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Constraint Management 191

operating expenses but would increase revenues by over $26,000 per day. They were
making about 22 percent on sales, so this was extremely profitable, to say the least. The
plant manager was interested, but it was the policy of the company (that ugly word,
policy) that they would not increase manpower for any reason, above their current
levels. Hence, he no longer had the authority to add these people. Well, as you might
expect, there was a lot more to this experience … but this was not the first, nor the last,
time I encountered a business decision where “The Policy” was the system constraint.
These constraints are usually very costly and frequently the management is blind to
them and does not see them as constraints to the business.

The Economics of Constraints
The system constraint will limit the ability of the business to make money. However,
in most cases, if the constraint is broken, the resultant increase in production is often
the most profitable production the company has. Let’s look at a simple example of a
5 step process, shown in Fig. 12-1, which shows the process cycle times for each pro-
cess step.
It is clear the 1.0-hour process step is the constraint and will limit production to
24 units per day and, as shown in Table 12-1, profits will be $20/unit.
Let’s say we have added possible sales and we want to increase production. We
could design and build a complete new line, just like our 5 step process, but someone
notices that the line is not well balanced and suggests we break the system constraint.
The constraint is the one-hour cycle time at step 3. It is easy to see that if we wished to
double production, we could duplicate the third step and place it in parallel with the
third process step. We do this and have a new 5 step process, as shown in Fig. 12-2.
The third step would now produce two units in one hour. We have broken the
process constraint and the new process constraint would be any one of the 0.5-h
process steps—either steps 1, 3, or 5. Very likely, we could now produce up to 48 units
per day, and on a good day our sales department could sell them and everyone would

0.5 hrs 0.1 hrs 1.0 hrs 0.1 hrs 0.5 hrs

FIGURE 12-1 The 5 step process.

Cost Category $/Unit
Sales Price 200
Variable Costs 20
Fixed Costs 60
Raw Materials Cost 100
Profits 20

TABLE 12-1 Economic Profile, One-Hour Constraint