The Theory of Constraints (TOC) has probably had more impact on our prizewinning business than any other management gem!
We first heard of it when reading that Jeff Bezos, Founder of Amazon, required all his managers to read the book that introduced ToC – The Goal. Bezos has done OK so must be something in it for the rest of us!
ToC is an important optimising technique that focuses on improving the throughput of work at the (usually) single bottleneck or constraint in the workflow.
One research project demonstrated that 89% of improvement in a manufacturing business came from the application of TOC.
There is usually very few, and often just one, thing that causes a logjam in your business.
This is true of many types of business; not just manufacturers of products.
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This Skills Module draws together a number of the 12Faces articles on the subject of ToC. Learn how this important optimising technique can improve your business. ToC needs to become an ingrained habit so that you are always looking for the opportunities to dramatically improve your businesses throughput. Learn the remarkable simplicity and impact of the ToC concept, burn it into your mind.
The following is a list of ToC topics along with their Belt ratings. Start with Yellow and move up the Belts as you get more experience.
When a Bottleneck is Good - Introducing Theory of Constraints
Yes, often it is a very good thing to have some bottlenecks in your production system. This article introduces the concept of ToC, expected results from taking advantages of it , the cost of ignoring your bottleneck and how to identify and implement remedies to exploit it. Yellow then Blue Belt
80/20 and TOC
The Amazing 80/20 Rule is an optimising technique. 80/20 demonstrates that some parts of your business are up to 16 times more valuable than other parts. When the 80/20 Rule meets ToC, it is the 12Faces equivalent of Godzilla meets the Hulk! Blue Belt
Theory of Constraints in Retail
Retailers probably don't think of themselves as a workflow business but this article shows that ToC can apply to them and how to take advantage of the technique. Blue Belt
Theory of Constraints to Optimise Sales Funnel
The Sales Funnel is a well-known method of describing the several layers that a possible customer needs to pass through en route to becoming a customer. Each layer contributes more information about your business to the potential customer to encourage them to purchase. The Theory of Constraints (ToC) can show you the very first place you should look at in your Sales Funnel for maximum increase in sales. Green Belt
Drum, Buffer, Rope
These are three technical concepts for implementing ToC effectively once you have learnt to find the constraint in your business. They give you methods for tuning the workflow process to 'feed' the constraint in the most efficient manner so it always works at maximum throughput and therefore profitability. Brown Belt
Demand Driven Materials Requirement Planning
DDMRP follows on from Drum, Buffer, Rope and is based on sound flow-based principles. It is based on five sequential components and provides planning and execution performance improvements in variable environments. Brown Belt
Wrap-up
12Faces believes ToC is one of the fundamentals that every business person needs in their “toolkit” of skills.
The best way to grasp this concept is to apply it.
We are confident your time will be very well spent.
This article was provided by Scott Williams AO FAIDC. It describes the way best practice in many management areas has been brought together in the 12Faces GamePlan System. The Goal is to provide an easy to use and repeatable “flywheel” to improve small business owners’ outcomes. Scott is the Founder of NFP small business support services 12Faces and MentorSME and has a Philanthropic Foundation supporting students in education. Scott’s business Petals Network was National Small Business of the Year and 4 times in the Top 100 Fastest Growing Australian Businesses LinkedIn