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Theory of Constraints (TOC)


Vishwadeep Khatri

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Q 638What are the differences between the Theory of Constraints (TOC) and Lean? Provide examples to support your answer.

 

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Feature TOC Lean
Focus Constraint: Identifying and maximizing the output of the single bottleneck in the system. Maximizing value for customers while minimizing waste: Eliminating any activity that doesn't directly add value to the customer.
Approach Targeted: Focuses on specific interventions to improve the constraint. Holistic: Aims to continuously improve the entire system by eliminating waste.
Popular Methods: 5 Focusing Steps:
1) Identify the Constraint
2) Exploit Constraint
3) Subordinating Everything Else to the Constraint
4) Elevate the Constraint
5) Avoid inertia by going back to
Kaizen
Kanban boards
Value Stream Mapping (VSM)
5S
Just-in-Time (JIT)
Mindset Breakthrough: Aims for dramatic improvements by removing the constraint. Incremental: Focuses on small, continuous improvements over time.
Suitable for Situations with a clear bottleneck: Manufacturing, project management. Environments with pervasive waste: Any industry, service sector.
Benefits Rapid improvement, increased throughput, ROI focus. Reduced costs, improved efficiency, customer satisfaction, continuous improvement culture.
E-commerce example For e-commerce retailers, fulfillment of orders is a major factor in customer satisfaction. However, distribution centers are usually far away from densely populated cities because they require a lot of warehouse space that is not available in cities, also cities offer congested circulation for large trucks and shipment fleets. Close proximity to warehouse space is a bottleneck to distribution and fast delivery.
A solution to this constraint is the set up of micro-fulfillment centers (MFC) in cities and even in stores. 
Expanding the e-commerce example, let us consider a warehouse where waste exists in the product-picking process. Picker are spending a lot of time and effort moving around the warehouse to find items. By optimizing the warehouse layout, products can be stored by order frequency (the MFC is usually optimized with these products too). Using Kanban and 5S, the warehouse can be divided into zones, and pickers be assigned to each zone to improve their efficiency. Picking lists can be improved with hand-held technology as well. 

 

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Methodology TOC Lean
Concept Theory of Constraint is a methodology to identify the bottleneck that limits achieving the goal of the business, like output or throughput. This is a process improvement approach, focusing mainly on improving profitability and business performance by identifying and eliminating the constraint or limiting factor. Lean methodology is aimed for continuous improvement and waste reduction. It focuses to fulfil the customer demand by matching the throughput. Lean thinking helps to identify seven types of waste, by eliminating those, organization can improve the current efficiencies also can reduce the operating cost.
Differences on concept & process 1. TOC focuses to continuously increase the business throughput.
2. TOC approach is production lead, it increases throughput parallelly helps in reducing inventory and operating expenses.
3. Key measurements in TOC method are Throughput, Inventory & Operational expense
4. Method used in TOC are the Five focusing steps, followed by the Thinking process and then throughput accounting
5. Types of constraint that can be identified and eliminated are capacity constraint, cash constraint, Demand constraint, Regulatory constraints, Market constraint, supply constraint etc.
1. Lean focuses on matching the throughput with the takt time,
2. Lean is Customer lead approach, it helps organisation in fulfilling the exact customer need by matching the takt time
3. Key measurements in Lean system are the seven types of losses in the business processes
4. Tools used in Lean manufacturing are like Value stream mapping, Just-In-Time, OEE, Kaizen, Kanban, SMED etc.
5. Types of Wastes that can be identified and eliminated are Overproduction, Over processing, Transportation, Waiting, Motion, Defects, inventory. 
Examples TOC helps management to focus on what’s important by identifying individual constraints which is limiting organization for achieving goal. The work that I've done on implementing TOC, was to improve the machine capacity, as it was an old machine, team was unable to achieve the desired production due to the bottleneck of speed. After following the TOC approach, found that the constrain was the drives capacity and roller conditions, after investing on drives upgradation and changing old rollers, we could able reach the desired speed of 480 from level of 454 rpm, which has helped to improve the throughput of the plant. In my earlier organization Lean methodology implemented eight years back and followed which has resulted in increasing efficiencies, reducing losses, changing the mindset towards continuous improvement, and ultimately making the unit more profitable.
Introducing lean and it's successful implementation takes a lot of time as it requires involvement of all stakeholders from top to bottom, also to bring the cultural shift to see the losses in each step and take action to reduce the waste by continuous improvement.
After 3 years lean journey, witnessed the overall OEE improvement by 7%, thus productivity improved, also the product quality improved
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Theory Of Constraint (TOC) is the methodology of identifying a most important limiting factor which has the highest impact on achieving the goal and then systematically improve the identified limiting factor until it is no longer a constraint. This is achieved through five focusing steps,                             

