We’ve all heard the age-old adage “A chain is only as strong as its weakest link” and it is probably more true now than it was the day it was first penned. If making a profit in business is our main goal, identifying where we are losing profit should be our primary focus.
However, for all our advances in technology, automation and access to information, organisations often hamstring success by failing to identify weakest links in their business systems. Granted, some of these ‘weakest links’ are external – like weather, or suppliers, or the exchange rate – and difficult to control. So, how do we operate lean, profitable companies in these difficult economic times?
The Theory of Constraints in Real Life
An effective way of identifying weak links in an organisation is the Theory of Constraints (TOC) as put forward by Dr Eli Goldratt in his book ‘The Goal’. Goldratt suggests that every business has at least one constraint within a system that limits the organisation from getting more of what it wants, which is usually profit. It could be a bottleneck process in a manufacturing organisation, or non-manufacturing constraints like a slow market, supplies, policies and procedures, or even disgruntled employees.
As the owner of a local software development company for print and packaging industries for over 18 years, I have seen time and again how moderately successful print companies boost their production and efficiency by identifying and managing the constraint – or weakest link – that limits a system’s performance. The argument often put forward by nay-sayers is that the system (be it human or machine) is already successful and needs no improvement. But TOC suggests that every system has a constraint that can be improved on to increase capacity, and ultimately profitability.
Let’s see how this theory could be applied in your business.
Step 1: Identify the Limitation or Constraint
The first step in increasing your profit is to identify your weakest link, or the factor that is holding you back the most.
- First things first: First, earmark the processes that you use the most or that are most important to your organisation. Then consider if you are you working as efficiently as you could be within these processes.
- Identify bottlenecks: Bottlenecks are when output rate doesn’t match input rate. Something is causing delay. Bottlenecks can be due to lack of skills, poor machine speed due to old or slow machinery, or lack of capacity in a key area.
- Map it out: Use flowcharts, process mapping, and brainstorm with your team members to go through your system process and identify potential constraints. If you have ERP software, like QuickEasy BOS Print, you will easily be able to identify these constraints by accessing the production dashboard, or through the detailed management reports.
- Don’t forget non-manufacturing constraints: These could be restrictive company policies, a poor team attitude, union politics, and so on, and will also need your review.
- Prioritise: Identifying your constraint is an exercise in priorities; the theory stresses that a system can only have one constraint at a time. You need to identify which element is your absolute weakest link, and focus on that. Only once that is resolved will the next area of weakness become the key constraint.
Step 2: Unblock or Exploit the Constraint
After you’ve identified the constraint, unpacking and brainstorming how to unblock the constraint is the next step.
- Get real: Ask yourself what you need to do to increase efficiency in this area, thereby removing the constraint. Try to not be defensive in your thinking here – saying you’ve ‘always done it this way’ is detrimental to the process, and will slow it down. Goldratt calls this “exploiting the constraint” so it’s time to get real, and not be precious about anything that could be undermining your profitability. It could mean adding an additional shift to your team to get maximum throughput from that expensive machine that is standing idle 16 out of 24 hours. It could be removing or updating a policy that caps production unnecessarily.
- System insight: Again, using your ERP system, such as BOS Print, to identify the real issues behind complex problems will significantly streamline this process. The software clearly shows how productive a staff member is (or is not), or if your current estimating model is accurate and effective based on historical job data, or if a machine is underutilised and needs more work.
- If / then: I find using ‘if / then’ scenarios helps my thinking here. For example, if I have two old but functional machines that take a relatively long time to process a job, what would happen if I sold both machines and purchased one newer, faster machine? My new machine would probably need fewer operators, which reduces my salary budget and operational costs. It will probably work faster and so produce more jobs within my limited working day, enabling me to increase throughput. Use ‘if/then’ for other areas too, like modifying lunch breaks or scheduling leave time to make workflow more efficient. This will look different for each system – depending on your team, your goals, and the constraint you’re trying to overcome.
- Apply your changes: Once you have identified what needs to change in the constraint, implement the change accordingly. You can use change-management tools to do so to ensure the changes are adopted across the organisation, and carried out consistently.
- The good news: According to Goldratt, since the focus is only on the constraints and not across every process in the business, implementing these changes should result in substantial improvement after just three months of effort, without tying up a great deal of resources.
Step 3: Evaluate and Measure Performance
Finally, look at how your constraint is performing with the fixes you’ve put into place. Is there improvement or is it further delaying other systems in the process?
- Yes: If your changes have exploited or unblocked the constraint effectively, you can ‘rinse and repeat’ the process, move back to step 1 and tighten up profitability even more by identifying the next constraint within that system.
- No: If the constraint is still slowing down performance, revert back to step two and relook how you can better unblock this constraint.
- Important: Critical to this step is the ability to measure your production effectively. Having a helicopter view of all stages of production via a planner or dashboard like BOS Print is key if you are to evaluate if the changes are positive or ineffective, and continue the cycle of continuous improvement.
About Heinrich van der Vyver
Heinrich comes from the print industry, and created QuickEasy BOS Print out of the need he saw in the print and packaging industry for ERP software that is easy to use and doesn’t break the bank. QuickEasy Software is proudly South African and is distributed and supported throughout South Africa.
Contact: Email firstname.lastname@example.org
Or click here for more on our Business Operating Sofware.