2018-03-07 13:44:38Running a BusinessEnglishApply the Theory of Constraints to your manufacturing process to remove the limitations that keep your business from reaching bigger goals....https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/03/Small-business-owner-reviews-manufacturing-limitations-and-theory-of-constraints.jpghttps://quickbooks.intuit.com/ca/resources/business/manufacturing-limitations-theory-constraints/Understanding Limitations: Theory of Constraints

Understanding Limitations: Theory of Constraints

3 min read

What’s keeping you from achieving your goals? All companies face limiting factors. It’s the nature of doing business. But you don’t have to live with those bottlenecks. Using the Theory of Constraints helps you spot the inefficiencies and work on improvements.

What Is the Theory of Constraints?

The Theory of Constraints gives you a framework for finding issues and improving your production process from start to finish. Think of your manufacturing process as a chain with each step as a link. You start with the raw materials, manufacture your item, and end up with a finished product. The process involves lots of little steps where things can slow down.

The Theory of Constraints helps you find the weakest links in that chain, so it’s easier to make improvements. By strengthening those weak links, you make your entire process stronger. Removing the bottlenecks helps you improve profits and scale your business.

Types of Constraints

Constraints come into the process in different ways and at varying points. The physical manufacturing process is often a source on constraints. Maybe the equipment you use isn’t as fast as newer, advanced versions. But other elements of how you run your business can also cause problems.

Constraints are the parts of your system that hold you back, slow you down, and keep you from reaching the goals you have set. If you don’t work on those limitations, you miss out on the chance to grow your business. Constraints cut into your profits and limit productivity.

Constraints usually fall into one of the following categories:

  • Physical: Issues with equipment, material shortages, workforce shortages, and physical space restrictions
  • Policy: Ways employees work, whether required or recommended, like established procedures, union contracts, government regulations, and informal attitudes about the way things should be done
  • Paradigm: Beliefs and habits that become deeply ingrained
  • Market: Production capacity exceeding sales

All companies have at least one constraint or manufacturing limitation. Looking at the entire manufacturing process helps you identify the biggest weakness or constraint. Repeating the process lets you work on smaller issues or new things that pop up as you grow.

Steps in the Theory of Constraints

The Theory of Constraints uses a five-step process to work on the issues that slow down your business. This tool isn’t a one-time fix for your process. You work through the five steps continuously to fix additional constraints that can keep you from your goals. Scaling often brings up new issues because you’re trying to keep up with increased demand.

Steps in the process include:

  1. Identify the constraint. Look those each step in your manufacturing process to find the biggest bottleneck.
  2. Exploit the constraint. This step means you try to improve the constraint as much as possible without making huge changes to your process. You might increase the amount of time the constraint operates or create an inventory buffer leading up to that point in the process. You’re trying to push as much through the constraint as possible.
  3. Subordinate and synchronize to the constraint. The efficiency of all other non-constraint parts in the system takes a backseat to the constraint. Adjustments to those steps focus solely on easing the constraint. You might increase the capacity of the step after the constraint to make sure you don’t cause a backup that slows or stops the constraint.
  4. Elevate the constraint. Move to this option if steps two and three don’t solve the problem. This step involves doing everything possible to remove the constraint. That might mean making major changes to your system like upgrading equipment or hiring extra employees.
  5. Repeat the process starting back at number one.

Using this tool helps you work on issues that slow you down. By focusing on the constraints, you’re better able to push your company to success and greater profits.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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