Examining the theory of constraints: a source of operational and financial performance improvement for manufacturers

Abstract

The Theory of Constraints (TOC) is a management philosophy developed mainly by Israeli physicist Dr Eliyahu M. Goldratt. This thesis is a literature based research exercise that examines the structure, components, and results of applications of the Theory of Constraints. The literature review provides one of the first ever in-depth descriptions of TOC in a single document, synthesising information from across a wide range of published material, detailing the philosophical and technical aspects of this approach to management. The review contains discussion that draws comparisons between TOC approaches and more conventional management techniques, across a range of disciplinary groups. A comprehensive investigation collected empirical evidence of the results of the application of TOC to over eighty organisations, with the purpose of answering the following question: Is the Theory of Constraints a source of operational and financial performance improvement for manufacturers? The case survey method was employed, and data collected from case studies and published reports of applications of TOC. This research concludes that TOC is a source of performance improvement for manufacturers: As evidenced by the significant mean improvements to operational variables such as Lead-time, Cycle-time, Due-Date-Performance, and Inventory reduction. Data relating to financial variables representing increased income, such as Revenue and Throughput, shows TOC applications yielded significant improvements in organisational financial performance. These conclusions are supported by moderate, but not large sample sizes, a limitation created by the inconsistent nature of reporting of results. The findings of this thesis have significant implications for manufacturing organisations seeking to improve operational and financial performance in a competitive environment