constraint is not improved, working on a non-constraint will not produce any noticeable improvement in system performance.

The TOC, which is based on the natural laws that govern environment, seeks to determine the underlying cause(s) of problems and to find the best solutions. This is its primary concern. It is not limited to dealing with the invalid policies or physical limitations within a manufacturing company, but has evolved to be applied to a variety of such diverse fields as hospital management, engineering, quality management, information systems, military intelligence, sales and marketing, project management, distribution. It is virtually unlimited in scope and can be used in almost any field.

The cornerstone of TOC is the TOC thinking process. The TOC thinking process focuses on three major issues:

To accomplish a change successfully, it is necessary first to understand the underlying cause of specific effect and then to determine what to add, subtract or modify to eliminate effect. Just because the need for a change is obvious does not guarantee that it will be accomplished successfully. It is crucial to know how to accomplish the change without being blocked and without causing more harm than good.

Most would agree that return on investment (ROI) is an adequate measurement for determining whether an improvement has occurred. However, it does not provide insight into where to focus to produce improvements.

Owing to an increase in competition over the past 10 years, additional measurements have been developed for factors that can increase a company’s competitiveness. These key indicators are the competitive-edge issues of quality, lead time and price. It was easy to develop a logical approach that would maximize attention to each of these issues so that efforts could be made to eliminate those causes that effect these factors negatively. This approach fell into place with the current concept of cost/waste reduction. However, it has become apparent that improving a company’s position with respect to the competitive-edge issues may only serve to increase the potential for making more money. Such efforts do not guarantee increased profitability, and when approached without benefit of a thorough understanding of the impact of the total corporate environment, they may result in a much less competitive entity.

What is needed is a new set of measurements and a process of improvement that, when implemented correctly, will guarantee that profitability will go up. If this new set of measurements can be agreed on, then what is left is to determine the relationship between these measurements and the corporate environment. A company's decision processes and actions with regard to the process of ongoing improvement should follow naturally from there.

For a decision system to work, there must be a direct correlation between the measurements used externally, such as net profit (NP) and ROI, and those used internally. This is obvious. What is being proposed and gaining more and more acceptance as measurements of choice are:

These measurements were first introduced by Eli GOLDRATT in The GOAL (1984), The Race (1986), and The Haystack Syndrome (1990) and are easily understood by the most people without hesitation. The objective is to maximize Throughput while minimizing Inventory and Operating Expense.

Most companies measure "output": tons or units produced or shipped. Goldratt believes that this can lead to bad management decisions. Instead, Goldratt suggests measuring Throughput across the constraint. In this case, he's referring to a physical constraint, probably a resource. Assuming we know where the constraint in our system lies, we should focus on the final sales value to the company that moves through or across the constraint, because the capacity of the constraint is the capacity of the whole system.

What, exactly, is Throughput? Goldratt defines it, simply, as the rate at which the system generates money through sales. In other words, new money coming into the company transfer pricing of products between internal units of the same company doesn't count. Throughput is usually expressed as total sales revenue minus the truly variable costs of producing those sales. Variable costs are those directly related to a sale: generally raw materials, purchased parts, and sales commissions.

For local decision making, managers can consider "T" to be an absolute figure for the entire company or a company rate (the absolute figure per reporting period say, a quarter). But the most useful mode for considering "T" at the operational level is an hourly or daily rate at the constraint: how many dollars(Throughput) worth of product or service per hour does the constrained resource generate?

Goldratt defines inventory as all the money the system has invested in purchasing things it intends to sell. Primarily, this is the raw materials and purchased parts that go into the final product. Clearly, Goldratt aimed this definition at manufacturing industries. However, this concept of "inventory" becomes a little less clear when considering a software development company for example. A knowledge-based industry has little disposable inventory. Most of its "inventory" is tied up in the expertise of its people. But investment can also be made in upgrading a knowledge base, or purchasing of capital equipment. These "investments" can also be considered inventory, because at some point, even these will be sold the knowledge embedded in the product, and the capital equipment as scrap when its productive life is expired.

Operating Expense is all the money the system spends turning Inventory into Throughput. Clearly, this covers a wide spectrum. It includes the wages and salaries of all those who actually touch the product, but it also includes the overhead necessary to operate the company, even that not directly related to a sale. For example, the cost of utilities, equipment maintenance, the salary of the boss's secretary, and marketing costs would all be classified as Operating Expense.

