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What’s holding you back from achieving more of your goal?
The first step in improving a system is to identify what’s holding it back from achieving more of the goal, assuming that the system goal has been identified properly. This is called the System Constraint and can be in one of the four areas – supply, operations, demand, cash.
Some industries including automotive are currently experiencing a supply constraint in semiconductors. Industries with lumpy and expensive capital investments, like power generation, often have their constraint in operations. Consumer goods companies generally have the constraint in consumer demand. A few companies with low capital and high borrowings often face cash constraints.
It is important to identify where the system constraint lies as of now. If it is at the wrong place, we should take action to shift it to the desired area. Actions required to improve the system performance should then be focused on the constraint.