Eight Things You Need to Know About the Theory of Constraints - PM 360 Consulting
post-template-default,single,single-post,postid-17753,single-format-standard,wp-custom-logo,theme-bridge,woocommerce-no-js,ajax_fade,page_not_loaded,,qode-content-sidebar-responsive,columns-4,qode-theme-ver-11.0,qode-theme-bridge,wpb-js-composer js-comp-ver-5.1.1,vc_responsive

Eight Things You Need to Know About the Theory of Constraints

Theory of Constraints

Eight Things You Need to Know About the Theory of Constraints

Theory of Constraints

Students studying operations management are bound to come across the book by Dr. Eliyahu Goldratt called The Goal. In this classic from 1984, Goldratt reveals a set of “thinking tools” he developed, called the Theory of Constraints (TOC), and how he uses them to solve a range of problems at a fictional manufacturing plant.


This concept centers around practical methods for identifying solutions to business problems by deciding:

  • What to change
  • What to change it to
  • How to cause the change

The key focus of the Theory of Constraints is identifying constraints or bottlenecks in any process, and working out how to eliminate or reduce their impact. In his book, a constraint was defined as anything that prevents the system from achieving its goal.

Theory of Constraints Principles

So, what is the Theory of Constraints? Goldratt proposed that every real system must have at least one if not more than one constraint preventing it from achieving better or higher levels of performance. If this was not the case, there would be no limits and growth would be exponential.

These constraints limit performance, and unless they are addressed, performance will not nor cannot improve. Typical Theory of Constraints examples would include:

  • Machine capacity
  • Sales saturation
  • Limited demand
  • Raw materials shortage

In each case, unless the constraint is addressed, output is limited by that constraint.

To overcome this, Goldratt proposed five Theory of Constraints steps, known as the five focusing steps. These are:

  • Identify the limiting constraint
  • Exploit the constraint with existing resources
  • Subordinate and align all associated activities
  • Alleviate the constraint by investing in additional resources and equipment
  • Repeat the process to identify the next constraint


A System-Wide Approach

One of the key principles of TOC is that you need to consider the entire system, not just one aspect, and identify the real constraint. If this isn’t done, it’s likely that improvements to one part of the system will most likely make no difference to overall results, and it is even possible that an improvement to one part will make the overall result worse. Dr Goldratt felt so strongly about this that he is quoted as saying:

“Any improvements made anywhere besides the bottleneck are an illusion.”

For example, in healthcare, adding more beds to a hospital likely won’t improve quality of care if the real problem is a bottleneck in the emergency department. Or, in software, adding additional sales executives won’t drive revenue growth if there aren’t enough people ready to buy the product.

Identifying Unique Constraints

One of the core principles within TOC is that in any system, there aren’t tens or hundreds of constraints that affect output. In fact, at most there are a few in any given system, and in many instances, even highly complex situations, there’s only one constraint that limits output at any point in time.

The trick is identifying that particular constraint. While this may be self-evident in a simple production line, it’s altogether another matter in highly complex organizations and one of the reasons why leading companies are using advanced analytics to identify constraints.

TOC Constraints Are Not the Same as Mathematical Constraints

One of the difficulties analysts have is understanding that constraints as defined by the Theory of Constraints are not the same as constraints as defined in mathematical and system models. While there are similarities, the precise definition of a constraint differs depending upon the approach.

In mathematical modeling, a constraint is a restriction or limitation applied to a variable to restrict answers to real-world values. For example, an equation that represents the number of people who can be processed during college registration could theoretically have a negative answer, but in real life this is impossible; the minimum number of students processed cannot be below zero, which becomes a constraint.

Similarly, legal requirements such as restricting the volume of chemicals stored on a particular site would be constraints in a mathematical process model, but would not necessarily be a Theory of Constraints example unless they also limited plant output. In TOC, a constraint is always a limiting factor or weak link that inhibits an organization from achieving a particular goal, such as a revenue target.