Goldratt intended to provide managers a useful decision tool a connection between the operating floor and the more abstract global measures of net profit (NP), return on investment (ROI) and cash flow (CF). The relations between the two sets of measures are shown below.

T, I and OE can be used to describe any number of additional measurements, which may give insight to their importance as a decision tool.

Once established, these measurements can be used to analyze the impact of each internal decision on the external measurements of NP and ROI. Whenever a decision is made, the question becomes whether or not Throughput will go up or Inventory and Operating Expense will go down. Typical decisions include: where and how to focus process improvement efforts, what products should be sold and for what price, whether a setup should be torn down to run a hot order and, if so, how much should the customer be charged? Each of these decisions can be analyzed based on its impact on the key measurements of Throughput, Inventory and Operating Expense.

Examine the logical flow of work through the system and determine what constrains the output at the back end.

As used here, "exploit" means "to get the most from". This is another way of saying, "How can we use the constraining element of the system more efficiently and effectively?" The intent of this step is to sharpen the existing dull saw, rather than to buy new or more saws. From the quality standpoint, it means that we must do our best to ensure that the constrained resources works only on conforming parts, and that it does not, itself, produce rejects or rework.

This is the most misunderstood step, and the most difficult for most people to do. It requires the realization that one part of the system the constraint is more critical to organizational success than any other. It means that we must take deliberate steps to adjust all the other components of the system so that they don't degrade or overtax the constraint. And it means that we must accept the fact that individual departmental or process efficiencies have absolutely no bearing on the success of the system except to the extent that they affect the constraint. This might mean idle time at some parts of the process. Most managers have a tough time accepting that. They try to keep everybody busy, which can actually degrade performance at the constraint. Once subordination is complete, look again at what was originally identified as the constraint. Was subordination enough to make it no longer the system constraint? If so, jump ahead to Step 5 and identify the new factor that now constrains the system's performance. If the same constraint still exists, go on to Step 4.

"Elevate" in this case doesn't mean what it sounds like. By "elevate", Goldratt means "increase capacity" at the constraint. Sometimes this could require the purchase of more capital equipment. But more likely it would involve a change in the way the constraining element is used. If the constraint is a physical resource, it might require adding shifts at the constraint, or subcontracting out some of the constraint's work. If the constraint is poor quality materials or unreliable suppliers, it might mean finding new sources of supply, or bringing outsourced work back in-house. If the constraint is a rule, regulation, or policy, it might mean seeking a change. For example, "elevating" a resource constraint might require no more than waiving a "no overtime" policy. Eventually, a capital investment could be required to break the constraint, but this should be a last resort. Most systems have perfectly good alternatives available to them before they need to invest in new equipment or facilities. Step 4 requires us to keep "elevating", bit by bit, until the constraint is finally broken. Then go on to Step 5.

But avoid INERTIA. Remember that when you strengthen the weakest link in a chain, something else becomes the weakest link. So continuous system improvement requires us to start looking again for the next constraint. At some point, the constraint will no longer be internal to the system it migrates outside, to the market demand. That doesn't relieve us of the responsibility to keep searching out the constraint and trying to break it. But it does mean that the same skill sets we used to break internal constraints probably aren't appropriate to breaking an external one.

The "inertia" qualification requires some clarification. In physics, inertia is the tendency of an object in motion to remain in motion, or at rest, unless acted upon by an outside force. The corresponding phenomenon in system improvement is the tendency to consider a problem solved and not re-visit the solution again: "We solved that problem earlier; no need to change it again." But in reality, because systems are interdependent by nature, changes we make to the second and third level constraints will inevitably have some effect on the original solution. So we must not overlook the need to re-examine old solutions for the effects of new ones.

Policies, in particular, are susceptible to this problem. Who among us has not seen a policy that had long outlived its usefulness, but remained in effect because management assumed that re-examination wasn't required? Such policies can themselves often become constraints to further improvement. As Eric Sevareid once observed, "The chief cause of problems is solutions." And as luck would have it, policies are usually the most insidious, yet at the same time most devastating, constraints.

