How to exploit your constraints

Never Ending (2/365)I wrote previously about constraints and how you can take advantage of them.  But how can you isolate and exploit a constraint?

First of all, identify your constraint.  

Here are some possible constraints:

  • You have very little time to work on your business.
  • Your production capacity is limited.
  • Your store has limited floor space.

Next, find a way to measure your constraint.

  • Hours per week;
  • Number of units you can produce;
  • Square footage of your store.

Now think about your business in terms of your constraint.  There are two primary strategies:

Open up your constraint.  Find ways to grow so that this constraint no longer hurts you.

  • Quit another job so you have more hours available per week.
  • Buy another machine so that you can produce more units.
  • Rent more space.
Exploit your constraint.  Find ways to increase revenues and profits within an existing constraint.
  • Hire an assistant or find ways to work more efficiently.
  • Raise the price of your limited production units.
  • Squeeze more inventory into your tiny store or eliminate less popular (or less profitable) products to make more room for the most popular and profitable products.

Acknowledgement: I adapted this from Eliyahu Goldratt’s Theory of Constraints.  Goldratt’s website is here.

[Image: Never Ending (2/365) by Burtoo, on Flickr]

About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

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