The Current Reality Tree

One of the useful TOC tools is the Current Reality Tree that presents a picture of the current state of the organization and is used to highlight the root cause for why a particular system or process is not up to scratch. This is often used together with an Evaporating Cloud Tree to evaluate improvements and a Future Reality Tree that documents what the system will look like after improvements.

Plant Type Analysis

A plant type analysis describes how materials or activities move through the process. Known as a VATI analysis, plant types include:

  • V plant: Where one material or input can be processed into different components, such as milk into cheese, cream or ice cream.
  • A Plant: A typical assembly line process where many parts go toward making one product.
  • T Plant: A more complex situation where several parts, once assembled, can be fitted to different products.
  • I Plant: Where many parts have to flow sequentially through a common process, such as a paint shop, before final assembly.

Determining the type of plant or process helps understand the constraints limiting throughput.

Throughput Accounting

This represents a different view of accounting from traditional account methods. It focuses on three elements: throughput, investment and operating expense. Instead of the conventional accounting approach of cutting expenses, Throughput Accounting focuses on increasing throughput to raise net profit, return on investment and productivity. The methodology differs from conventional accounting in that plants, inventory and buildings are regarded as liabilities tying up cash that could be used productively elsewhere. Throughput is defined as all sales less truly variable costs, while operating expenses represent costs that aren’t variable.

In principle, Throughput Accounting has less focus on cutting costs and more on building profitable sales.

Using Optimization Modeling in TOC

While the Theory of Constraints model of identifying and alleviating critical bottlenecks is straightforward, actually identifying those bottlenecks isn’t easy. The TOC toolbox has numerous tools to facilitate that process, but they are not easy to apply in large and complex organizations.

It should be remembered that when The Goal was written, Steve Jobs had just announced the Macintosh and organizations relied extensively on paper flows. This isn’t the case anymore, and even medium-sized organizations operate with a degree of complexity that was unthinkable thirty-five years ago.

It made sense, then, to focus the company on a single goal and a single constraint, and this is still the case. In optimization modeling, that goal is referred to as an objective function, and, for most companies, the objective function is to maximize profit. Using optimization software, it’s possible to model the organization and determine opportunity values, which are almost the same as identifying critical constraints. Using solver software, managers can determine the best way forward to alleviate organizational constraints and achieve the organization goals.

Optimization software sets out to achieve exactly the same goals as the Theory of Constraints:

  • What to change
  • What to change it to
  • How to cause the change


Benefits of the Theory of Constraints Approach

The beauty of TOC is that it simplifies complex situations with unique and easy-to-understand answers. It helps management focus on what’s important by identifying individual constraints that inhibit the organization from achieving its goals.

The process allows organizations to identify the root cause for poor performance. In doing so, it opens the way to exploit the constraint, ensure associated processes are aligned to minimize interference, and to elevate the constraint. In simple terms, TOC identifies the primary bottleneck, allowing organizations to increase throughput by modifying or removing the constraint through additional investment.

This deceptively simple approach works, and there are many Theory of Constraints real-life examples that illustrate how TOC has helped organizations grow through identifying constraints and bottlenecks and dealing with them.




  • Lamont
    Posted at 03:10h, 10 December Reply

    Excellent article. Keep writing such kind of info on your blog.

    Im really impressed by your blog.
    Hello there, You’ve performed an excellent job.

    I’ll definitely digg it and personally suggest to my friends.

    I am sure they’ll be benefited from this web site.

  • Kristine
    Posted at 03:16h, 10 December Reply

    Hi there! I know this is somewhat off topic but I was wondering which blog platform
    are you using for this site? I’m getting tired of WordPress because I’ve had issues with hackers and I’m
    looking at alternatives for another platform. I would be awesome if you could point me in the direction of a good platform.

  • Lurlene
    Posted at 03:18h, 10 December Reply

    fantastic issues altogether, you just gained a new reader.
    What may you suggest in regards to your publish that you made some days in the past?
    Any certain?

