The core idea in TOC is that every real system such as a money-making enterprise must have at least one constraint that limits the system to achieving its goal. Every for profit organization will have a constraint in supply, operations, orders or cash. Current constraint may shift, but there cannot be any situation when there is no constraint. Had it been so, its profit would have been infinite!
The output of the organization is achieved through the synchronized efforts of various functions. The output is limited by the weakest area. The strength of the chain is determined by the strength of the weakest link. What should be done to improve the output of an organization?
Dr. Goldratt created a Process Of Ongoing Improvement (POOGI) or five focusing steps.
Step 1: Identify the system’s constraint
The first step is to identify what factor is currently limiting the organization from achieving its goal.
Step 2: Decide how to exploit the system constraint
It is imperative the most possible out of the existing capacity of the constraint. Utilization at the constraint is critical. In the case of an internal resource constraint, to exploit means get more goal units by taking actions that make the best use of or take the best advantage of the constraint. Some examples: staffing the machine during lunch, breaks, and shift changes, quality inspection just prior to the constraint machine, reducing setup times at the constraint etc.
Step 3: Subordinate everything else to the above decision
Subordination is vital to achieve full exploitation of the constraint. It has two major components:
1. All non-constraint resources must be managed to ensure that the constraint always has exactly what it needs when it needs it; and
2. All non-constraint resources are not allowed to process work beyond what is required for the constraint.
All policies and measurements must be designed to get the most out of the constraint. Utilization and efficiency at the non-constraint resources must not be measured. However, this does not imply that there are no measurements for non-constraint resources. This step is often missed, and thereby the majority of financial benefits of TOC are not achieved.
Step 4: Elevate the system constraint
If more capacity is required after steps 2 and 3 to meet the market requirements, increase it through capital investment, outsourcing, or off-load the constraint by defining alternative routings, processes or design. Capital investment should not be the first option. Often, exploitation and subordination are sufficient to reach the needed output. Do not increase the investment too soon.
Step 5: If in the previous steps a constraint has been broken, go back to step 1, but do not allow inertia to become a system’s constraint.
The five focusing steps are not intended to be used as an infinite loop whereby an organization identifies and eliminates the current constraint over and over again. Rather, top management should determine where to move and hold the constraint.
The long-term strategic application of TOC does not call for continuous removal of all constraints. In any case all constraints cannot be removed. Rather, the idea is to choose where the constraint should be in order to best exploit the market opportunities, and then keep it there!