Theory of Constraints Applications
The 8 Formal Theory of Constraints Applications
A TOC expert can apply Theory of Constraints to any environment and come up with a powerful, outside-the box solution to performance problems; one that may be unique to that environment, at that time.
But there are 8 “formal” Theory of Constraints Applications – applications where the detailed body of knowledge is rock-solid and has been applied to hundreds or even thousands of different companies.
For example, the TOC production solution, which includes the scheduling and shop floor control technique known as “Drum-Buffer-Rope,” can be applied to ANY manufacturing business and it will generate the same outcomes. So we call the Production solution “an Application.”
In company after company for more than 20 years, this application has generated increased output from the same resources, reduced lead time, reduced inventories, improved on-time delivery, reduced or eliminated overtime, stable and clear priorities, and a valid shop schedule. This is what Rod and I do in Synchronix, over and over, with different manufacturers. It’s so predictable it’s almost boring.
But Synchronous Manufacturing is only one of 8 Theory of Constraints applications. Some can be used independently; others work best in combination.
Click on any link to be taken to a more detailed explanation. (Before you point it out … yes, there are 9 headings below and I said there were 8 Theory of Constraints applications. Well, formally there are 8, but this includes “Distribution and Supply Chain.” I just prefer to separate the two sub-topics. )
- Synchronous Manufacturing This gives manufacturers the fastest and most direct path to large-scale, bottom-line improvements. Typical results include reduced inventories, reduced manufacturing lead times, increased service levels/superb on-time delivery, and increased productivity. We’ve included a business case calculation, if you’re interested.
- Throughput Accounting Even the accounting profession has conceded that traditional fully-allocated Cost Accounting causes managers to make wrong decisions. Activity-Based-Costing is just as bad, if not worse. Throughput Accounting is the alternative, a basis for sensible decision making for manufacturers. Throughput Accounting, now formally included in the curriculum of the Management Accounting qualification, is a natural partner of a Synchronous Manufacturing implementation.
- Critical Chain Project Management This is an extraordinarily powerful new approach to Project Management that offers results that continue to astonish project-experienced managers. Critical Chain enables organizations to generate schedules that are 25% shorter than traditionally planned schedules, AND to meet the promised completion date 85% or more of the time. Better still, organizations are finding up to 100% more productivity from the same project resources when they follow the Critical Chain approach.
- Distribution The TOC offers an approach to having the right parts in the right location in the right quantity at the right time, with a minimum of effort … while contradicting most of the rules of conventional Distribution thinking. Common outcomes include close-to-100% availability of product with inventories in the system reduced by 50% or more.
- Supply Chain (Actually, this and the Distribution application are treated as one, in the formal body of knowledge). The TOC approach to Supply Chain management is so much more powerful than, and so far beyond the conventionally popular and superficial view of Supply Chain, that it really deserves a different name. When a retailer, garment manufacturer, cloth manufacturer and yarn manufacturer set-up their TOC supply chain they caused sales to increase throughout the system by 30% or more, and each unit in the supply chain realized a substantial increase in ROI.
- Marketing There is a special way of applying Theory of Constraints in MOST (not all) manufacturers that creates a major competitive edge – large enough to win a LOT of business even in the most competitive markets, and sometimes large enough to be able to charge more even in the most cost-driven markets.
- Sales The TOC sales approach is necessary for three reasons. One is that the Unrefusable Offer developed as part of the marketing solution has to be sold unconventionally. Another is that the conventional selling model is quite simply very ineffective … it does not generate sales growth at the rate that is possible. And the third is that the sales management set-up in most manufacturing businesses is not capable of generating sales growth at the rate that is possible (except in those rare instances where a company has a hot product and a hot market that allow the product to sell itself).
- Strategic Planning Managers emerge from a TOC strategic planning session with a clear consensus of the company performance targets, a clear understanding of the role that every function will play, and an action plan that aligns everyday activities and decision-making in the plants to the highest-level strategic goals of the business. It’s an extraordinary experience.
- Specific Management Skills development. These simple skills have a major impact – how to construct win/win solutions when there’s a conflict, how to make sure that a course of action will indeed generate the outcomes you want and will not generate the outcomes you don’t want, and how to plan the transition from how things are today (whatever the issue) to how they need to be.
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