  • Lyn
    Posted at 03:21h, 10 December Reply

    Hey there would you mind letting me know which webhost you’re using?

    I’ve loaded your blog in 3 completely different internet browsers and I must say this blog loads a
    lot faster then most. Can you suggest a good web hosting provider at a fair price?
    Thanks a lot, I appreciate it!

  • judi slot
    Posted at 03:37h, 10 December Reply

    I would like to thank you for the efforts you’ve put in penning this website.
    I’m hoping to check out the same high-grade content by you in the future as well.
    In truth, your creative writing abilities has encouraged me to get my own blog now 😉

    Feel free to surf to my page; judi slot

  • Thalia
    Posted at 03:42h, 10 December Reply

    Hi there very nice website!! Guy .. Beautiful .. Superb ..

    I will bookmark your blog and take the feeds also?
    I’m satisfied to seek out a lot of useful info here in the post,
    we want develop extra strategies in this regard, thanks for sharing.
    . . . . .

  • Tracy
    Posted at 03:48h, 10 December Reply

    This info is invaluable. Where can I find out more?

  • Elvia
    Posted at 04:01h, 10 December Reply

    Thank you for the auspicious writeup. It in fact was a amusement account it.
    Look advanced to far added agreeable from you!
    By the way, how could we communicate?

  • Roscoe
    Posted at 04:08h, 10 December Reply

    I’m not sure why but this website is loading incredibly slow for me.
    Is anyone else having this issue or is it a issue on my end?

    I’ll check back later and see if the problem still exists.

  • Waldo
    Posted at 04:09h, 10 December Reply

    Thank you for sharing your info. I really appreciate your
    efforts and I am waiting for your next post thanks once again.

  • Annett
    Posted at 04:11h, 10 December Reply

    I like what you guys are up too. This sort of clever work and
    coverage! Keep up the great works guys I’ve included you
    guys to my own blogroll.

  • Trudy
    Posted at 04:13h, 10 December Reply

    I’m not sure where you are getting your information, but good topic.
    I needs to spend some time learning more or understanding more.
    Thanks for great info I was looking for this info for my

  • Danae
    Posted at 04:14h, 10 December Reply

    Thanks a lot for sharing this with all of us you actually
    recognise what you are speaking approximately! Bookmarked.
    Kindly also discuss with my web site =). We could have a link alternate
    agreement among us

  • Val
    Posted at 04:17h, 10 December Reply

    Hi there to all, it’s in fact a good for me to pay a visit this site,
    it consists of valuable Information.

  • Jaclyn
    Posted at 04:21h, 10 December Reply

    Spot on with this write-up, I honestly think this site needs a
    lot more attention. I’ll probably be back again to read through
    more, thanks for the advice!

  • Raphael
    Posted at 04:35h, 10 December Reply

    This text is invaluable. How can I find out more?

  • Gabriel
    Posted at 05:07h, 10 December Reply

    You actually make it seem so easy with your presentation but I find
    this topic to be really something which I think I would never understand.
    It seems too complicated and extremely broad for me.
    I’m looking forward for your next post, I’ll try to get the hang of it!

  • Elvis
    Posted at 05:29h, 10 December Reply

    Good day! I know this is kinda off topic however , I’d
    figured I’d ask. Would you be interested in trading links or maybe
    guest writing a blog post or vice-versa? My website goes over a lot of the same topics as yours and I think we could
    greatly benefit from each other. If you are interested feel free to shoot
    me an email. I look forward to hearing from you! Wonderful
    blog by the way!

  • Silke
    Posted at 05:43h, 10 December Reply

    Thanks for sharing your thoughts on website. Regards

  • Cathleen
    Posted at 06:41h, 10 December Reply

    I’m now not certain where you’re getting your info, however great topic.
    I needs to spend a while studying much more or figuring out more.
    Thanks for great information I used to be searching for
    this info for my mission.