The process of improving Throughput is not to be confused with the Shewhart’s plan-do-check-action. In any chain of events, only one thing must be fixed to increase Throughput.

The Five Focusing Steps are extremely useful in guiding management efforts to break constraints. But constraints can come in many flavors, and it's often difficult to know where to look first. Is the constraint internal or external? Should we be looking in our own operations, or somewhere else?

Here's a rule of thumb, developed by Dr. Van Gray, of the Hankamer School of Business at Baylor University. For most organizations, constraints can be classified into one of six categories: market, resource, material, supplier/vendor, financial, or policy. Eliyahu Schragenheim has added a seventh: knowledge/competence. By following the sequence below, it's somewhat easier to zero in on the system constraint.

1. MARKET. Is market demand the constraint? A market constraint is external. Could we sell more products or serve more customers than are queuing up for what we have? If so, quality could definitely be a cause, but it might be something else as well.

2. RESOURCE. Are we unable to keep up with demand? A resource constraint is internal. Do we have long lead times between orders for service or products and our deliveries? Are parts of our system overloaded (bottlenecks)? If so, availability of machines or people (or both) might be the constraint. Are we doing a lot of rework that diminishes our rate of output? If so, quality might be a cause.

3. MATERIAL. Are we losing business or delaying deliveries because the materials we use are faulty or supplies of good materials are inadequate? If so, we have a material constraint. Material constraints are largely external.

4. SUPPLIER/VENDOR. Is our success hobbled by unreliable suppliers or vendors, who miss required delivery dates, deliver the wrong items, or provide poor quality items? If so, the constraint lies in our supplier or vendor. This would also be an external constraint.

5. FINANCIAL. Sometimes companies can be so cash-constrained that they can't deliver Friday's orders until they sell and are paid for Tuesday's orders, because that revenue is needed to buy more materials for Friday's orders. Other times lack of financial resources can prevent a company from upgrading capital equipment needed to fill new orders. In either case, the company suffers from a financial constraint. The financial constraint is usually internal.

6. KNOWLEDGE/COMPETENCE. In some cases, organizations must change the way they do business in order to survive. The long-term "shakeout" of the aerospace industry is a typical example. As defense budgets shrank and projects were cancelled or delayed, many aerospace companies found themselves unable to survive without diversifying into other arenas not dependent on defense contracts. Successfully shifting to new business opportunities depends on how transferrable the company's existing core competencies are, or how quickly it can develop new ones. A narrow focus of competence or knowledge could be an internal constraint to success which could become critical, if survival is at stake.

7. POLICY. Sooner or later, the system constraint becomes a policy: a rule, regulation, or measurement, that by its very existence, serves to limit what the system can do. In many cases a policy is no more than a mind-set: "That's the way we do things around here," or "We don't do those things here." Policy constraints are insidious because they're often very difficult to identify. They're hard to identify because they're usually accepted on faith their underlying assumptions are never challenged. Because policies govern the way we relate to each of the previous six kinds of constraints, they can be devastating in their effects.

The objective of the TOC thinking process is to define those actions necessary to improve a company, given its current situation, and to guide each step to a sometimes not so obvious conclusion. It defines:

Defined in It's Not Luck (Goldratt, 1995) and included in the TOC thinking process are five tools, including:

The TOC thinking process is used to guide the implementation of the theory of constraints and to aid in creating breakthrough solutions. It can also be of tremendous benefit to the implementation of the TOC-based system by ensuring that any undesirable effects that manifest themselves during the implementation process are eliminated.

Goldratt has conceived five logic-based tools to help identify and break system constraints, whether they be internal or external. The first of these is a Current Reality Tree. This is not a decision tree, nor is it a tree diagram from the Seven New Tools. Rather, the Current Reality Tree is a cause-and-effect diagram, constructed by using very specific logical rules. Unlike the "fishbone" diagram, there is no standard configuration for the Current Reality Tree. Each one is unique to the individual situation it's used to model. And each one traces logical cause-and-effect from the visible undesirable effects in a system backward to the root causes, which are inevitably hidden beneath many layers of cause and effect. The Current Reality Tree is one of the few maybe the only tools capable of identifying the interdependent connection of seemingly disparate effects to one or two single root causes, which are usually organizational policies.

