Tell me about the "Theory of Constraints"

June 24, 2005 3:14 AM

Have you been exposed to the "Theory of Constraints" at work? Did you choose to use it or was it imposed upon you? What came of it? Did it improve things? If it changed the way you work, how so? More importantly: what the hell is it?
posted by pracowity to work & money (5 comments total)

Ask Google, it has many answers for you.
posted by agregoli at 9:28 AM on June 24, 2005

There's a pretty interesting book about it that's presented as fiction, in a sort of Socratic method. It's called "The Goal". Essentially, the theory is that to optimize production you need to identify steps/processes that are limiting and do whatever it takes to make them not. Repeat.
posted by lrivers at 10:11 AM on June 24, 2005

Yeah, The Goal is fairly gripping as business books go, I got a number of "aha"s from it long ago.
posted by kindall at 11:00 AM on June 24, 2005

lrivers touched on it pretty well. I have a degree in Supply Chain and Logistics Management, and I apply the Theory of Constraints to small businesses' administrative processes. The man who came up with this stuff is named Eliyahu Goldratt, and he's a pretty darned smart guy. I've met him in person.

There's two parts to the Theory of Constraints. The simple part is: "Find the bottleneck, and find a way to move things through it quickly." Another part of it is "Cost accounting -sucks-." Those two points are covered in "The Goal". The second book, "It's Not Luck" is a continuation of the story from "The Goal" and covers the broader application of Goldratt's Thinking Processes, which is how he figured out all this crap in the first place. The Thinking Processes are a general yet structured and deifned way to problem-solve using common sense.

To answer your questions: I've chosen to use the Theory of Constraints with my clients, and it's been pretty damned effective. Let me give you a quick case story: There once was a business that sold a subscription to some stuff as a reseller. They sold this stuff to people all over the country from an office in my town via the telephone. When a salesperson made a sale, after dancing around and high-5-ing everyone, they'd sit down and fill out a sales form. This would take them about fifteen minutes. They would then take the sales form to an administrative staffer, who would enter the product into the parent company's database, which would then activate the stuff for the customer. They'd also start their billing process, which was in a database designed for websites to bill for subscriptions to a service. This would take the admin person anywhere from ten minutes to a half hour to enter... and this company was selling twenty or thirty subscriptions to stuff per day.

They had two bottlenecks, which were easily identifiable. The first was their customer entry process. By having the salespeople fill out the form on a computer and have it go into a local database, we cut down the time to get a customer set up to about 1 minute. This got the salespeople back onto the phone faster and ended up doubling sales.
The second bottleneck was their admin staff. They had five processes that they had to go through to set up a customer after they received a form from the salesperson. (Input, Upload to parent co., start billing, confirm live, file paperwork) We expanded the database that the sales reps used to cover the input, upload, and starting billing (since the salespeople put all the data in anyway), moved the 'make sure it's live' to the salespeople since they should be caring for their customers, and elminated the paper completely unless someone asks for a receipt. Net result was a 2-week backlog disappearing in one day, an increase in efficiency that was so large as to be unmeasureable, and admin people refocused on hunting down problems by using the information in the database and supporting the salespeople.

To sum all of that up: the Thinking Processes and the Theory of Constraints are 100%, 200-proof distilled common sense. They help you look at your business or life from another point of view ... or, if you use them well, *all* points of view, to smooth out conflicts and make things make sense.

I heartily reccomend reading "The Goal" and "It's Not Luck" on a friday before a long weekend, though ... if you finish them during the week, you'll come charging into work all excited and want to change EVERYTHING and you'll get shut down by the status quo. ;) Read the books and spend a few days or weeks playing with the concepts and modeling them by yourself before you try to change things.
posted by SpecialK at 12:04 PM on June 24, 2005

As a work of fiction, "The Goal" was ho-hum, but as a story designed to introduce the reader to "systems management," I think it does a pretty good job. And yes, it was forced on me & several co-workers by a new boss, who was a True Believer. Unfortunately, in a very bureaucratic organization, the number and quality of bottlenecks can be very hard to overcome, but still -- he and we yielded some modest results due to our understanding of "The Goal."
posted by davidmsc at 7:48 PM on June 24, 2005