Constraints Management

Topics: Theory of Constraints, Management, Eliyahu M. Goldratt Pages: 10 (3288 words) Published: June 19, 2013
In operations management, a constraint is any factor that limits the performance of a system and restricts its output. The existence of constraints causes capacity imbalance and as a result, the overall performance of an organization will be affected. Constraints can occur anywhere within the supply chain, that is, with Suppliers or customers, or within the internal processes. In Goldratt’s definition, there are two types of constraints that companies may encounter: physical and non-physical. A physical constraint is usually a capacity-constrained resource, such as machine capacities, the width of a work-centre, time on a particular work center, or raw materials, finances or the capacity of a vehicle. Nonphysical constraints include policies, procedures, organizational structure and mindset, or consumer demand. Constraints can be internal or external to the system. Internal constraints (bottlenecks) are usually characterized by the limitation of capacities (of working centers, capital, etc.), or the management operating policy limiting the working time (working in one shift, five working days per week, suspension of working time during lunch, etc.). An external constraint exists when the system can produce more than the market will bear (Spector, 2006). A special type of constraint is known as a bottleneck. It is defined as any resource whose available capacity limits an organization’s ability to meet the service or product volume, product mix, or fluctuating requirements demanded by the market (Noreen, Mackay & Smith, 1995).

Constraints force management to think smarter and be more innovative and they get challenged to do more with less. Managing constraints requires inter-functional cooperation in any organization since one will have to make appropriate capacity choices at the individual-process level, as well as at the organizational level. Usually, eliminating a bottleneck in one section of an organization might not have the desired effect unless bottlenecks in other parts of the organization are also addressed. Constraints management recognizes that organizations succeed or fail as a whole. Even if one department performs superbly, if the organization fails, that superb performance has no value. The constraints will determine the output of the system whether they are acknowledged and managed or not so management should be so conscious about such constraints in the organization if they are to achieve the goal of making money now and in the future. Once a constraint has been eliminated, the system needs to be reassessed to verify whether the constraint has not relocated to another link (Cyplik, Hajdul 2008). Contrary to conventional thinking, TOC views constraints as positive, not negative. Because constraints determine the performance of a system, a gradual elevation of the system’s constraints will improve its performance [pic]


Policy constraint: This is a management-imposed guideline for how a process is to be conducted which may be written or unwritten. Policy constraints can be divided into the categories of "mindset constraints," "measures constraints," and "methods constraints." Mindset refers to the thought process or culture of the organization. It is mindset that organizes the company’s thinking and assigns priorities to different courses of action. New measures that contradict the prevailing mindset have little chance of being implemented. Measures constraints may be responsible for creating situations that encourage behaviors that have a negative effect on the performance of a business. Bonuses that have an overall negative impact on the bottom-line of a firm would fall into this category. Methods constraints refer to the procedures and techniques that determine how the day-to-day operation of the organization is carried out. For instance, there may be a rule regarding the minimum batch size that should be run through a machine, or the economic order quantity to be ordered from a supplier, or...

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