Theory of Constraints — An Overviewfor Project Managers!

Project management is all the rage these days, and the term is having a moment. People have realized that project management provides tried-and-true methodologies and tools for getting their jobs done more productively and efficiently.

In fact, project management is such a broad topic that it incorporates and applies other management concepts. The theory of constraints is one such concept. While the theory of constraints is most commonly associated with manufacturing, it can be applied to almost any project.

What Is the Theory of Constraints?

The theory of constraints basically states that a set of constraints prevents any management or manufacturing system from achieving more of its objectives. A bottleneck is always caused by at least one constraint or limiting factor, and the theory of constraints employs five focusing steps to identify that constraint and then improve it so that it no longer exists.

Eliyahu Goldratt invented the theory of constraints (TOC) in 1984 and introduced it to managers in his book “The Goal.” Consider the old axiom, “A chain is only as strong as its weakest link.” The theory of constraints seeks to identify that link and weaken it. That applies to processes, organizations, individual team members, or whatever or whoever is preventing the project from being completed successfully.

Theory of Constraints Elements

The elements that make up the TOC process are as follows:

· Constraints: A system’s productivity is affected by a limiting factor.

· Five Focusing Steps: Managers can use the focusing steps to identify constraints and improve systems.

· Thinking Processes: Thinking processes are problem-solving techniques for reducing constraints and eliminating bottlenecks.

· Throughput Accounting: An accounting method that focuses on the business’s throughput.

We’ll go over each of these in greater detail once we’ve covered the fundamentals of TOC theory.

Theory of Constraints Key Assumption

The key assumption of the theory of constraints is that an organization can be managed by measuring these three things:

· Throughput: The rate at which the system generates “goal units” (money) from sales.

· Operational Expense: Money spent on the creation of “goal units”

· Investment: All of the money that has been put into the system (inventory, machinery, etc.)

There are, however, conditions that must be met before any goal can be achieved. Typically, these are things like safety, quality, and legal obligations. Although for-profit organizations have a primary goal of making money, the theory of constraints can be applied to non-profits with a secondary goal of making money.

Benefits of the Theory of Constraints

TOC’s main goal is to improve productivity by streamlining management and manufacturing systems. But that’s not all; a successful TOC implementation will also provide the following advantages:

· Reduction of operating expenses

· Increased profit and return on investment

· Increased capacity

· Increased throughput rate

What Is a Constraint?

Understanding what a constraint is critical to identifying and resolving it. A constraint is any limiting factor that prevents you from achieving your goal, and it can appear in a variety of forms. However, TOC claims that there aren’t an infinite number of constraints affecting your project or system, but rather at least one and at most a few.

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