In recent years, increasing numbers of businesses have espoused the ideas embodied in the theory of constraints, a management philosophy that views operations in terms of key factors that limit performance.

The ideas associated with constraint theory, growing out of  the writings of Eliyahu M. Goldratt, were first associated with manufacturing, but are now widely applied to service providers as well as to nonprofit operations. TOC, as the theory is known, has a specialized vocabulary filling seven pages, but the ideas underpinning it are straightforward. In fact, the more complex a business operation, the simpler its problems become in TOC analysis, focusing on the relationships of all business operations to a common obstacle that blocks maximum performance.

TOC can be used in tandem with concepts of total quality management, or TQM, but TOC does not endorse continuous improvement of every process. Unlike TQM, constraint theory concentrates on one key area of improvement. In fact, TOC advocates believe that to improve processes throughout the enterprise actually can be counterproductive if the area of constraint remains unchanged, because across-the-board improvement can create additional stress at the constraint point and wasteful excess capacity elsewhere.

For example, a technical services company in which customers wait unacceptably long periods for service because of a chronic shortage of skilled staff would worsen its situation by improving its sales effort. The key constraint –– skilled labor –– needs to be addressed. If there’s no solution to that problem, it’s a waste of time and resources to strive for gains in other areas of operation. And waste is costly.

Similarly, a manufacturer unable to obtain key parts or supplies will increase its costs, not its profits, by improving its warehouse or delivery capacity. Either the required supplies need to be found or the product line needs to be modified to align with available resources.

TOC efforts usually begin with an assessment of business processes to determine the constraints that limit performance. The assessment serves as the framework for an integrated business strategy to focus on reducing the constraints.