 

image.png.ac7064c036cf91c65a45f82c6b4a74fc.png

 

Lean is the methodology that optimize the organization’s people, resources, effort and energy to create value for the customer. The Five Steps of Lean Thinking,

01)   Specify Value from the Perspective of the Customer

02)   Identify the Value Streams

03)   Flow

04)   Pull

05)   Perfection

 

Even though both are systematic approaches for the improvements, there are below differences,

 

TOC

Lean

·         Focuses on continuously improving the throughput to make money

 

·         Goal is to make profit through improving the throughput

 

·         TOC is a production lead approach

Eg: This increases the through put with the assumption of sales can just sell more

 

 

·         Assume top-down authorization approach

 

 

·         Even though TOC suggest to reduce setup times, increase reliability, and decrease downtime, it offers no recommendations for how to go about doing this.

 

·         TOC measures Throughput, Inventory and Operating Expenses

 

·         Focuses on matching throughput to takt time by eliminating wastes

 

·         Goal is to make profit through adding value to the customer

 

·         Lean is customer lead approach

Eg: If the customer demand increases then the process will reset to meet the new takt time for the demand

 

·         Considers that everyone in a company can contribute to problem-solving and improvements

 

·         Lean provides the techniques such as Single Minute Exchange of die to reduce setup time, total productive maintenance to reduce downtime and etc

 

·         Lean measures Lead time, Cost and Value-added percentage

 

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TOC in the management perspective it mainly focuses on making money whereas Lean focuses on customer value stream.TOC identifies and addresses the bottlenecks of the process while lean eliminates waste which doesn’t add value to the customer.

Example for TOC would be

if a manufacturing plant is manufacturing Active Pharmaceutical Ingredients if the reactor which produces API is not producing in the expected way because of less speed(lesser than the machine limits) production may get delay as the machine limits the production speed.The production wouldn’t stop but the process could be late ultimately leading to customer disappointment.Applying the TOC strategies the bottleneck could be identified as MACHINE SPEED.So optimisation of machine can be done.

With the same example for lean implementation of lean principles we can eliminate the waste process,optimizing the flow of raw material to produce API  into the reactors and improve overall production efficiency.

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TOC and Lean both are usefull waste management methods. But TOc focuses more on identifying and removing waste that impacts output. Where as in Lean all types of waste is managed including the ones not impacting output. 

 

Example of traffic jams in Hinjewadi IT park : TOC will identify the bottleneck spots and will fix them to ensure smooth traffic. Where as Lean will also fix the bottleneck areas but it will also look at the whole root for any possible blockages and will remove them even if they were not the main ones causing the overall traffic. 

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Theory of Constraint identifies the bottleneck process to drive the entire process, while lean focus on eliminating waste to reduce cost but still give value to customers.

 

Example:

In a Customer Service Department, the AHT is high and Low CSAT score.

 

Theory of Constraints:

By analyzing the customer service process, we can identify bottlenecks or areas where the flow of work is impeded.

Lean:

By analyzing the customer service process and applying Lean tools and techniques, such as Value Stream Mapping and 5S, we can identify non-value-added activities that contribute to the high AHT low CSAT score.

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TOC is a methodology to identify the most important limiting factor that stands in the way of achieving a goal. TOC focuses on weakest link in chain of processes & lists 5 steps for system improvement: 

 

 1.   Identify the weakest link (process) in the system

 2.  Use process improvement methods like kaizen to improve the weakest link / rate of the process

 3.  Adjust rate of other processes in the chain to match that of the constraining process

 4.  Invest in the additional equipment/new technology to revise the constraining process & elevate the system 

 5.  Repeat the same steps with a new constraint if system performance can be improved

 

 

Lean thinking shines the spotlight on waste reduction. Lean is a systematic approach to identify & eliminate waste through continuous improvement.

Lean focuses on waste reduction and achieves its goals by using less technical tools like kaizen, visual controls etc.

Lean promotes work standardization & flow

 

 

 

 

 

 

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Lean and Theory of constrain (TOC) differ in certain areas. Lean segments a company into individual parts that can be analyze and improved, however, TOC on other hand focuses on single constrain that can be improved and benefit the company. lean focused on reducing time and inventory to cut waste and removing non-value-added task in process, however, TOC aims to improve throughput, capacity and develops competitive edge. Lean and TOC, both aim to improve the efficiency of company but in a different way.

