Constraints Of The Business example essay topic

The Goal, by Eliyahu Goldratt, demonstrates the 'theory of constraints' in an interesting manner. It portrays clearly what the goal of a business is and suggests a number of methods that could be applied in both manufacturing and service companies - methods that are fascinating practical and logical. Throughout the book, Goldratt raises a number of issues concerning management decisions and key issues that need to be considered. Goldratt emphasizes the fact that the society itself is a source of information where flows and relationships can be applied in the business world i.e. the hiking experience.

Furthermore, it encourages managers to use common sense and always consider alternative ways of doing things. Also, managers should be able to identify the need for change. Nevertheless, it is vital to know what to change, what to change to and how to cause the change. However, some of the illustrated points are contradicting conventional business assumptions. Firstly, the flow should be balanced with demand and not capacity.

Secondly, It is the actual constraint of the system that will determine the activity that can generate profit and not individual potential. Thirdly, activating a resource and utilizing is not the same thing. Finally, an hour lost at the bottleneck is an hour lost by the system as a whole when the same thing but for a non-bottleneck is not worth considering. Accepting the above anti-conventional assumptions can produce a number of conclusions. Money is a more significant issue for management than efficiency.

Also, cost accounting and the conventional way of evaluating inventory costs is an enemy for productivity as a number of cost sources is not considered fully, Finally, a workforce where everyone is working in full capacity is inefficient because of the implications involved from the interdependence of bottlenecks and non-bottlenecks. It is widely accepted that businesses should be managed in a holistic way. The job of the manager is to identify the different interdependent constraints and try to improve the current conditions in favour of profit. To do so, Goldratt introduced the Five Focusing Steps of continual improvement: 1. Find the constraints of the business that can include physical constraints within the business, a supply constraint, a market constraint as demand will not necessarily meet our production) and policy constraints.

2. Identify the decisions that should be taken in order to exploit the constraints. At this point it is worth mentioning that these decisions should maximise the business output. If not, money will be invested unnecessarily. 3. Subordinate total operations according to the above decision.

Consideration has to be taken upon the fact that constraints have to be exploited fully, which implies subordination by the rest of the organisation. 4. Elevating capacity by investing money. This step should be taken in the case where the constraints are still there after exploiting them fully. 5. If during any of the above steps the constraints are broken go back to step one.

However, inactivity should not be let to become the system's constraint. This is very essential, as assumptions should always be re-evaluated in order to avoid mistaken decisions that can be costly.