Do you know of any company that reports infinite profits? Certainly none. This verifies that something exists that limits the profits of an organisation. That something is a constraint on the performance of the organisation. Just as the strength of a chain is dictated by its weakest link, the overall performance of any company is dictated by its constraint. The constraint might be in operations, ability to generate new orders, capability of procuring raw material, or even the market size itself! If you can find a way to manage the constraint you can dramatically increase sales, cash, and profit without any significant investment.
Dr Eli Goldratt first introduced Theory of Constraints (TOC) in his best-selling book THE GOAL. Millions of people around the world could relate to Alex Rogo and his tale of turnaround at Unico manufacturing plant. The book has featured on Time magazine’s list of top 25 five most influential business books of all time. Jeff Bezos, Founder of Amazon, has often shared that THE GOAL is one of the top three books he recommends to his top team.
Due to the overwhelming popularity of The Goal, most people assume that TOC is applicable to manufacturing only. Companies that have implemented TOC understand that it is a holistic philosophy, with as much application to strategy and marketing, as it does to production and operations. TOC has been successfully applied across sectors including automotive, consumer goods, insurance, high-tech, FMCG, apparels, logistics, government, steel, projects, retail, education, healthcare, to name a few.
Process Of OnGoing Improvement (POOGI)
Source: The World of the Theory of Constraints, Mabin and Balderstone, St. Lucie Press
Organizations try to improve their performance by utilizing all their resources as much as possible rather than focusing on their critical resource. TOC provides a structured process to focus improvement efforts on areas where it will have maximum impact on the system’s goal.
TOC focuses on on-going global improvement rather than attempting local improvements everywhere. TOC is proven to help organizations identify what to change, construct robust solutions and draw up implementable road maps to achieve noteworthy results.