Introduction
The primary duty of a manager is to ascertain that processes within their organization run effectively and smoothly. Managers use different tools and methods to ensure that their business processes run smoothly and guarantee success to the enterprise (Anastasia, 2017). Managers use philosophies that suit with their strategies to attain a competitive advantage over rival firms and these approaches ensure that manager identify weakest points in their production process. One of these approaches is the use of theory of constraints (TOC) and this paper discusses its importance, its principles and how it can be used in fixing bottlenecks in organizations.
Theory of Constraints (TOC) and its Principles
The theory of constraints is a production process that implores on organizations to identify their goals, factors that hinder the attainment of these goals, and enhance business operations through striving continually to reduce or eliminate any limiting factors (Anastasia, 2017). These limiting factors are bottlenecks and organizations should always eliminate any potential constraint in its operations. As such, the theory proposes that the most effective way for any firm or organization to attain its goals is to reduce costs associated with operations, reduce inventory, and improve output. Formalized and introduced by Eliyahu Goldratt in 1980s, the theory consists of three core principles, a six-step implementation process, and a five-stage thinking process (Simsit, Gunay & Vayvay, 2014).
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The theory is founded on the concept that each system has at least a bottleneck which is a situation that impedes its effective performance levels so that it can achieve its purpose. As such, effective elimination of these bottlenecks requires the organization to apply the principles, implementation process, and its thinking approach. The three primary principles of TOC include convergence, consistency, and respect. The convergence principle advances that a complicated organizational system is simpler in its management since any adjustment or correction to a single part of the system will affect the entire system (Anastasia, 2017). Consistency means that any internally generated conflict is a result of a flawed assumption while respect suggests that humans are good and deserve respect even in situations where they make errors or mistakes in the system’s process.
Further, organizations must use the six-step implementation process when using this business performance philosophy. The first step is identifying a measurable goal through stating the amount of products or services that are produced and offered to customers. The goal should focus on a firm’s success and profitability. Secondly, a firm should identify a bottleneck or constraint that may limit its production process. The constraint may be internal or external like having a competitor or an influential force in the market (Anastasia, 2017). Thirdly, the firm should exploit the bottleneck which implies that it needs to ensure that the bottleneck is converted to the most profitable utilization. Fourthly, the firm needs to subordinate all other factors that affect the bottleneck in its operations.
The implication of this process at this stage is that the firm must optimize its production process so as to overcome the speed of the bottleneck. Fifthly, the firm needs to improve that capacity of the bottleneck. For instance, in an organization if a bottleneck provides 3 products each hour, the firm should attempt to improve the output by outsourcing such services (Simsit et al., 2014). Further, the organization can buy additional production machines to improve the output and ensure that the bottleneck does not affect productivity. Therefore, at the fifth stage, the firm must have the ability to eliminate or mitigate the bottleneck by altering how they approach productivity and the entire organizational system. Lastly, upon the elimination of the previous bottleneck like low production, the firm should start all over again by identifying the next constraint and handling it effectively.
An organization can have a competitor as its bottleneck or constraints. Therefore, by following the six step implementation process, it can deal with the situation. Firstly, it needs to know its goal and in this case; the goal is to mitigate or eliminate the competitor. Secondly, it identifies a competitor, for instance a firm dealing in personal computers will identify Apple Inc, Hewlett Packard (HP), Dell Corporation, and Lenovo among other producers of personal computers. Thirdly, firm should exploit the bottleneck which is competition from rival personal computer manufacturers. The firm can manufacture price-friendly laptops that have unique features to compete with the established brands. Fourthly, the firm needs to optimize productivity and marketing to ensure that they have reduced costs that allow them to offer competitively but quality priced products (Simsit et al., 2014). Fifthly, the firm should improve competitiveness in the industry by enlarging its market share, product range, and providing uniquely-designed products that meet consumer needs and preferences in different markets. Once they have successfully eliminated competition, the firm should move to the next bottleneck.
Conclusion
It is evident that the theory of constraints provides several benefits to firms as it demonstrates that firms should approach business operations in an organized manner. Further, using the process companies can enhance their systems and performance so that they become profitable. In addition, the process increases throughput, reduces operational costs and inventories, as well as improving operational control and business reputation and branding. Consequently, organizations in different areas of production should use the approach to create synergies and enhance overall profitability, resource utilization, and performance in the market.
References
Anastasia, C. (2017 March 10). A Quick Guide to Theory of Constraints. Retrieved from
https://www.cleverism.com/theory-of-constraints-toc-guide/
Simsit, Z., T., Gunay, N. S. & Vayvay, O. (2014). Theory of Constraints: A Literature Review.
Procedia-Social and Behavioral Sciences , Vol.150, pp.930-936.
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