Theory of Constraints And Continuous Process
Improvement
A system or a process cannot be more efficient than its limiting
factor!
In "The Goal" Eli Goldratt presents the Theory Of Constraints (TOC). TOC
introduces primary measurements for the analysis of systems based on
productivity and ultimately, profit. The core truth of TOC is that every system
or process has at least one constraint or bottleneck, and that the
identification of this constraint should be the focus for any improvement
activity.
TOC advocates that organisations take a three-dimensional view of three core
business concepts, Inventory, Operating Expense and Throughput. To relate these
financial terms to IT one needs to expand the definitions beyond their
traditional concepts.
- Inventory: All of the money, investment, outstanding issues,
pending changes, unresolved incidents, excess capacity, etc. an organisation has
tied up in an un-sellable, unfinished, unresolved, undeliverable, or pending
state.
- Pre Process Inventory: stuff that is currently waiting in queue in a raw or
input state. i.e.: Calls that are waiting in the ACD system or emails that have
not been answered by the Service Desk.
- Active Inventory: stuff that is currently within the system or process and
is currently being transformed into a desired or sellable output state, i.e.:
Change Management records that are currently being assessed, authorised and
scheduled.
- Post Process Inventory: stuff that has been successfully transformed into a
desired output but has not been delivered to a client, sold, confirmed resolved,
or generated profit, i.e.: The Service Desk's feedback calls back to the users
to confirm that an incident, which has been resolved, can be permanently closed.
In TOC, the concept of Inventory contradicts the conventional balance sheet
definition of Inventory as an "asset" and redefines inventory as a "liability."
- Operating Expense: All of the money, time, energy, thought,
resources, overtime, etc. tied up in the process of converting raw data or
inventory into the output of the process.
- Throughput: Defined as the speed at which inventory is moved
through the end-to-end process, and delivered to the customer in order to
realise the goal of profit, resolution, deployment, etc.
Goldratt observes that these three core principles are inseparably linked and
that a change in any one of these three dimensions will automatically result in
a proportionate change in the others. The perspective taken by TOC is that the
biggest gains are realised by increasing throughput. However, to increase
throughput the bottlenecks to the process need to be identified and
eliminated.
Question: What occurs when you remove a
bottleneck?
Answer: Another bottleneck appears elsewhere in the
process.
Result: The identification of the next area for
improvement to increase throughput, and the cycle of continuous improvement
continues.
In conclusion, Goldratt's Theory of Constraints places a practical tool in
the hands of individuals involved in the ongoing management and improvement of
business processes.
Source: PinkLink, December 04, 2002