Using the Theory of Constraints to Improve the Identification and Solution of Managerial Problems

Competition has intensified in recent years, whether in local markets or in the global market. To face such changes, management philosophies are created and continually improved, and new managerial techniques and methods are also discussed and applied. Theory of Constraints (TOC) is a complete-direction Management Philosophy that was recently suggested, the concept and managerial tolls of which have seriously altered theories and notions in various different management fields. TOC includes two major groups of techniques, namely methods of dealing with physical production constraints and generic problem-solving tools. main method is the Drum-Buffer-Rope scheduling system that is used to manage the capacities of the Bottleneck Resources and the output of the Non-bottleneck Resources. necessary tool is The Thinking Process used for symptoms diagnosis and problem solving. Moreover, this study develops a Reality Tree-a step step approach for searching core problems and proposed solutions guided the TOC, that can significantly improve organizational management. Introduction Theory of Constraints was introduced in 1984 in Goal, written Goldratt and Cox. This unusual book on management theory took the form of a novel about a plant manager named Alex Rogo. Rogo managed a plant that was in deep trouble and in imminent danger of being closed top management. plant however was rescued overthrowing time-honored and cherished management practices that were creating serious problems. Rogo was helped in saving the plant considering the probing questions posed Jonah, an Israeli academic who appeared at critical points in the novel. In Goal, the traditional corporate cost accounting and variance reporting system was responsible for many of the problems faced the factory that are in danger of being closed. Instead of focusing efforts on activities that would increase profits, the traditional management accounting system that the company utilized, focused mainly on counterproductive efforts to reduce unit production cost. If real improvements in operations were achieved, the management accounting system almost invariably would have sent inappropriate signals in the form of unfavorable cost variances. Therefore, the first step to improvement would be discard the old cost accounting and variance reporting system. Rogo then completely redesigned the accounting and performance reporting system from the ground up. Goal posed a major challenge for management accountants. Specifically, Goal mentioned that traditional systems, including absorption costing and standard cost variance reports were the source of problems. Many controllers frankly admitted that by encouraging manufacturing department's efficiencies and standard cost variances, we often moved the company away from rather than toward our goal. Because we ignored system constraints and relied on traditional standard cost calculations, past decisions to outsource production and price our product were frequently wrong. If existing management accounting practices are creating problems, the question then would be what can be done to improve them. This thought is changing and discovering the way for solving problems. Goal told managers to identify the weakest link in the system to ensure the system constraints (Step1), then focus all efforts on the weakest link and maintain ongoing improvement, decide how to exploit the system constraints (Step2) and subordinate everything else to the constraints (Step3), thus elevating the system constraints (Step4) and translating the weakest link. Moreover, if a constraint has been broken in the previous steps, then managers should return to the first step (Step5), but do not allow inertia to cause a system constraint. above five steps are TOC's process of ongoing improvement proposed in this book (Goldratt and Cox, 1992). TOC includes two major groups of techniques, namely methods of dealing with physical production constraints, and generic problem-solving tools. …