Applying Theory of Constraints (TOC) and Critical Chain (CC) Tools to Management Problems Essay

Part One: Introduction

The theory of constraints (T.O.C) is a framework put forward by Eliyahu Goldratt in his book “The Goal”, to describe the holistic approach to systems management The T.O.C. model provides managers with an approach to running a profitable and efficient organisation, which reflects the decisions and actions undertaken (i.e. cause and effect relationship).

A common way of looking at an organisation under Goldratt’s model is to envision a ‘chain’, in which each part of a production process is inter-linked with the tasks around it. The speed and efficiency of the entire process (throughput) can only be as fast as the slowest part (the bottleneck). Bottlenecks are an extremely common constraint that occur all around us; from waiting in traffic at peak-hour to buying groceries, bottlenecks limit the speed of the entire process. In an organisational context, bottlenecks could be out-of-date machinery, poorly trained staff, or myriad other problems.

If the ‘whole is greater than the parts’, then the opposite can certainly be true – “the weakest link determines the speed of the system” (Mabin, Daniell and Hislop, 2008), and every organisation must focus on identifying and removing these constraints.

To fix an organisation we must know what to change, what to change to and, most importantly, how to make the change occur. The T.O.C’s allows us to do so via several important and basic models, namely; the five focusing steps, evaporating cloud, negative branch and prerequisite tree frameworks.

Each of these allows us to move towards an organisational solution that will alleviate the underlying problems that constrain efficiency.

Five Focusing Steps

Allow us to identify the system constraint and determine how to work the system around the constraint for maximum throughput. They also look at investment in the system to improve it overall. Finally, and most importantly, they allow us to start the process again, cementing the idea that identifying system constraints is a never-ending cycle – indeed it has to be infinite, or else the current solutions will gradually become obsolete as the competitive industry around the organisation moves on.

Evaporating Cloud

Allows managers to focus on two core mutually exclusive decisions. The model identifies the subconscious assumptions that hold us back from finding a solution to the problem. The assumptions visualises our assumptions and highlights the assumptions that can be broken and those that hold true. By breaking these assumptions we can see what it is in the organisation that we need to change.

Negative Branch

After finding out what needs changing, we can use the negative branch method determine what to change to. This deals with the negative consequences of proposed ideas (or injections) from the evaporating cloud and gives us a much clearer overall picture of the system and the cause and effect of decisions. This provides us with a more holistic view, a key function of the Theory of Constraints.

Prerequisite Tree

The final part of the T.O.C. model is aimed at making the change happen, and the obstacles that can be encountered when attempting to do so. The prerequisite tree identifies the conditions necessary to achieve the set goal. It deals with certain obstacles that may prevent the achievement of the organisations goals and also intermediate objectives to overcome each obstacle on the way to achieving the goals.

Part Two: Application of Theory of Constraints to a Management Problem

When working with the Five Focusing Steps it is necessary to understand the current situation of the problem. The three preliminary steps help us with this understanding.

Preliminary steps

  1. What is the system under study? Four group members, Mgmt399 Assignment
  2. What is the goal of this system? Complete assignment and achieve satisfactory mark
  3. How will progress towards this goal be measured?

Throughput: productivity of members – i.e. amount of tasks completed per day

Inventory: quantity of work in process – i.e. drafted work, completed work and research

Operating Expense: time taken to transform drafted work and research into completed work

Five Focusing Steps

1. Identify the constraint- This is where one must identify the bottleneck constraining the system.

For the Mgmt399 assignment, the bottleneck is a team member who is not doing an equal amount of work to their peers. Social loafing prevents the team from progressing because the incomplete task must be finished. This can arise due to timetable-clashes, motivational problems or other unseen issues.

If student B is the constraint, i.e. taking too long to complete their task, student C will not be able to complete their work at the desired time.

