Theory of Constraints

Background

Eastern Financial Florida Credit Union is the largest credit union in South Florida. The last three years have been intensive with rates dipping to there lowest in 40 years. Because of this, 92% of mortgage holders had economic reasons to refinance.

Eastern exists to achieve goals to improve member service, work performance and increase profitability; however, certain factors limit their capacity to manage constraints and they needed help.

Eastern Weak Links

Eastern needed help because they were faced with a bottleneck/constraint of having more loan applicants than they were able to timely process so they decided that the problem can be eliminated by implementing Theory of Constraints (TOC) drum-buffer rope and five focusing steps. Other weak links that need to be addressed are:

· Inability to commit to closing dates

· A lot of work in process in the system

· Lead times too long

· Constantly shuffling priorities

· Too much expediting

· Stressful work environment

· Difficulty in responding to urgent member requests

· Overtime doesn’t increase profits

· Outsourcing doesn’t solve the problem

TOC is based on the fact that all businesses operate with constraints or bottlenecks, which disable the progress or success of a company. By identifying the bottleneck, the entire operation is strengthened.

Drum, Buffer, Rope (DBR)

Eastern uses this view in managing constraint along with the five steps. Using DBR assures that the company is running the right thing at the right time.

Five Focusing Steps

· Identify

· Exploit

· Subordinate

· Elevate

· Inertia

Identify/Drum

Since we just reviewed the weak links, we must seek and destroy the bottleneck. Identifying