 

Below is pointwise comparison of Theory of constrain (TOC) and Lean.

 

Sr No.

Theory of Constraints (TOC)

Lean

1

 TOC helps to Increase throughput.

 

Lean helps to Eliminate waste.

2

TOC has Singular focus on constrain.

Lean has Broad focus on eliminating waste from process.

3

TOC us useful in Increasing manufacturing capacity.

Reduced manufacturing cost.

4

TOC helps Maintaining sufficient inventory to maximize throughput at constrain.

Lean helps controlling inventory to reduce waste.

5

TOC creates imbalance to maximize throughput.

Lean creates balance to eliminate waste.

6

TOC has Bottleneck oriented approach.

Lean has overall system / Process related approach,

7

TOC focuses on waiting time reduction.

 

Lean focuses on cycle time reduction.

 

 

 

 

Example: - Inventory

TOC- Focuses on Maintaining a small stock of material that is ready for assembly process ensuring part for assembly is sufficient for a certain duration, this way, in case of unforeseen challenges, there will be some stock to maintain the constraint at maximum capacity in order to increase the throughput. However, Lean Focuses on identifying and eliminating additional inventory (Waste) for enhancing value of company.

 

Although, Lean and TOC methodology differ in certain areas, they use Pull system to keep consistency in timely deliveries and both require continuous improvement.

 

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The Theory of Constraints is a method for identifying the limiting factor (i.e., constraint) that stands in the way of achieving a goal and then systematically improving that constraint until it is no longer the limiting factor. It focusses on improving the weakest link in the chain to improve the system’s performance.

 

The Theory of Constraints working in the following steps:

image.png
 

Step

Objective

Identify

Identify the limiting factors that constrain the achievement of an organization's goals.

Exploit

Implement easy and quick improvements to the throughput of the constraint using existing resources

Subordinate

Other parts of the system are aligned and synchronized to support the constraint, ensuring that their activities do not overwhelm or impede the constraint's performance.

Elevate

If the constraint cannot be fully exploited with existing resources, efforts are made to enhance or remove it. This could involve investing in additional capacity, improving the efficiency of the constraint, or redesigning processes to eliminate the constraint altogether.

Repeat

Once the initial constraint is addressed, the process is repeated by identifying the next constraint in the system.

 

 

Lean is focusses on maximizing customer value by minimizing waste in the systems. The core principle of lean is to reduce and eliminate non-value adding activities and increase customer value.

 

Lean works in the following steps
image.png
 

Step

Objective

Identify Value

Determine what the customer values in terms of products, services, or outcomes. Value is defined from the customer's perspective.

Map Value Stream

Analyze and map the entire value stream, including all steps and processes involved in delivering the product or service from start to finish.

Create Flow

Eliminate interruptions, delays, and bottlenecks to establish a smooth and continuous flow of work, materials, and information through the value stream.

Establish Pull

Implement a pull-based system where work is initiated based on customer demand, ensuring that products or services are produced only when needed to minimize waste.

Seek Perfection

Continuously strive for perfection by identifying and eliminating waste, improving processes, and fostering a culture of continuous improvement throughout the organization.
 

Establish Pull

Implement a pull-based system where work is initiated based on customer demand, ensuring that products or services are produced only when needed to minimize waste.

Seek Perfection

Continuously strive for perfection by identifying and eliminating waste, improving processes, and fostering a culture of continuous improvement throughout the organization.

Differences between TOC and Lean

 

What?

Theory of Constraints

Lean Manufacturing

Focus

Identifying and alleviating constraints to improve throughput

Eliminating waste, optimizing processes, and continuous improvement

Core Philosophy

Optimize the weakest link in the system

Minimize waste, create value, and achieve continuous improvement

Customer Focus

While customer satisfaction is important, focuses primarily on maximizing the throughput of the system.

Places a strong emphasis on delivering value to the customer by minimizing waste and optimizing processes.

Application

Often applied where there are clear constraints limiting overall system performance (e.g., manufacturing, supply chain).

Widely applied across various industries beyond manufacturing (e.g., healthcare, services, software development).

Example (Manufacturing)

Identifying and optimizing a bottleneck machine in production

Reducing setup times, improving flow, and minimizing inventory

Example (Project Management)

Identifying and managing critical paths in a project

Using Critical Chain Project Management to streamline project execution

 

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