An Explanation of the Theory of Constraints in Simple Terms

I have written extensively in my books, articles, and blog posts about a concept referred to as the Theory of Constraints (TOC). If you have limited experience with TOC, this article is for you! I will explain its basic concepts so that you can easily understand it and then put it to use.

Let’s begin with a short explanation of TOC. It is a methodology used to identify the limiting factor in a process. This limiting factor decreases throughput, that is, the amount of product moving through the process.

One of the best ways to demonstrate concepts is with simple graphics. The figure below represents a cross section of a piping system used to transport water.

Water enters into this system through section A, then flows into section B and continues flowing until it enters section I and the receptacle at its base. As you can see by examining the middle (flow) area of this graphic, the pipes all have different diameters. So let’s consider a rudimentary problem solving challenge: If your objective is to increase the flow of water through this piping system, what should you do and where should you focus your efforts?

If your answer is to increase the diameter of section E, you are right. You should focus your efforts on section E to improve the throughput of this piping system because section E is constraining the flow of water. Section E is the constraint, also called a bottleneck.

Assuming that section E is your answer, here is another question to consider, would focusing on any other section increase the flow of water?

The correct answer is, no it would not. This may come as a surprise. To better understand why widening another section would not increase the flow, let’s examine the figure below. This is a 4-step manufacturing process with each step’s processing time listed. Using the piping analogy as a reference, which step prevents more parts from being produced? In other words, which step is preventing us from achieving more throughput?

If your answer is step C, you are correct. Because step C requires three minutes to process the product, this process cannot produce product any faster than 20 parts per hour (i.e., 60 minutes divided by 3 minutes per part). If you reduce the processing time of step B from two minutes to one minute, are you increasing the throughput of this process?

The answer is no. You are still limited by step C processing at three minutes per part. Just as with the piping system, you must focus your improvement efforts on Step C to improve the throughput of the process. The critical point of this lesson is that Step C is the system constraint. It controls the amount of product that can be produced.

The Theory of Constraints teaches us to follow five basic steps as we work to improve the output of our processes:

1. Identify and locate the constraint. (Find it in your process.)
2. Decide how to exploit the constraint. (Make the most of it.)
3. Subordinate everything else to the constraint. (Never outpace it.)
4. If necessary, elevate the constraint. (You may have to spend some money.)
5. Return to step 1 and repeat the steps. (Continue improving.)

In applying the Theory of Constraints, you must understand that the key to improvement is to find the constraint (bottleneck) and focus improvement efforts there until it is no longer the limiting factor. Once the constraint moves to a new location, move your improvement efforts to focus on that bottleneck. This is the essence of the theory and it applies to all industry types including manufacturing, service industries, and logistics companies.