  • oceanofdoom.com
    Posted at 07:34h, 10 December Reply

    Quality articles or reviews is the crucial to interest the users to pay
    a quick visit the website, that’s what this web site is providing.

    My web page :: oceanofdoom.com

  • playfortuna-msk4.azurewebsites.net
    Posted at 07:45h, 10 December Reply

    Именно поэтому данный клуб получает высокие оценки среди игроков и входит
    в рейтинг лучших онлайн казино в России и СНГ.

  • http://thebigmitt.com
    Posted at 07:59h, 10 December Reply

    I’ve been exploring for a bit for any high quality articles or
    blog posts on this kind of house . Exploring in Yahoo I ultimately
    stumbled upon this site. Reading this information So i am glad to show that I’ve a very excellent uncanny
    feeling I discovered just what I needed. I so much without a doubt will make sure to do not disregard this web site and provides
    it a glance on a constant basis.

    My web-site; http://thebigmitt.com

  • slot Deposit Dana
    Posted at 10:48h, 10 December Reply

    Thank you for the good writeup. It in fact was a amusement account it.

    Look advanced to far added agreeable from you!
    By the way, how can we communicate?

    My page; slot Deposit Dana

  • https://buy-generic-amoxiln.blogspot.com/p/slot-deposit-pulsa-telkomsel-xl-tanpa.html
    Posted at 11:22h, 10 December Reply

    Everytrhing is very open with a very clear clarification of the issues.
    It was really informative. Yourr site is very
    useful. Many thanks foor sharing!

  • hubpages.com
    Posted at 12:03h, 10 December Reply

    Hello there! Would you mind if I share your blog with my
    myspace group? There’s a lot of folks that I think would really appreciate your content.
    Please let me know. Thanks

  • discuss
    Posted at 12:04h, 10 December Reply

    I wanted to thank you for this wonderful read!! I definitely enjoyed every little bit of it.
    I have you saved as a favorite to check out new stuff
    you post…

  • http://jbcy.net/home.php?mod=space&uid=14084
    Posted at 12:26h, 10 December Reply

    Hello, Neat post. There’s an issue together with your web site in web explorer,
    might check this? IE nonetheless is the marketplace chief and a good element of other people will pass over your wonderful writing because
    of this problem.

  • http://answers.codelair.com/index.php?qa=user&qa_1=celeryagenda43
    Posted at 12:27h, 10 December Reply

    Hi to every , since I am in fact eager of reading this blog’s post to be
    updated daily. It contains nice stuff.

  • xt_blog
    Posted at 12:28h, 10 December Reply

    Incredible! This blog looks exactly like my old one!

    It’s on a totally different topic but it has
    pretty much the same page layout and design. Excellent choice of colors!

  • blogfreely.net
    Posted at 12:30h, 10 December Reply

    I am sure this paragraph has touched all the internet viewers, its really really pleasant article on building up new webpage.

  • http://huarenyese.com/home.php?mod=space&uid=11528
    Posted at 12:31h, 10 December Reply

    It’s genuinely very complex in this active life
    to listen news on TV, so I simply use web for that reason, and get
    the most up-to-date news.

  • http://goddessxuan.com/home.php?mod=space&uid=13272
    Posted at 12:32h, 10 December Reply

    Admiring the hard work you put into your site and detailed information you offer.
    It’s good to come across a blog every once in a while that isn’t
    the same unwanted rehashed material. Great read!
    I’ve bookmarked your site and I’m including your RSS feeds to my Google account.

  • http://forums.visualtext.org/member.php?action=profile&uid=367459
    Posted at 12:33h, 10 December Reply

    What’s up i am kavin, its my first time to commenting anyplace, when i read this article
    i thought i could also create comment due to this good post.

  • www.openstreetmap.org
    Posted at 12:33h, 10 December Reply

    Hello, yeah this article is in fact fastidious and I have learned
    lot of things from it about blogging. thanks.