Once the Current Reality Tree is completed, the system constraint is invariably identified. Whether it's a resource, vendor, material, financial, knowledge, or market constraint (or the policy that perpetuates them), the root cause at the bottom of the tree is usually the system constraint.

There's an unfortunate aspect to system constraints, from a management standpoint. Because they're so far reaching in their effects on the system, they normally require a significant change in the way business is done to break them. This can be especially true of policy constraints. And therein lies the difficulty: major change is upsetting, perhaps even traumatic, to those within the system. As one wise man said, "Consider how difficult it is to change yourself, and you'll realize how much more difficult it can be to change others."

Assuming we can clearly identify what needs changing the constraint how can we effect change with the highest probability of success? We'll probably use up any accumulated good will in the first attempt, so we'd better be certain we're selecting the right course of action.

The second and third of Goldratt's logical tools are the Conflict Resolution Diagram (Evaporating Cloud) and the Future Reality Tree. The Conflict Resolution Diagram surfaces our assumptions about why we do things the way we do the policies that constrain our ability to improve the system and it helps create "breakthrough ideas" to eliminate or neutralize the constraint.

The Future Reality Tree is somewhat like mirror image of the Current Reality Tree. By showing how the proposed idea to break the constraint will "play out" in the future, it serves the indispensable purpose of validating the effectiveness of the idea it assures us that it will, in fact, produce the results we desire, without creating any devastating new ones.

If we only have one chance to do it right, we can't afford to not know the answer to the question, "What should we change to?" These two logical tools provide the answer that question.

The last two of Goldratt's logical tools, the Prerequisite Tree and the Transition Tree, are designed for implementation.

The Prerequisite Tree begins with the change you want to make the solution generated in the Conflict Resolution Diagram and verified in the Future Reality Tree. With this as its objective, the Prerequisite Tree identifies all the potential obstacles to implementing the solution and enables change agents to develop ways to overcome them (called intermediate objectives). And equally as important, it sequences the obstacles in the order they must be overcome to ensure success.

The Transition Tree picks up where the Prerequisite Tree leaves off. It converts the network of intermediate objectives in the Prerequisite Tree into a step-by-step action plan, complete with the justification for each step. The Transition Tree is particularly useful for persuading people of the need for each change you're asking them to make in other words, "buy in".

Between them, the Prerequisite and Transition Trees provide the road map crucial to successful change: how to make the change happen.

Two major management movements of the eighties and nineties, Total Quality Management (TQM), and Theory of Constraints (TOC) , are really different facets of the same management philosophy. The foundation of modern total quality management is W. Edwards Deming. In his book, Out of the Crisis, Deming demonstrates that a TQM management philosophy is really the use of the concept of a system, systems thinking, process measurement and a never ending cycle of process improvement. TOC is really a focused methodology for performing systems thinking (using the concept of Throughput rather than Cost Control) on the business entity as a whole to focus changes to be made on constraints that are directly limiting better total-system profitability.

Terrence R. Ozan, a partner with Ernst and Young, in The Economist magazine (1992), said that companies found TQM too time-consuming, that some companies expected "pushing quality" alone to produce favorable business performance. Managers found that applying TQM to complex, less-structured functions is difficult.

There might be some validity to what Ozan has said. While many organizations have embraced Total Quality Management (TQM), fewer have been able to make it really succeed. By some estimates, only 25-30 percent of organizations that attempt some formal quality improvement effort succeed. In the rest of the cases, TQM is largely abandoned, or ignored to a death befitting another "flavor of the month."

The missing link is system focus. Is TQM really dead? Let's hope not. Evolved, maybe, but quality and the customer satisfaction that it implies is still a necessary condition for success. However, it's no more than a necessary condition, which means we have to consider other factors in planning to succeed. This brings up the question, "How does quality fit into the overall business performance picture?" Or, in other words, "How do we integrate quality with the other elements of business success?" The answer lies in finding a way to focus our attention on the system as a whole, rather than on its component processes. If we are able to do that, all the necessary conditions are afforded the attention they merit, not just service or production quality.

