Father of CM: when it was recognised.

Management is a soft science, a normative science. t does not provide set solutions to situations
or problems. Management science trains our mind as to how to approach a development, reach
the root cause and resolve the problems. Constraints management provides a novel approach to
exploit the constraint by focusing attention on material and resources at the same time. Theory of
constraints emphasizes that there is always a constraint in the system, physical or policy
constraint.
The objective of the constraint management is not to minimize the cost because there is a limit to
which level costs can be reduced. ts objective is to maximize throughout by subordinating
everything to reduce limiting impact of the constraint. The goal of the organization is to make
more money now and in the future, to provide a secure and satisfying workplace now and in the
future, satisfy customers and stake holders now and in the future.
Constraint is anything that prevents a system from achieving a higher performance relative to its
goal. He has advocated five steps to resolve the problem of constraint without compromise. They
are identify the system's constraint, decide how to exploit the system's constraint, subordinate
everything else to reduce limiting impact of the constraint, elevate the constraint and go back to
step one Constraints management is a thinking process in which 'cause and effect' technique is
incorporated to identify a constraint and analyze it. Plants are unbalanced. Some resources have
less relative capability than others. This creates a constraint. The fundamental thesis is that,
constraints determine the performance of any system. The theory advocates that managers
should focus on constraint rather than on production cost. The theory concentrates on the
thinking process and on verbalization of intuition. This is based on two logical constructs, namely,
sufficiency logic describing reasons for existence of a situation and necessity logic describing
prerequisites associated with desired outcome.
Performance in production can be improved with managerial know how {knowledge to what to
change to}, the logical know how {knowledge of what to change to} and psychological know how
{knowledge of how to cause change}. t identifies bottlenecks in plants and sets up production
and material plans simultaneousl y around the best use of resources. Goldratt has developed
innovative tools to analyze the problem; search root cause of the problem and find a solution to
the problem without compromise.
The main tools are- the evaporating cloud, the current reality tree, the communication current
reality tree, categories of legitimate reservation, the future reality tree, the prerequisite tree,
drum-buffer-rope and the critical chain.
Constraints management is a sophisticated philosophy, therefore all the employees must be
trained in skills required to implement the strategy and soft skills of managing those who
implement the strategy. Good amount of home work need to be done before embarking upon
introduction of constraints management in the organization. Present book discusses all these
aspects of the philosophy in great detail.
Constraints management is an improvement in line with T.Q.M., J..T., reengineering and
learning organization. The theory has introduced novel research methods; it has a broad
spectrum of robust application. After having discussed the theory in its various aspects,
constraints management in productive activity like two wheeler assembly line, diesel oil engine
manufacturing plant and small scale engineering unit is discussed. Constraints management in
process industries like petroleum refinery, pharmaceutical unit, sugar processing unit and milk
pasteurization plant is analyzed. n the last chapter this theory as practiced i projects like water
storage dam and software solution project is described. t is observed that the theory of
constraints is applicable to one constraint one product activity. However, constraints can be
managed in multi-constraint multi-product entity with the help of dual simplex linear programming
along with MARLAB fuzzy tool box and modified flexible S-curve membership function. Fuzzy
solution to multi-constraint multi-product problem is discussed with the help of numerical and
graphical example.

