Theory of Constraints
What is the Theory of Constraints?
The theory of constraints (TOC) is a systems-based methodology that identifies and addresses the weakest link—or constraint—in a process or system. A constraint is any factor that limits a system’s ability to achieve its goals, such as a bottleneck, resource shortage, or inefficiency. By focusing on improving the constraint, TOC enhances overall system performance and productivity.
The Basic Idea
Imagine that you are trying to perfect your process for making a homemade vegetable lasagna. Despite your best efforts, it is taking you way too long to be considered an easy weeknight dinner, and you want to identify a more efficient approach. The theory of constraints suggests that you should find out which step in the process is the least efficient and is holding you back. By analyzing each step of the process, you realize that cutting up the vegetables is taking more time than it should. Now that you’ve identified the constraint, you can find efficiencies. You might sharpen your knife, buy a food processor, or cut the veggies beforehand. Once the biggest bottleneck has been eliminated, you can revisit each step of the process to see where other efficiencies may need to be implemented.
Similarly, businesses use the theory of constraints as a continuous improvement tool by following five focusing steps:
- Identify: Find the part of the process that limits the rate at which a goal is achieved.
- Exploit: Make quick improvements using existing resources.
- Subordinate: Review other steps in the process to ensure they are not putting additional pressure on the limiting constraint.
- Elevate: If exploiting existing resources has not eliminated the constraint, consider other ways to diminish it. This often involves a financial investment, potentially in new machinery or additional staff.
- Repeat: Once the constraint has been solved, the steps should be repeated to identify the new constraint.1
According to Eliyahu Goldratt, the originator of the theory, even the most complex businesses can be broken down into three measures: throughput (the rate at which the organization generates money), inventory (the total financial investment into things that produce a product or service), and operating expenses (money spent turning inventory into throughput). The theory of constraints aims to help businesses to maximize throughput while minimizing inventory and operating expenses.2
“Since the strength of the chain is determined by the weakest link, then the first step to improve an organization must be to identify the weakest link.”
— Eliyahu M. Goldratt, a business management professional who introduced the theory of constraints in his novel The Goal: A Process of Ongoing Improvement 3
About the Author
Emilie Rose Jones
Emilie currently works in Marketing & Communications for a non-profit organization based in Toronto, Ontario. She completed her Masters of English Literature at UBC in 2021, where she focused on Indigenous and Canadian Literature. Emilie has a passion for writing and behavioural psychology and is always looking for opportunities to make knowledge more accessible.