I.e. if Student B is slow on the drafting and brainstorming process of the systems chain, student C, who relies on B’s ideas and data processing, will be severely disadvantaged and unable to write satisfactory Conclusions for the assignment. Therefore, the process cannot continue until B has been completed.

2. Decide how to exploit the constraint- Attempt to squeeze as much volume out of the bottleneck as is possible. This is for two reasons. Firstly, the constraint is costing the entire process valuable resources every minute it is in operation (so it is logical to minimise this wastage), and secondly, when the other processes are subordinated, the subordinate level should be as ‘high’ as is possible.

I.e. holding regular meetings with all team members to address the problem caused by Student B. Good communication between members will increase accountability and help exploit the constraint.

3. Subordinate everything else- All other processes must be brought to the same speed of the constraint, so as to reduce inventory building up. By getting all tasks to run at the same ‘beat’ as the bottleneck, the productivity of the entire process can be gradually improved. Several ways to do this include; diverting resources from other processes to ensure the constraint is always working at full capacity, maintaining a buffer of work for the constraint to work on (ensuring it is never idle), and finally taking care of the process to ensure it is always at its’ most productive (i.e. regular status checks ).

I.e. agreeing to reduce the amount of tasks required of each team member per day, so as to alleviate the daunting nature of doing many things at once. Additionally, planning exactly what tasks must be done every day by each member (regardless of ability or efficiency) will help remove the constraint, albeit at the cost of reducing the speed of the most able members.

4. Elevate the constraint- Invest resources getting the constraint up to the same speed as every other process; there is a level of sacrifice in this stage of the process, because effort must be made to get around the bottleneck.

I.e. re-delegating group tasks to give the three diligent students the majority of tasks, and the decision to either leave out the fourth member (i.e. prevent them from receiving any marks for the assignment) or give them non-crucial tasks that can be completed later in the process (i.e. tasks on a feeding chain rather than the critical chain).

5. Back to step one- After elevating the constraint the process must again be assessed. Invariably there is another process that is, to some degree, constraining the entire system. This may have been caused by focusing on the initial constraint, and must now be treated in the same way. This final step is important in illustrating the infinite nature of the Five-Focusing Steps.

I.e. while the assignment moves ahead and is completed, the remaining students are alerted to the bottleneck problem and are careful to avoid the same problems again.

Evaporating Cloud

Assists in addressing what to change. The following model illustrates two conflicting decisions, of which only one can be implemented. The first prerequisite (D) to work in a four-person group on the assignment or the alternative prerequisite (D`) to work individually on the assignment. The model uses the economic concept of opportunity cost dilemmas, wherein only one of the two options can be achieved. Both prerequisites are aiming to fulfil the mutual objective (A) of completing the assignment to pass MGMT 399.

The Evaporating Cloud can be read as:

“In order to (A) pass the assignment to pass MGMT 399, students must (B) learn to work towards a common goal as a team. Therefore they must (D) work on the assignment in groups of four.”

It can also be read as:

“In order to (A) pass the assignment to pass MGMT 399, students must (C) work on a research task individually. Therefore they must (D`) work on the assignment individually.”

We must next identify underlying assumptions behind the objective, requirements and prerequisites. Exposing these assumptions will make it easier to solve the dilemma and achieve both goals. Students need to pass in order to achieve terms and pass MGMT399 in this case, irrespective of how the assignment is carried out. These assumptions are in the grey boxes on

We must then identify any possible injections in the Evaporating Cloud analysis, which will break the assumptions. These injections serve as leverage points from which the conflict may be eventually solved, making them vital to our investigation. Three possible injections are listed below:

1. (C) – (D`): To prevent certain members from doing a disproportionate amount of work (without reward), the inclusion of an evaluation form that all team members must fill out will prevent social loafing.

2. (B) – (D): Appoint team leader to keep the assignment progressing and distribute tasks

(B) – (D): Hold meeting to distribute tasks to ensure each member has an equal workload.

