TQM has been around for several years now. The concept is being applied to business and industry processes for the purpose of quality improvement in their departments. Many businesses feel that TQM is only for large manufacturing type businesses or major industries. TQM can be used for company with managers and employees, and certainly for everyone involved with customer service. It is important to recognize that TQM is made up of identifiable and measurable components. Proper understanding of the TQM philosophy, team development, problem solving techniques, and statistical process control must be the mission of everyone in any organization.
For example, customers in the last century have become more concerned about the quality in the products they purchase. Individual have insisted that the products one buys must be, ones of quality. Meaning that the product or service must perform it functions, for which it was designed, in an efficient and reliable manner. TQM has become associated with assuring its customers that the quality is not only created, but that it is well maintained. To be the best requires a company’s total commitment, beginning with upper level management. Expected results include increased repeated business and shorter project completion times.
The benefits of quality to an organization are: Customer satisfaction resulting in customer loyalty and repeated business, lower production costs and higher productivity, improved cash flow and return on investment, have the ability to charge higher prices, reduced service calls. These benefits lead directly to increased market share and improved profitability.
Theory of Constraints (TOC)
The Theory of Constraints comes from the work achieved by Eli Goldratt's, on "how to think". It is the Thinking Processes and their applications. By knowing how to think, one can better understand the world around them. By understanding the environment one works in, one can make improvements.
Cause and Effect is Central to the concept of TOC. The Thinking Processes of TOC give us a series of steps which combines cause-effect and our experience to gain knowledge. With knowledge, one can make improvements.
One major benefit of the Thinking Processes is that it provides the ability to recognize the Paradigm shifts which occur when times change but our assumptions and rules don't. We cannot constantly monitor every assumption to be sure we are in line with constantly evolving reality. Those who continue their usual patterns of operation, regardless of the changes in reality, will suffer when the effects of their actions are not those that they expect.
A constraint is anything that exists in an organization that limits it from moving towards its goal, assuming that a goal has been defined. For most business organizations the goal is to make money. There are two basic types of constraints: physical constraints and non-physical constraints. A physical constraint is something like the physical capacity of a machine. A non-physical constraint might be something like demand for a product, or a corporate procedure.
The steps in applying TOC are as follows:
- Identify the system's constraints.
- Decide how to exploit the system's constraints.
- Subordinate everything else to the above decision in Step 2. Since the constraints are keeping us from moving toward our goal, we apply all of the resources that we can to assist in breaking them.
- Elevate the system's constraints. If we continue to work toward breaking a constraint at some point the constraint will no longer be a constraint.
- If the constraint is broken, return to Step 1. When that happens, there will be another constraint, somewhere else in the system that is limiting progress to the goal.
For a manufacturing organization, with an intended goal of making money, TOC defines three operational measurements that measure whether operations are working toward that goal. They are:
- Throughput: The rate at which the system generates money through sales.
- Inventory: All the money the system invests in things it intends to (or could) sell.
- Operating Expense: All the money the system spends in turning Inventory into Throughput.
The following four measurements are used to identify results for the overall organization:
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Net Profit = Throughput - Operating Expense
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Return on Investment (ROI)= (Throughput - Operating Expense) / Inventory
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Productivity = Throughput / Operating Expense
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Turnover = Throughput / Inventory
Relationship between TOC and TQM
TQM and TOC are really different facets of the same management philosophy. The foundation of total quality management is originated by W. Edwards Deming. In one of his books, Out of the Crisis, Deming demonstrates that a TQM philosophy is really “the use of the concept of a system, systems thinking, process measurement and a never ending cycle of process improvement”. TOC is really a “focused methodology for performing systems thinking (using the concept of Throughput rather than Cost Control) on the business entity as a whole to focus changes to be made on constraints that are directly limiting better total-system profitability”.
One of the primary reasons Total Quality Management has such a tough row to hoe is that it “lends itself very easily to sub optimization”, which, as Deming observed can be the death of a system. The Theory of Constraints provides an orderly means of connecting departmental actions and decisions with the company's goal and necessary conditions. TOC provides the tools to determine what to change, what to change it to, and how to cause the change. And TOC measures Throughput, Inventory, and Operating Expense which allows managers to assess the global impact of local decisions.
The Theory of Constraints is not a replacement for Total Quality Management. It is a focusing tool. Where TQM says, "Improve everything at once", TOC says, "Improve the most important things first." The effective integration of TQM with TOC can alleviate the shortcomings of the former. TOC provides a direct link between quality improvements and the bottom line. With TOC, an organization can trace performance gains directly to the improvements that caused them. Moreover, such gains are immediate. On the contrary, TQM need years to show results.
TQM and TOC compared to “Loan Company”
REFERENCES
Goldratt, Eliyahu M., "Computerized Shop Floor Scheduling," International Journal of Productivity Research, March 1988.
Goldratt, Eliyahu M. and Cox, Jeff, The Goal, Second Revised Edition, Croton-on-Hudson, NY,1992.
Goldratt, Elihyhu, M., "Chapter 1: Hierarchical Management--The Inherent Conflict," The Theory of Constraints Journal, Avraham Y. Goldratt Institute, New Haven, Nov, 1987.
Deming, Edwards, W, W. Edwards Deming Institute, http://www.deming.org/, 1993