One of the primary reasons Total Quality Management has such a tough row to hoe is that it lends itself very easily to suboptimization, which, as Deming has observed, can be the death of a system. The Theory of Constraints provides an orderly means of directly connecting departmental actions and decisions with the company's goal and necessary conditions. In the Five Focusing Steps, it offers a simple road map identifying and breaking constraints. With the five-stage logical thinking process, TOC provides the tools to determine what to change (problem identification), what to change it to (solution generation), and how to cause the change (implementation). And TOC's simple global measures Throughput, Inventory, and Operating Expense enable managers to assess the global impact of local decisions.

The Theory of Constraints is not a replacement for Total Quality Management, business process re-engineering, or any other management approach. It's a focusing tool. Where TQM says, "Improve everything at once", TOC says, "Improve the most important things first." The effective integration of TQM with TOC can alleviate the shortcomings of the former. TOC can provide a direct link between quality improvements and the bottom line. With TOC, an organization can trace performance gains directly to the improvements that caused them. Moreover, such gains are immediate. Contrary to popular opinion, TQM need not take years to show results. One company in Silicon Valley turned its performance around from a $2 million loss one year to a $2 million profit the next year, and increased revenues 40 percent a year for the subsequent four years.

The objective of a TOC-based TQM is to establish an effective management system designed to implement the process of continuous profit improvement while meeting the necessary condition of good quality.

The principles of a TOC-based TQM serve as guidelines to help in understanding how to focus efforts in maximizing profitability through the implementation of TQM. A violation of these principles will result in undesirable effects.

The perception of quality for money spent is a condition that must be met before most people will buy a particular product. While an increase in quality will not always guarantee an increase in profitability, the condition of quality has a regulatory effect that, if not continually met, will definitely result in a decline of profitability.

Any solution that may have been valid at the time it was implemented will serve to invalidate itself once it has solved the particular problem it was designed to fix. If the problem is a flat tire and the solution is to mount a spare, once the spare tire has been mounted, the problem as well as the solution are no longer in effect. While this seems like a trivial matter, when applied to a chain of events that occur in a company, it means that once a problem has been solved, continued attempts to fix it would be utterly unproductive. Using the spare tire analogy, continually driving from store to store to buy a new and better tire to replace the one that went flat would be a complete waste of time. In the same way, continually massaging a cost accounting issue - even though the massaging has ceased to solve any problems - would be foolish.

As seen in the description of the process of continuous profit improvement, companies represent a chain of events. In any chain there is a weak link. It is the weak links that determine the limits to how much money can be generated.

Principle 4. The value of an activity is determined by the limitations of the system.

The limitations of the system ultimately determine how much money a company can make. Any activity must be weighed based on its impact on those limitations. Value is not determined by the frequency or the cost of the occurrence. An improvement in a resource that has excess capacity will not by itself result in an increase in the profitability of the company and may actually result in a decrease in profitability.

Principle 5. In a chain of events, the utilization of any resource may be determined by any other resource in a chain of events.

The interactions between resources and ultimately customer or forecasted demand determine the extent of utilization. However, since resources are used collectively to produce an overall effect of satisfying the customer, if one resource does not perform its specific function, it will ultimately block the creation of Throughput.

Principle 6. The level of Inventory and Operating Expense is determined by the attributes of the non-constraints.

Inventory and Operating Expense exist to create or protect Throughput. The characteristics of the non-constraints determine how much protection is actually required. A decrease in protection due to a lack of capacity at a non-constraint resource results in an increase in inventory, as jobs must be released earlier. Operating Expense goes up, as overtime is needed to catch up. Material arriving late to the constraint does so because of a problem at a non-constraint, whether it be delivery of late material by a vendor or a quality problem at a product resource.

Principle 7. Resources are to be not merely activated, but utilised in the creation or protection of Throughput.

Activating resources to produce inventory that is not needed to create Throughput will ultimately result in an increase in inventory. An increase in Inventory will cause profits to decline. However, the major problem is the impact on Throughput. As Inventories go up, lead times are extended and Throughput declines.