Negative Branch Method

The Negative Branch Method addresses the question ‘What to change to?’ and will expand one of the above injections and evaluate whether it will be a feasible strategy to implement. This Negative Branch is untrimmed and provides a holistic view of the negative externalities of completing the assignment in groups.

This Negative Branch includes the positive effects of enforcing the proposed injections. It shows how the injections (shown in red boxes) work to break the negative externalities of group assignments and lead to the overall objective (A) complete the assignment to MGMT 399.

The final Negative Branch illustrates how the proposed injection of holding a team meeting, appointing a team leader and evaluating the process will assist the group in achieving objective (A):

The Negative Branch reads as:

“If the assignment can be completed in a group and workload shared, the assignment can be started.”

“If the group appoints a leader (to prevent social loafing) and a meeting is held to distribute tasks, the group members can be kept on task, and the workload can be kept even.”

“If members are kept on task and the workload is kept even, members can be held accountable for completing tasks and individuals can ensure they spend a proportionate amount of time on the assignment and have an acceptable workload.”

“If members are held accountable and individuals are able to spend a proportionate amount of time on the assignment with an acceptable workload, the assignment will be completed on time and individuals will have free time to spend on other activities.”

“If the assignment is completed on time and individuals have free time to spend on other activities, the level of analysis and content contained within the assignment will be higher, and the overall grade will be higher.”

“If the level of analysis and content within the assignment is higher, and individuals are able to evaluate the performances of other team members, each individual (who put in an equal amount of work) will be more likely to get a higher grade and pass Mgmt399.”

Prerequisite Tree

Finally, we must address how the change will occur. The prerequisite tree model can be used to answer this question; it considers the various obstacles that may arise before the change can actually be implemented. Before being able to achieve the overall objective – completing the assignment in order to pass MGMT 399 (A) – there are numerous obstacles that will arise. To overcome these obstacles, we must implement intermediate objectives (IO’s), which become a necessary condition to achieving the overall objective. These are presented below:

Target Objective

Obstacle (O)

Intermediate Objective (IO)

Complete assignment with above-average grade.

Complete assignment with above-average grade.

O 1: Team members have different skills/knowledge

IO 1: Assign tasks based on skills/ brainstorm ideas collectively

O 2: Assignment time frame is only four weeks

IO 2: Prepare a ‘game plan’ of tasks that must be completed by a certain time

O 3: Members forget to turn up to scheduled meetings

IO 3: Assign someone to send out a reminder the night before

O 4: Members have differing work ethics and contribute different amounts

IO 4: Establish desired scope and quality of assignment and ensure all members agree

O 5: Some group members not willing to put in equal contribution

IO 5: Agree on proper processes for assignment

O 6: Cannot decide on a challenging enough issue which may increase marks

IO 6: Everyone submits ideas which are then voted on

Part Three: Application of Critical Path and Critical Chain to Management

My system is Foodstuffs Inc., a large warehouse in Silverstream. The organisation caters to the needs of its’ members (i.e. Pak ‘N’ Save, New World, Four Square, numerous dairies etc.)

Below is a simplified list of the core tasks that occur in the warehouse, relating to the core function of re-supplying members with foodstuffs.

Critical Path

The critical path is the longest time from the start of the project (i.e. NW Metro placing order) to when the project is completed (i.e. order delivered to NW Metro). Some tasks, like L, are not parallel to any other tasks, showing that they are independent and can be delayed to the end of the project (as denoted by a feeding buffer).

Critical Chain

The critical chain takes into account various factors that may alter the actual time taken to complete the project. I.e. J cannot be started or completed until I has been finished. If there is a delay in this task, the entire project will take longer to complete, thus justifying the resource buffer. In comparison, L does not have any dependent factors, meaning it does not need to be started until the very end of the project, justifying the feeding buffer.

