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The Theory of Constraints
The Theory of Constraints refers to a philosophy of management that was invented by Dr. Goldratt. According to the author, the potency of any process, chain or system relies on the system’s weakest link.
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TOC is usually systemic and endeavors to spot the things that prevent the system from being successful. It attempts to produce the necessary changes to eliminate the limitations or problems that may cause it to be successful. Theory of constraints has separate yet linked processes as well as interrelated concepts that entail “logistics, performance measures, five focusing steps and logical thinking processes” (Cox and Michael, 1998).
Goldratt states that there are three major measurements of the performance to assess. They include inventory, throughput, as well as operating expense. Additionally, TOC stresses out the usage of these global measures of operation instead of the usage of local measures like utilization and efficiency. Goldratt also points out enhancement of throughput. The rate of generation of money by the system through sales is referred to as throughput. Goods may not be considered assets until the time they are sold (Dettmer, 1997).
The money that is invested in the products intended to be sold by the firm or the materials that are supposed to be converted into items that can be sold are all inventories. Operating expense entails the money that the organization spends in the conversion of inventory to throughput. The firm will, therefore, be aiming at increasing throughput and decreasing inventory as well as the operating expenses so as to enhance cash flow, returns on investment as well as the overall profit (Dugdale, and Colwyn, 1997).
When the throughput is increased and inventory is as well as operating expenses are minimized, the firm will most likely achieve its objectives of making money, both in the present as well as in the future. All the things that will be preventing the organization from attaining this given goal should be described as a constraint. They may feature in form of material, capacity, logistics, behavior, or the policy of management (Gardiner, John and Lorraine, 1994).
In order to deal with constraints, a tool called five focusing steps is developed. These steps make sure that the efforts of improvement are still on track. These are collectively believed to be the most significant TO aspects. The five focusing steps include:
Step 1: Identification of constraint(s) that may take place within the system.
Step 2: Decision on how to make sure that the constraint(s) of the system are exploited.
Step 3: Subordinating all things to the decisions that are made within Step 2.
Step 4: Elevating the constraint(s) of the system.
Step 5: If any constraint is interfered with within Step 4, it would be good to move back to the Step 1.
TOC is oriented toward the entire system’s output. These five focusing steps help in the identification of the biggest constraint overshadowing others. As soon as a constraint has been made stronger, the weakest link that follows will be the priority constraint which ought to be addressed.
Kaizen Five-Step Plan
The application of Kaizen in organizations is capable of delivering significant outcomes through small actions within the areas of safety, productivity as well as employees. Organizations that have embraced this philosophy usually encourage all employees within the organization to assess their environments and work processes.
They are also enabled to implement suggestions on how standards, workflow, as well as processes should be improved. At the end, improvements ultimately result into improved quality, improved productivity as well as higher profits.
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5 Steps on how to use Kaizen within an organization:
1. Definition of a Problem
When there is no problem at all, there will be no improvement required. The first thing that should be done is the identification of the existence of a problem.
2. Creation of a standard
When there are no standards, it will be very hard to improve them. Besides, it will also be very hard to detect if there are any improvements. Measuring standards need to be developed.
3. Development of 3 to 5 better Ideas
After the identification of a problem as well as the standards, it is prudent to come up with three up to five ideas. The ideas may be brought by anybody within the organization. When suggestions have been brought, selection of the best ones should follow. The ones that are very easy to implement and that will produce results in 120 days should be selected.
4. Go back to step 1
The last step of the procedure is starting it all over again. This makes it a continuous process.
Benchmarking entails comparing the services and products offered by a firm against the products that are offered by the best firm within the whole industry. It is always a constant practice of measuring services, products as well as practices against companies which are considered to be the leaders within the industry. The process is aimed at exploring and implementing the best practices at very favorable costs (Camp, 1989).
Benchmarking involves the identification of comparison points referred to as the benchmark. Against the benchmark, all the products as well as services offered by the organization are compared (Balm, 1992).
Benchmarking is mainly aimed at ensuring that there are quality improvements. Benchmarking has a track record of quality improvements and when it is implemented by the organization (Barber, 2004). Benchmarking involves four major step, they are thorough understanding of own processes, scrutinizing other firms’ processes, contrasting other firm’s performance with own performance and implementing all the steps required to seal the performance disparity.
Benchmarking is a potentially valuable tool for the management of quality processes.
Park Place Mercedes-Benz can greatly improve on the quality of its products as well as services it provides by comparing them with those of the leading dealers. However, benchmarking with the leading manufactures will not be beneficial. Besides, they are not the actual manufactures of the vehicles but they are only dealers. They can only benchmark against dealers like them.
Benchmarking, Kaizen Five-Step Plan as well as The Theory of Constraints are very significant for Parkplace Mercedes-Benz since together with them, the organization will be able to enhance the quality of products that it provides to its customers. With benchmarking, the organization will be able to compare its products with those of the leading ones in the industry and as such it will be able to improve the quality of products that it provides.
Balm, G.J. (1992). Benchmarking: A Practitioner’s Guide for Becoming and Staying Best of the Best. Shaumburg, IL: QPMA Press.
Barber, E. (2004). “Benchmarking the Management of Projects: A Review of Current Thinking.” International Journal of Project Management 22: 301–07.
Camp, R.C. (1989). Benchmarking: The Search for Industry Best Practices That Lead to Superior Performance. Milwaukee: American Society for Quality Control Quality Press.
Cox, J.F., and Michael S. S. (1998). The Constraints Management Handbook. Boca Raton, FL: St. Lucie Press.
Dettmer, H. (1997). Goldratt’s Theory of Constraints: A Systems Approach to Continuous Improvement. Milwaukee, WI: ASQC Quality Press.
Dugdale, D and Colwyn J. (1997). “Accounting for Throughput: Techniques for Performance Measurement, Decisions and Control.” Management Accounting 75, no.11: 526.
Gardiner, S.C., John, H.B. and Lorraine R. G. (1994). “The Evolution of the Theory of Constraints.” Industrial Management 36, no. 3: 136.