The key TOC-based TQM strategy involves team problem solving utilizing self-directed worker and management teams and valid/well-focused improvement processes and control mechanisms

A TOC-based TQM program is a very broad system of management, which includes the following key components:

The effects of a customers perception of poor quality will have an immediate impact on sales but it will also produce long-lasting residual effects. It may be more expensive and take more time to change a customer's perception than to actually increase product quality. Poor quality is a competitive edge issue that cannot be ignored. While good quality will not always increase the amount of money coming into a company, poor quality will definitely have a negative impact that can last for a long period of time. Product quality is a necessary condition and therefore should not be allowed to become the constraint to making more money.

The objective in meeting the necessary condition of good quality is to build and deliver products that meet customer expectations and requirements. To do this means being able to:

While the symptoms and surface causes for failure to meet customer expectations can be very broad, the root causes are few. They include

Of all the causes, probably the biggest problems to meeting the necessary conditions set by the customer and for meeting the profit objectives of companies stem from conflicting goals and measurements as well as poor or invalid decision systems and support mechanisms.

The degree of improvement of a product is a strategic issue, and whether or not a process of continuous improvement is carried out depends on its strategic implications. To ignore the improvement of a product in a highly competitive environment such as the computer industry is to court certain death for the product line or company. What characteristics a product must have to be salable one to five years from now cannot be ignored. Ignoring an opportunity to improve a product until the last minute simply because it is not the immediate constraint, or because the necessary condition is currently being met, while expecting to be competitive in the future is like sitting on a train track while a train is coming and being happy because you haven't yet been hit.

Under traditional TQM, the objective of the statistical sciences is to track and support the reduction of the amount of variation that occurs in the system. Emphasis is placed on the magnitude and frequency of occurrence. The causes of abnormal variation for a manufacturing environment include man (personnel), material, machine, method and tooling. The causes of variation are further categorized into chance causes, which are considered normal, and assignable causes. Assignable causes create recognizable trends, are assumed to be correctable and is the subject of SPC.

Under TOC-based TQM, the degree of variability is not as important as its impact on Throughput, Inventory and Operating Expense. Variability is viewed as an issue in the five-step improvement process. If it causes a constraint or restricts the ability to properly exploit and subordinate, its relative importance must be elevated above the normal programs dedicated to the control and reduction of variability within processes. Normal variability reduction programs should represent an on-going process designed to prevent quality from becoming the constraint or to ensure that the "necessary condition" is met as part of an overall strategic plan.

Theory of constraint is a combination of philosophy, concepts, principles, and tools conceived by Dr. E.M. Goldratt to maximize the performance of any system by identifying, managing, and breaking the most restrictive limiting factor that constrains system performance. Goldratt began applying his ideas about constraint theory in the early 1980s. It has been applied mostly to manufacturing companies, though service and government agencies have begun to find ways to use it in the 1990s. For almost 10 years, Goldratt himself was the only one to write about constraint theory for publication. Since 1990, several other authors have published books on constraint theory. TOC recognizes that the output of any system that consists of multiple steps where the output of one step depends on the output of one or more previous steps will be limited (or constrained) by the least productive steps. In other words the strength of any chain is dependent upon its weakest link.

The Theory of Constraints and the Thinking Process tools are already being used to great effect in many companies throughout the world. Companies both large and small have applied constraint theory and tools for over 12 years. These companies manage change, rather than letting change manage them. Many of them already have reported astounding results. For example, Avery Dennison reported a 20% increase in market share only 18 months after adopting the Theory of Constraints. One Vice President of Texas Instruments recently reported that that company improved operations to the extent that it could defer a $600 million investment in new plants. Results such as these suggest that the Theory of Constraints will soon sweep not the nation but the world.

However, TOC is not a panacea. Panaceas are only for wishful thinkers. The concepts and principles have the widest application to the most systems, but even some of the concepts are limited. The constraint theory measure of Throughput is very difficult to apply to not-for-profit organizations. The tools certainly have limitations, too. They can't substitute for effective leadership, or the will to act. They can't provide the motivation to make things better. And they are useless if the people trying to apply them don't know enough about how their system works. The thinking process is probably the most widely applicable tool, but it doesn't solve problems as much as it focuses problem-solving efforts on the right issues.

In short, the Theory of Constraints is not a substitute for process improvement tools you might already be using. Rather, it's an adjunct a "power booster"-- that can make those other tools much more effective. TOC's strength lies in the fact that it addresses the performance of the system as a whole and its dependencies. It's not an isolated process tool.