My critical chain is in essence the same length as my critical path. This is because the most time intensive process at Foodstuffs, checking tobacco orders, is a central task that must be undertaken with every shop order. It is the process in the chain that dictates the speed at which the organisational ‘drum’ can beat. The second diagram includes project variance (i.e. the shortest amount of time the project can take) which allows us to streamline tasks.

Managing Project

The project is filling an order for NW Metro, a member of Foodstuffs Cooperative. Typically, such an order would involve alcohol, tobacco products and various other items from the Foodstuffs warehouse, all of which must be picked by bulk and tobacco pickers. After the order has been placed, assignments are given to workers in each of these departments; they are then picked and dropped in dispatch. Tobacco orders must be stringently checked however, because they are contain more valuable products (see below). Simultaneous to this is the process of products arriving in Toops Trucks (one of Foodstuffs’ main distributors/suppliers) from Ngauranga. Products are unloaded in Inwards, scanned and labelled (determining where they are to go in the warehouse), and moved to their respective locations by forklifts. Items being moved to Reserve locations will eventually be moved to Pick locations (in my diagram this delay is not shown), and then on to Dispatch. This area of the warehouse orders completed assignments and readies them for delivery. Some orders are wrapped (exclusive to bulk orders, which do not need security), a process that takes extra time but is not involved onthe critical chain.

I would focus on the constraints that are currently slowing the entire process down, namely the tobacco room and suppliers. The latter is less of a concern, because Foodstuffs have effective stock management procedures in place, but for the sake of simplicity in the model this could not be shown. Therefore, the only bottleneck are processes F-J.

The picking of tobacco orders is relatively slower than others in the warehouse because no machines are used. Rather, pickers walk around the aisles pulling bins behind them. This is something of a constraint because it is not the most efficient way of doing the task, and could therefore be elevated.

The real constraint is the checking of tobacco orders – this is a manual job that requires scanning every item picked, weighing it, and ensuring that the correct number of items have been picked. This system is in place because a number of items in the system are of high value, such as tobacco and liquor. While some attempts have been made to speed this system up, (i.e. training staff to be more efficient, specialisation of tasks) there is definitely room for improvement. I would focus on improving the technological elements of the task, such as improved scanning equipment, faster methods of counting items, and greater numbers of workers available to elevate the task. Since the processes within the tobacco room are estimated to take three times longer than those of bulk (the other process that must be done before a members’ order can be dispatched), there must be a concerted effort to speed the constraint up (maximum exploitation of constraint).

The project is functional in design. This is because various resources from different systems in the organisation come together to work cohesively on the project, but remain in their own process and work on other jobs too. Ie forklift drivers who unload trucks are also involved with moving pallets off the floor, restocking the pallet/bin machine etc. Bulk selectors also help clean the warehouse, pick tobacco orders and wrap pallet orders in dispatch etc.

Part Four: Conclusion and Reflection

The T.O.C. framework provides us with insights into decisions and the resulting consequences (i.e. cause and effect). It helps us (via the Five Focusing Steps) identify the constraint within a system, know what to change it to, and most importantly how to implement these changes. This simple yet effect framework can be applied to every organisational and systems context, from a small group assignment to a large company.

The other tools in the T.O.C complement the focusing steps well, allowing us to identify and break assumptions, and maximise the positive outcomes of a scenario. Even though they are used in different circumstances, the outcomes of these models are often similar; for example assigning tasks based on the skills of each team member, a solution that emerged in both. This strengthens the solutions, showing that we can find the same outcomes in two different ways.

Senge’s archetypes are similar to the tools used in the T.O.C., because of the way they relate to cause and effect analysis. The negative branch is possibly the most similar, dealing with the negative consequences of implementing any changes. The archetypes can be used as models to complement the T.O.C. tools to see how an injection will affect the rest of the system and to decide whether or not it is worth introducing a change. Systems thinking should not only be considered when looking at a system holistically, but when thinking about systems thinking; which in itself requires a macro-thinking outlook. All the tools and methods used complement each other, due to the sharing of a common purpose; achieving set goals and improving a system.