The theory of constraints was formulated in 1984 with the publishing of the Eliyahu Goldratt path-breaking novel "The Goal". Theory of Constraints is based on the basic principle that a chain is as weak as its weakest link and that process efficiency can be improved by finding means to reduce the vulnerability of that weak link which, in most cases, is an identified bottleneck.

The essence of the theory of constraints is that there are a number of constraints that adversely affect the performance of a manufacturing process or a system from achieving its goals and that there are 5 steps to identify the constraints and minimise their effect, if not eliminate them altogether.

The process of the theory of constraints is first to identify the constraints, follow the 5 focusing steps to identify the constraints and improve systems. The next steps are the thinking processes that look for solutions to the constraints and eliminate bottlenecks. A key process of the theory of constraints is throughput accounting. The theory of constraints assumes that any organization can be managed by measuring throughput, operational expenses, and the money invested in the system.

There are several benefits in applying the theory of constraints thinking is that any organization can be taken to the next level by increasing production capacity and throughput rate. Another benefit is reduction of operating expenses and achieving greater profits.

The five focusing steps in the theory of constraints thinking are to first identify the constraints and making quick improvements with existing resources. The next step is to ensure that all subsequent activities are aligned with and help eliminate and minimise the constraint. The fourth step is to look for more solutions in case the constraint persists. The fifth process is to repeat this solution cycle as often as needed as constraints will keep showing up in a dynamic system and will require countermeasures to be thought up and implemented all the time. This is the essence of Theory of constraint consulting.

The TOC thinking process is a cause and effect tool that helps identify the root cause of undesirable effects that often translate into constraints in a system. The essence of the thinking process is to ask the following three questions.

  1. What needs to be changed
  2. How should the identified change be brought about?
  3. What focused action will bring about the change?

The original thinking process originally developed by Goldratt had focused on the following actions.

  • Using a current reality tree that identifies all the undesirable effects and their causes
  • Using an evaporating cloud tree that identifies changes to be brought about
  • Building a future reality tree with the project after the identified changes or countermeasures have been made
  • Making a strategy and tactics tree which is an implementation plan to apply the changes and take the project to the next stage

The theory of constraints is measured by a parameter known as throughput accounting which is different from conventional accounting.  Throughput is the rate at which a business makes money from sales after deducting variable costs. Throughput accounting is based on net profits, investment turns and productivity.  Investment turns are calculated by dividing throughput with investment.

The focus on the theory of constraints on processes that add value brings it closer to Lean manufacturing, which primarily focuses on eliminating wasteful processes and waste. The three focus areas on the TOC thinking process have close links with lean.

Good project management uses TOC thinking, where constraints are prioritized to identify changes to improve throughput. 

An organization and even a project can be taken to the next level of professional efficiency using the Theory of Constraints thinking process.