Theory of Constraints in Complex Organizations (Chapter 33 of the Theory of Constraints Handbook)

Dr. James R. Holt and Lynn H. Boyd


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Level of TOC knowledge acquired:

Advanced and Intermediate

Length:

33 pages

Designed for:

Business owners, Consultants, Implementers, Leaders and Project Managers

Topics:

Finance and Measurements and Project Management

Application:

Critical Chain, Evaporating Cloud and Throughput Accounting

Language:

English

Format:

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This is an individual chapter of Theory of Constraints Handbook. The purpose of this chapter is to suggest ways that TOC can be used to address problems of complex organizations. We start by providing a definition of complexity and then describe the core conflict of complex organizations, which we believe results from the need for both continual growth and organizational stability.

The problem complex organizations face is coordination of many independent units that are all trying to maximize local measures. We propose a key injection "Everyone in the organization who has a significant impact on Throughput is measured by Throughput Dollar Days (TDD)" and show how TDD and other TOC Supply Chain measures can be used in complex organizations to create an effective method of coordination between independent units and give senior management new insight and greater ability to manage such organizations.

Feature points:

  • The four Supply Chain Flow Concepts (Goldratt, 2009) set the direction for the solution
  • TDD, one of the TOC Supply Chain measures, provides the common measure for all units of the organization that have a direct impact on Throughput and is the mechanism for reliable and effective operation across many interconnected elements of the orga
  • For units and departments that do not have a direct impact on Throughput, T/D and IDD are useful for measuring progress toward unit goals

Comprehensive coverage of the Theory of Constraints 

Complete Table of contents of the Theory of Constraints Handbook

About the Authors:

James F. Cox III, Ph.D, CFPIM, CIRM, holds TOCICO certifications in all disciplines. He is a Jonah's Jonah, Professor Emeritus, and was the Robert O. Arnold Professor of Business in the Terry College of Business at the University of Georgia. Dr. Cox has written three books on TOC.

John Schleier holds TOCICO certifications in all disciplines. He was President and Chief Operating Officer of the Mortgage Services Division of Alltel, Inc., Executive Vice President of Computer Power, Inc., and Director of Office Systems and Data Delivery for IBM.

 

The Theory of Constraints Handbook: