Theory of Constraints from ValueMetrics
You can only substantially and sustainably improve your business performance once the impact of flow of products and/or services to your customer and the interdependency of the various business functions are fully visible and understood. Sound financial decision-making can be greatly enhanced once this visibility is created through effective measurement and analysis of material flow, operational expense and production throughput.
The Success of Any Organisation Hinges on The Decisions It Makes
Whilst goal achievement and expectations vary, it is fair to say, that for most businesses, the ultimate success story lies in the ability to make a profit now and in the future. To achieve this, you need to be able to analyse and measure the cumulative impact of your business’ activities. By understanding the interdependency between activities and processes it becomes clear that any process has a constraint, or bottleneck, and improvement activities should be focused on management of this bottleneck as it is the most effective and quickest route to profitability.
The Role of the Theory of Constraints in Performance Improvement
Theory of Constraints was developed by the Avraham Y Goldratt Institute (AGI) and offers a holistic approach to strategic improvement. This revolutionary approach to business improvement focuses on companies with more complex supply chains and material flows. Theory of Constraints Methodologies have a role in development and improvement in Production, Logistics, Project Management, Finance and Measurement, and Thinking Processes.
Theory of Constraints Methodologies and a Common Framework
The principal underpinning the Theory of Constraints Methodology is the need for a common framework from which actions are aligned, and that the success of your organisation can be measured by variations on three core areas of business:
- Throughput in terms of money generated through sales
- Inventory
- Operational Expense
Theory of Constraints and Five Steps Towards Continuous Improvement
The Theory of Constraints Methodology identifies five focusing steps in the process of ongoing improvement (POOGI). These steps are centred round the your organisation’s constraints (as researched and identified) and are as follows:
- Identify the Constraint
- Decide how the Constraint can be exploited
- Subordinate everything else
- Elevate the system constraint
- If any of the steps in the above list has been broken, go back to step one.
ValueMetrics and Theory of Constraints Consulting
At ValueMetrics we have over 10 years’ experience in the Theory of Constraints arena and have successfully completed projects across a number of industries including: Mining, Packaging and Paper, Minerals and Sand, Iron Ore Rail Transport and Food Processing Plants.
Our consultants, using proven technologies, have empowered many organisations to improve throughput and profitability, and make more effective financial decisions that have revolutionised the way they run their business.
