The basic promise of constraint management is to identify and
help remove obstacles to any business's objective. Typically,
that goal is to increase profits, and TOC identifies three ways to
achieve it: increase throughput, cut inventory or lower operating
expenses.
Throughput is a key concept in constraint theory, much of which
is devoted to finding and dealing with bottlenecks. TOC throughput
differs from other throughput concepts, however. Rather than, say,
the number of units that pass through a manufacturing stage,
throughput in TOC terms refers to finished products that generate
sales. It is also described as related to cash flow, similar to
gross margin in distribution companies.
Constraints may be found internally, often in the form of
company policies, or externally, which generally means the market.
Market limitations may, for instance, arise from the presence of
competitors. Internal limits may result from physical production
ceilings, as in the case of West Tape, or from less tangible
factors such as corporate policies.
Content Continues Below
Of the two, internal constraints are often the most easily dealt
with and produce the most rapid and marked results, says
independent educator and management consultant Thomas McMullen. He
cites one case of a company whose management used TOC to identify a
policy against overseas expansion as a limiting factor. Merely
deciding to enter foreign markets helped the company significantly,
he says.
Often, companies achieve major benefits simply by changing
outdated performance measurement methods. Says McMullen,
"There have been many cases where companies used TOC thinking
to identify one or two policy constraints and with a stroke of a
pen, really turned things around."
Page
1 |
2 | 3 |
4 |
5 |
6 