ueflnlLlon of a ConsLralnL
Slmply puL a consLralnL ls anyLhlng LhaL llmlLs a sysLem (company or
agency) ln reachlng lLs goal (ColdraLL 1990 pp 3637) 1hls ls a very broad
deflnlLlon because lL encompasses a wlde varleLy of posslble consLralnlng
elemenLs ConsLralnLs could be physlcal (equlpmenL faclllLles maLerlal people)
or Lhey could be pollcles (laws regulaLlons or Lhe way we choose Lo do buslnessor choose noL Lo
do buslness) lrequenLly pollcles cause physlcal consLralnLs Lo appear
1ypes of ConsLralnLs
ldenLlfylng and breaklng consLralnLs becomes a llLLle easler lf Lhere ls an
orderly way of classlfylng Lhem lrom Lhe precedlng dlscusslon we know LhaL
sysLem consLralnLs can be consldered elLher physlcal or pollcy WlLhln Lhose Lwo
broad caLegorles Lhere are seven baslc Lypes (Schragenhelm and ueLLmer
2000 ch 4)
# MarkeL noL enough demand for a producL or servlce
# 8esource noL enough people equlpmenL or faclllLles Lo saLlsfy Lhe demand
for producLs or servlces
# MaLerlal lnablllLy Lo obLaln requlred maLerlals ln Lhe quanLlLy or quallLy
needed Lo saLlsfy Lhe demand for producLs or servlcesCuallLy Amerlca lnc 2000 All rlghLs
reserved 8eprlnLed wlLh permlsslon 7
# Suppller/vendor unrellablllLy (lnconslsLency) of a suppller or vendor or
excesslve lead Llme ln respondlng Lo orders
# llnanclal lnsufflclenL cash flow Lo susLaln an operaLlon lor example a
company LhaL can'L produce more unLll paymenL has been recelved for work
prevlously compleLed because Lhey mlghL need LhaL revenue Lo purchase
maLerlals for a flrm order LhaL's walLlng
# knowledge/CompeLence knowledge lnformaLlon or knowledge Lo lmprove
buslness performance ls noL resldenL wlLhln Lhe sysLem or organlzaLlon CompeLence eople don'L
have Lhe skllls (or sklll levels) necessary Lo perform aL hlgher
levels requlred Lo remaln compeLlLlve
# ollcy Any law regulaLlon rule or buslness pracLlce LhaL lnhlblLs progress
Loward Lhe sysLem's goal
nC1L ln mosL cases a pollcy ls mosL llkely behlnd a consLralnL from any of Lhe
flrsL slx caLegorles lor Lhls reason Lhe 1heory of ConsLralnLs asslgns a very
hlgh lmporLance Lo pollcy analysls whlch wlll be dlscussed ln more deLall under
1he Loglcal 1hlnklng rocess below
noL all of Lhese Lypes apply Lo all sysLems MaLerlal and suppller/vendor
consLralnLs mlghL noL apply Lo servlce organlzaLlons MarkeL consLralnLs are
generally noL relevanL ln noLforproflL sysLems such as governmenL agencles
8uL resource flnanclal knowledge/compeLence and pollcy consLralnLs can
poLenLlally affecL all Lypes of organlzaLlons
lour underlylng AssumpLlons
ConsLralnL managemenL ls based on four assumpLlons abouL how
sysLems funcLlon (Schragenhelm and ueLLmer 2000 ch2) 1hese assumpLlons
are
1 Lvery sysLem has a goal and a flnlLe seL of necessary condlLlons LhaL musL be
saLlsfled Lo achleve LhaL goal LffecLlve efforL Lo lmprove sysLem performance ls
noL posslble wlLhouL a clear undersLandlng and consensus abouL whaL Lhe goal
and necessary condlLlons are
2 1he sum of a sysLem's local opLlma does noL equal Lhe global sysLem opLlmum ln oLher words
Lhe mosL effecLlve sysLem does noL come from maxlmlzlng
Lhe efflclency of each sysLem componenL lndlvldually wlLhouL regard Lo lLs
lnLeracLlon wlLh oLher componenLs
3 very few varlablesmaybe only onellmlL Lhe performance of a sysLem aL
any one Llme 1hls ls equlvalenL Lo Lhe weakesL llnk" concepL dlscussed earller
4 All sysLems are sub[ecL Lo loglcal causeandeffecL 1here are naLural and
loglcal consequences Lo any acLlon declslon or evenL lor Lhose evenLs LhaLCuallLy Amerlca lnc
2000 All rlghLs reserved 8eprlnLed wlLh permlsslon 8
have already occurred Lhese consequences can be vlsually mapped Lo ald ln
slLuaLlon or problem analysls lor Lhose declslons LhaL have yeL Lo occur or
whlch are conLemplaLed Lhe ouLcomes of Lhese acLlons declslons or evenLs can
be loglcally pro[ecLed lnLo Lhe fuLure and vlsually mapped as well
All of Lhe descrlpLlon and prescrlpLlon conLalned ln consLralnL managemenL ls
predlcaLed on Lhese assumpLlons
Pow Lo ueLermlne Where Lhe nexL ConsLralnL Wlll 8e
1he easlesL way Lo do Lhls ls Lo apply Lhe flrsL Lhree of Lhe flve focuslng
sLeps ln our heads" before acLually elevaLlng for Lhe flrsL Llme ln oLher words
ldenLlfy Lhe nexL mosLllmlLlng facLor lnslde or ouLslde Lhe sysLem LhaL wlll
