Breaking Business Bottlenecks – The Theory of Constraints

Author: tracysigler | Posted: May 20th, 2011 | | Tags: , , | No Comments »

Could fixing one “minor” bottleneck in your business double your revenue?

What’s the goal of any business? It’s to make money now and into the future. Every business has at least one bottleneck or constraint affecting its ability to reach that goal.

The Theory of Constraints (TOC) was created by Eli Goldratt and popularized by his book The Goal. One of the big ideas in The Goal is that your organization is a system with many interdependent parts. Suboptimal performance in one area can have a huge impact on the entire business. Focus on removing the bottlenecks to improve the overall performance of your organization.

One of my favorites quotes from The Goal is when the mentor character Jonah tells our hero, plant manager Alex, “we are not concerned with local optimums.” Say what? That phrase means that just because there are areas of your process, your business, that could be improved or optimized, doesn’t mean they should be. Are they constraints? If the answer is no, then those “local areas” are not the problem, and making them work better will not move you toward your goal.

“We should be trying to optimize the whole system. Some resources have to have more capacity than others. The ones at the end of the line should have more than the ones at the beginning–sometimes a lot more.”

Theory of Constraints can be rather complicated to implement, but I find it helpful just to be aware how constraints can affect the whole. The five basic steps are: Read the rest of this entry »