Optimization Of Supply Chain By Theory Of Constraints In A Manufacturing Industry

Abstract

Supply chain management is one of the governing factors contributing to the firm's productivity and profitability.This supply chain performance is adversely affected with the presence of constraints or obstacles. As a result, the firm’s efficiency will reduce and the profitability decreases. Theory of Constraints is a systematic approach to identify and eliminate these constraints by using various methodologies and tools which help in the process of continuous improvement. This paper entails a detailed empirical analysis carried out to show the association between supply chain performance and theory of constraints. The study adopted a self-administered questionnaire to collect inputs from 42 medium scale manufacturing industries in Bangalore. Regression model was used to test the derived research hypothesis. The primary constraints present in the supply chain division of a manufacturing company, namely suppliers, production, finance, and customers, were identified using thinking process tools. Extended lead times for raw material procurement, decrease in overall equipment efficiency, price negotiation with customers and high production expenses beyond the budget were the main identified constraints. Drum Buffer Rope, Bottleneck analysis and Throughput accounting were among the few solutions suggested, pertaining to the identified constraints. By applying these techniques, the company could increase their overall productivity.