keep Lhe whole sysLem from achlevlng beLLer performance afLer Lhe currenL
consLralnL ls broken 1hen deLermlne whaL acLlons wlll be necessary Lo explolL
LhaL new consLralnL ln Lhe fuLure and how Lhe resL of Lhe sysLem wlll have Lo
acL Lo subordlnaLe lLself Lo Lhe explolLaLlon of Lhe new consLralnL
Cnce Lhls ls done Lhe ramlflcaLlons of each alLernaLlve Lo elevaLe should
be obvlous and a beLLerlnformed declslon ls posslble abouL whlch alLernaLlve LoCuallLy Amerlca
lnc 2000 All rlghLs reserved 8eprlnLed wlLh permlsslon 14
choose and lL mlghL noL be Lhe obvlous
1CCLS Cl CCnS18Aln1 MAnACLMLn1
Success or fallure ln any endeavor ofLen relles on Lhe selecLlon and proper
use of Lhe rlghL Lools ConsLralnL managemenL ls no excepLlon Whlle Lhe llve
locuslng SLeps are effecLlve guldellnes for Lhe LacLlcal and sLraLeglc managemenL of any klnd of
sysLem ln speclflc slLuaLlons Lhe naLure of consLralnLs and
Lhe problems assoclaLed wlLh Lhem call for dlfferenL Lools and procedures
LxplolLlng a consLralnL would be done dlfferenLly ln a servlce envlronmenL Lhan
ln a producLlon process SubordlnaLlon would be dlfferenL ln a heavy manufacLurlng company LhaL
produces sLandardlzed producLs Lhan lL would be ln a
small [ob shop Wouldn'L lL be useful Lo have an ald LhaL could polnL us Loward
Lhe rlghL consLralnL managemenL acLlons for each slLuaLlon?CuallLy Amerlca lnc 2000 All rlghLs
reserved 8eprlnLed wlLh permlsslon 13
1he Loglcal 1hlnklng rocess
WlLh so many dlfferenL klnds of consLralnLs and wlLh pollcy consLralnLs
underlylng mosL of Lhem how can we ldenLlfy whaL speclflc changes we should
be worklng on? Many of Lhese consLralnLs aren'L easy Lo ldenLlfy CfLen Lhey're
noL physlcal or Lhey're noL easy Lo measure 1hey someLlmes exLend beyond Lhe
boundarles of producLlon processes alone alLhough Lhey sLlll affecL manufacLurlng and
someLlmes especlally lf Lhey're pollcles Lhey pervade Lhe whole
organlzaLlon
1o faclllLaLe Lhe analysls of complex sysLems ColdraLL creaLed a loglcal
Lhlnklng process 1he Lhlnklng process ls composed of slx loglc dlagrams or
Lrees" (ueLLmer 1997 1998) lL was speclflcally deslgned Lo analyze Lhe
pollcles of an organlzaLlon and deLermlne whlch one(s) mlghL consLlLuLe a
consLralnL Lo beLLer performance
1hls Lhlnklng process ls unlque from one perspecLlve lL's one of Lhe few
(maybe Lhe only) problemsolvlng meLhodologles LhaL goes beyond problem
ldenLlflcaLlon and soluLlon generaLlon and lnLo soluLlon verlflcaLlon and
lmplemenLaLlon plannlng 1he componenLs of Lhe Lhlnklng process lnclude
1 1he CurrenL 8eallLy 1ree (C81) ueslgned Lo help ldenLlfy Lhe
sysLem consLralnL especlally when LhaL consLralnL ls a pollcy of
some klnd llgure 2 shows an example of a Lyplcal CurrenL 8eallLy
1ree
2 1he LvaporaLlng Cloud" (LC) A klnd of confllcL resoluLlon
dlagram Pelps creaLe breakLhrough soluLlons Lo resolve hldden
underlylng confllcLs LhaL Lend Lo perpeLuaLe Lhe consLralnL llgure
3 lllusLraLes a Lyplcal LvaporaLlng Cloud
3 1he luLure 8eallLy 1ree (l81) 1esLs and valldaLes poLenLlal
soluLlons rovldes loglcal verlflcaLlon LhaL a proposed soluLlon wlll
acLually dellver Lhe deslred resulLs llgure 4 deplcLs a luLure
8eallLy 1ree
4 1he negaLlve 8ranch (n8) AcLually a subseL of Lhe l81 Pelps
ldenLlfy and avold any new devasLaLlng effecLs LhaL mlghL resulL
from Lhe soluLlon llgure 3 represenLs a noLlonal example of a
negaLlve 8ranch and how lL mlghL have been used Lo anLlclpaLe
Lhe dlsasLrous consequences of a very hlghproflle declslon noLlce LhaL Lhls
example underscores Lhe facL LhaL appllcaLlon of Lhe Lhlnklng process Lools ls
noL conflned Lo commerclal buslness slLuaLlons alone
3 1he rerequlslLe 1ree (81) Pelps Lo surface and ellmlnaLe
obsLacles Lo lmplemenLaLlon of a chosen soluLlon
6 1he 1ranslLlon 1ree (11) Can faclllLaLe Lhe developmenL of sLepbysLep lmplemenLaLlon plans
Also helps explaln Lhe raLlonale for
Lhe proposed acLlons Lo Lhose responslble for lmplemenLlng Lhem
1hls can be especlally lmporLanL when Lhose charged wlLh execuLlng a plan are noL Lhe same people
who developed lL
hile establishing a business there are various limitations that one needs to consider. Business
Constraints are nothing but the non-functional requirements that need to be considered or else will
have a significant impact on the smooth running of operations.
