Leverage - Theory of Constraints

Tom Foster of ManagementBlog.org interviewed me about Goldratt's Theory of Constraints. Here is the fifth installment:

--- Start interview
TF: If we do a good job of placing our constraint in our highest cost, most scarce resource, what is the next most difficult thing to do?

Dr. Lisa: Leverage it. Leverage is a great word but we are not taught how to do this or what we are taught is simply wrong.

The book The Goal by Eliyahu M Goldratt describes leverage as exploiting the constraint and subordinating everything else based on the point where you have placed the constraint.

Exploit means not wasting any of what you have. Subordinating is often the harder one because it requires the non-constraint silos to fall in line by supporting the exploitation of the constraint. This is difficult because each silo is usually measured and rewarded on its individual results.
---End interview

That completes Tom's interview of me.

Here's to maximizing YOUR profits!
Dr Lisa Lang
(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.