  • 6ukj.com
    Posted at 12:34h, 10 December Reply

    Howdy, There’s no doubt that your site may be having browser compatibility issues.
    When I take a look at your blog in Safari, it looks fine however,
    if opening in IE, it has some overlapping issues. I merely wanted to give you a quick
    heads up! Aside from that, fantastic website!

  • atavi.com
    Posted at 12:35h, 10 December Reply

    Hmm it appears like your website ate my first
    comment (it was super long) so I guess I’ll just sum it up what I submitted and say, I’m thoroughly enjoying
    your blog. I as well am an aspiring blog blogger but
    I’m still new to the whole thing. Do you have any suggestions for novice
    blog writers? I’d really appreciate it.

  • https://www.1xg.net/home.php?mod=space&uid=259845
    Posted at 12:36h, 10 December Reply

    Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your
    point. You definitely know what youre talking about, why waste your intelligence on just posting
    videos to your site when you could be giving us
    something informative to read?

  • https://www.aq111.net/home.php?mod=space&uid=125501
    Posted at 12:37h, 10 December Reply

    We absolutely love your blog and find many of your post’s to be just what I’m looking for.
    can you offer guest writers to write content available for you?
    I wouldn’t mind producing a post or elaborating on most of the subjects you write with regards to here.
    Again, awesome web log!

  • http://mnogootvetov.ru/index.php?qa=user&qa_1=schoolcall7
    Posted at 12:38h, 10 December Reply

    Good day! I know this is somewhat off topic but I was wondering
    if you knew where I could find a captcha plugin for my comment form?

    I’m using the same blog platform as yours and I’m having trouble finding one?
    Thanks a lot!

  • wx2.jjcbw.com
    Posted at 12:38h, 10 December Reply

    If you desire to improve your knowledge just keep visiting this web site and be updated with the most recent
    news update posted here.

  • Summer
    Posted at 12:38h, 10 December Reply

    I love what you guys are up too. This kind of clever work and
    exposure! Keep up the good works guys I’ve added you guys to
    my own blogroll.

  • vendetodocomercial.com
    Posted at 12:38h, 10 December Reply

    I’ve learn several excellent stuff here. Definitely value bookmarking for revisiting.
    I surprise how a lot effort you set to create the sort of excellent
    informative site.

  • bbs.stmsc-sino.com
    Posted at 12:40h, 10 December Reply

    Your style is unique in comparison to other people I have read stuff
    from. Thank you for posting when you’ve got the opportunity, Guess I will just
    book mark this blog.

  • http://pandora.nla.gov.au/external.html?link=https://pastelink.net/zjqb98i2
    Posted at 12:40h, 10 December Reply

    Appreciate this post. Will try it out.

  • wang0898.com
    Posted at 12:41h, 10 December Reply

    You ought to be a part of a contest for one of the highest quality blogs online.
    I’m going to recommend this website!

  • Viola
    Posted at 12:43h, 10 December Reply

    You truly make that seem super easy with your business display but The other half and i also
    also find this kind of matter to get actually a thing that
    I think I would personally never benefit. It seems as well complex and extremely broad for me personally.
    I am looking forward for your next post, I could try to get used
    to it!

  • Aiden
    Posted at 12:55h, 10 December Reply

    Good post. I learn something totally new and challenging on websites I stumbleupon everyday.
    It’s always exciting to read through articles from other authors and practice a little something from other sites.

  • Sal
    Posted at 12:55h, 10 December Reply

    Hey there! Do you use Twitter? I’d like to follow you if that
    would be okay. I’m definitely enjoying your blog and look forward
    to new posts.

  • Jesenia
    Posted at 13:03h, 10 December Reply

    I used to be recommended this website through my cousin. I’m now not sure whether or not this submit is written via
    him as no one else realize such unique about my problem.

    You’re incredible! Thank you!

Post A Comment