TypicaI Businesses Face The FoIIowing Constraints:
a. Operating Constraints: Business face a number of operating limitations such as:
1. The size of the market: there should clearly be a market for the product being offered. Absence of
proper market conditions would lead to low sales.
2. Demand in the market: Thorough market research should be undertaken to anticipate the
requirements of the customers.
3. The avaiIabiIity of resources: Supplier availability is very important for setting up operations.
4. Extent of competition: f the competition in the sector is highly stiff, then this could lead to major
constraint on business success. Attempt should be made to limit the effect of competition in the
market.
5. Investment requirements: Liquidity is very important for business success. Business need to
have minimum funds to sustain themselves in dire situations.
. SkiIIed Iabour: t has been acknowledged by businesses around the world that human resource is
one of the most important resources of any organisation. Human resources help the organisations to
gain competitive advantage as it is not easy to duplicate the capability of skilled labor.
b. LegaI Constraints
Legal and regulatory constraints have significant impact on business success. Different governments
have different regulations for setting up business operations in their respective countries. Business
should not overlook the importance of such constraints. Various legal constraints that business faces
are confidentiality and privacy of information, regulations and contracts that must apply when
consumers and providers are located in different countries.
Nike Price Strategies
Case Study Documenting Nike's Success and Challenges.
The key reasons for the success of Nike are associated with its global brand promotion. Due to its
extensive advertising campaigns the Nike's brand is known in almost every household worldwide.
Considering the major revenue increase over the last decade, the company has proved its popularity
and high demand for its products among people. Nike's brand management strategy as a key of its
global success is based on the sponsorship agreements with the world-class athletes, including
individual performers and sport clubs. Mainly all kinds of sportswear equipment are branded with
Nike's logo which reminds people of success and associates it with the achievements of star
performers. n such a way, Nike not only expands its corporate image worldwide, but also enhances
the healthy lifestyle and devotion to sport activities.
Unfortunately, despite million-dollar promotional and advertising campaigns, the original Nike's
products remain unavailable to most people worldwide. The price for individual items is rather high
and so the overwhelming majority of purchasers buy franchise copies holding Nike's logo. However,
this is one of the justified and reasonable business strategies applied under the conditions of
globalization.
n the recent years, Nike was reported to apply unfair working practices, involving child labour,
insufficient working conditions, under-standard wages etc. n addition to this, the company was
subject to legal claims for unfair public campaigns associate with the advertisement of corporate
brand. Therefore, Nike's further business success necessitates changes and reconsideration of its
business strategies. To this end, recently Nike has ceased its irrelevant practices and tries to lead
socially and environmentally responsible business operations.
t also comes as no surprise that the company constantly challenges anti-globalization claims. To this
end the company should emphasise on transparent practices, considering human rights and social
concerns. n this respect, the company should regain the image of more socially-oriented player on a
global scale. Therefore, Nike's management is fully aware that large corporate revenues gained from
multinational operations should be combined with socially-oriented projects aimed at recycling and
environmental campaigns.
Opportunities Facing Nike In The Future
n the foreseeable future, Nike's facing great opportunities backed up with the company's 2008
financial success. The company will continue to implement its corporate projects and programmes to
suit the demand and social needs of its worldwide customers. Though, the main emphasis will be put
on promotions and so new sponsorship agreements will be concluded with the rising stars.
Possible Challenges Facing Nike In The Future
t is rather difficult to predict corporate challenges to be faced by the company considering the overall
adverse affects of global financial crisis. Most likely, as many other multinational businesses, Nike will
close its subsidiary offices in a number of countries and/or shorten manufacturing rates in Asia.
Overall, it is apparent that Nike has a solid potential background to hold strong competitive stance in
the foreseeable future. Hopefully, in terms of further business orientation strategy, the company will
become more socially responsible in the eyes of average consumers, and so the availability of its
brand products will further increase.