Applying theory of constraints to Fonterra Kapuni

Abstract

This thesis presents an application of the Theory of Constraints to a New Zealand manufacturing organisation where the potential for improvement of the organisation's performance was identified. The objective of the thesis was to apply the theory of constraints (TOC to a New Zealand business in order to develop solutions to improve its performance. TOC is based on several premises, such as that, of all the problems that exist in our environment there is always at least one core problem that is preventing an organisation from improving its performance. As long as there is a constraint limiting an organisation's performance, there is always an opportunity for improvement. The theory of constraints is a system-based methodology that has been developed to assist people and organisations to think through problems and their solutions logically, and systematically. Case study methodology and the TOC were used and applied to Fonterra Kapuni. The TOC's three questions for change, what to change, what to change to and how to cause the change, were used along with the five focusing steps, to determine what, how and why improvements could be made. An analysis of Fonterra Kapuni was completed and a discussion presented recommendations for change. The analysis identified a core problem and a physical constraint that were limiting Fonterra Kapuni from improving its performance. A focus on throughput generation, strategic buffering and the use of a pull system for buffer replenishment were the main recommendations discussed. The thesis also provides recommendations on what should be included in the implementation plan, if Fonterra Kapuni is to take advantage of the opportunities presented. The thesis closes with a discussion of the benefits for Fonterra Kapuni and the researcher, and wider implications and limitations of the research.