13 Jun 2012
Theory of Constraints in Lean Six Sigma
What is the most effective way of improving my organisation?
Why does your organisation exist?
If it’s a commercial company, you want to make profits. If you are public sector or charity, then you want to apply your resources to best effect for your users.
Your business may be manufacturing (making widgets), information-processing (“transactional” such as finance and design) or service industry such as travel & transport, distribution, holidays and hotels. To make money (profit) you need to havefast and efficient through put of work from the start of the process to the customer.
What is Lean Six Sigma?
To improve flow of work and drive out waste (waste is anything you do that your customers won’t be happy paying for) many organisations use the highly effective tools of lean thinking. To reduce unwanted variation causing waste and troubling the customer we can use Six Sigma which is a powerful statistical toolkit. The combination of lean thinking and Six Sigma is Lean Six Sigma: widely and successfully used in very many organisations. Good training is available: for example, Silicon Beach Training offer Lean Training as well as Six Sigma Yellow Belt(three days),Green Belt(five days) and Black Belt Conversion(additional ten days).
Will you get the best return on your improvement efforts?
Common questions from those starting with Lean Six Sigma are “Where do I apply the improvement project effort?”and “Where should I do improvement activities?”. If you start with easy targets or at random, you most likely won’t get the benefit that you should. Despite the power of Lean Six Sigma, quite possibly you will seeno increased profit! We must start with the big picture and think about what is flowing through the organisation.
How does work “flow”?
As we discussed earlier, every organisation that provides a product or service to customers must have a flow of work towards the customer. If the work flows more rapidly to the customer then the company will make more money (or, in public sector and charities, the public will get best value from resources).
So where should we apply our improvement efforts? We start with a top level view of the flow of work.
So, where to focus the effort?
We can call the flow of work to the customer “throughput”. Throughput is what the organisation does for the customer, to create profit for the organisation. Other things being constant, the more throughput then the more money that is generated. So where should we focus our improvement efforts? We will get the greatest benefit if we target the bottlenecks where can increase the flow of work (raise the throughput). These bottlenecks are called “constraints” to throughput.
What are “constraints” to throughput?
Constraints can be physical. For example, if in our widget manufacturing line, the gluing step has the lowest capacity (fewest widgets per hour: we see parts building up waiting to be glued) then this is the constraint step of the process. Constraints can be skills. For example, in a design consultancy a constraint to doing projects faster may be the skills of staff. Constraints can be policy and procedures. For example, in pharmaceutical manufacturing, if the interpretation of the requirements of “Good Manufacturing Practice” is over-complicated and unnecessarily bureaucratic, then this could be a constraint to factory throughput.So a constraint is anything which limits the throughput of an organisation: physical, skills, policy or beliefs.
So why are constraints important?
To get the most benefit from process improvement activity (such as Lean Six Sigma) we must identify and understand constraints. This way of thinking is called the “Theory of Constraints”. This is an off-putting name for some. Despite being termed a theory, it is a method that leads to highly practical benefits. If you don’t know your constraints to throughput, how do you know where to apply improvement effort? Improvement projects on non-constraint processes will have minimal or zero impact on the bottom line. Conversely, you can use Theory of Constraints to identify and analyse what limits the throughput of work in your organisation. You then know where best to apply your improvement efforts: this will definitely maximise your chances of getting big benefits.
A little more about Theory of Constraints
Well controlled trials in industry (Pirasteh and Farah 2006) showed that using Theory of Constraints combined with Lean Six Sigma enormously increased the benefits (eight-fold!) compared with using Lean Six Sigma alone.
Theory of Constraints is a toolkit of methods including:
- System Thinking: in line with many other experts, this approach highlights the importance of starting with a top wide view of the organisation before delving down into detail.
- The Five Focussing Steps: how to understand and use constraints to increase profits.
- Current Reality Tree: one of a series of methods giving a logical and powerful way to solve problems.
- Critical Chain Project Management: how to deliver projects in much less time and delight the customer. Shows how multitasking is the enemy of efficiency.
- People are central to improving processes. People must discover improvements themselves (not have changes imposed).
- Training in Theory of Constraints is not by telling but by questioning(sometimes called the Socratic Method).