The Theory of Constraints (TOC) as offered by Eli Goldratt is a very powerful conceptual as well as practical tool of which every Business Analyst should be aware. Many MBA programs recommend the reading of ‘The Goal’ (authored by Goldratt) and cover the core elements of TOC in Operations Management modules.
Very simplistically, TOC is about identifying the core bottleneck in a system and then eliminating that bottleneck (something like ‘a chain is only as strong as it’s weakest link’). The bottleneck will then be somewhere else in the system so the process of identification and elimination continues.
ITIL and TOC
In relation to Quality Management and ITIL, the ITIL books refer primarily to The Deming Cycle (‘Plan, Do, Check, Act’) for process improvement (ITIL version 3 also describes a ‘7-Step Improvement Process’). TOC is conceptually very powerful and compliments the Deming Cycle. The power of TOC is it’s simplicity in illustrating that there is always a bottleneck (constraint) in any system. The challenge is to identify the primary bottleneck and eliminate it as the primary bottleneck. ITIL process maturity is all about eliminating the bottleneck at which time the bottleneck will move and during this removing of the bottleneck/constraint the ITIL processes mature. TOC therefore works very well with the Deming Cycle together in that TOC assists to identify the bottleneck whilst the Deming Cycle assists in eliminating it (we could also add in Lewin’s ‘Unfreeze Change Refreeze’ Change model as we are we unfreezing a stable state, effecting the Change and then moving to the next constraint).
As an example, suppose that we are continuously failing a Service Level where the Service Desk should be responding to all emails within ten minutes even although we employ two people to specifically respond to emails. We analyse our business process and discover that 40% of emails are received between 12 p.m. and 2 p.m. each day and that these are the hours where our two email responders take a lunch break. Our constraint is in the supply of services where demand exceeds supply during the two hours. We eliminate the bottleneck by changing the lunch break hours of the responders. Now we are free to look at the next bottleneck (please note that this is a very simplistic example).
Below is an article offering TOC as part of an ongoing Process Improvement initiative. The article may provide some benefit however doesn’t articulate well how TOC may be used for process improvement (I believe that the article was originally authored by Pink Elephant):
A system or a process cannot be more efficient than its limiting factor!
In “The Goal” Eli Goldratt presents the Theory Of Constraints (TOC). TOC introduces primary measurements for the analysis of systems based on productivity and ultimately, profit. The core truth of TOC is that every system or process has at least one constraint or bottleneck, and that the identification of this constraint should be the focus for any improvement activity.
TOC advocates that organizations take a three-dimensional view of three core business concepts, Inventory, Operating Expense and Throughput. To relate these financial terms to IT one needs to expand the definitions beyond their traditional concepts.
Inventory: All of the money, investment, outstanding issues, pending changes, unresolved incidents, excess capacity, etc. an organization has tied up in an un-sellable, unfinished, unresolved, undeliverable, or pending state.
- Pre Process Inventory: stuff that is currently waiting in queue in a raw or input state. i.e.: Calls that are waiting in the ACD system or emails that have not been answered by the Service Desk.
- Active Inventory: stuff that is currently within the system or process and is currently being transformed into a desired or sellable output state, i.e.: Change Management records that are currently being assessed, authorized and scheduled.
- Post Process Inventory: stuff that has been successfully transformed into a desired output but has not been delivered to a client, sold, confirmed resolved, or generated profit, i.e.: The Service Desk’s feedback calls back to the users to confirm that an incident, which has been resolved, can be permanently closed.
In TOC, the concept of Inventory contradicts the conventional balance sheet definition of Inventory as an “asset” and redefines inventory as a “liability.”
Operating Expense: All of the money, time, energy, thought, resources, overtime, etc. tied up in the process of converting raw data or inventory into the output of the process.
Throughput: Defined as the speed at which inventory is moved through the end-to-end process, and delivered to the customer in order to realize the goal of profit, resolution, deployment, etc.
Goldratt observes that these three core principles are inseparably linked and that a change in any one of these three dimensions will automatically result in a proportionate change in the others. The perspective taken by TOC is that the biggest gains are realized by increasing throughput. However, to increase throughput the bottlenecks to the process need to be identified and eliminated.
Question: What occurs when you remove a bottleneck?
Answer: Another bottleneck appears elsewhere in the process.
Result: The identification of the next area for improvement to increase throughput, and the cycle of continuous improvement continues.
In conclusion, Goldratt’s Theory of Constraints places a practical tool in the hands of individuals involved in the ongoing management and improvement of business processes.