See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/235279599

The Theory of Constraints’ Thinking Process Approach to

Developing Growth Strategies in Supply Chain

Article in International Journal of Physical Distribution & Logistics Management · December 2002
DOI: 10.1108/09600030210455429

CITATIONS READS
121 3,256

1 author:

Shams Rahman
RMIT University
113 PUBLICATIONS 5,943 CITATIONS

SEE PROFILE

All content following this page was uploaded by Shams Rahman on 01 December 2015.

The user has requested enhancement of the downloaded file.

 International Journal of Physical Distribution & Logistics Management
The theory of constraints’ thinking process approach to developing strategies in supply
chains
Shams-ur Rahman
Article information:
To cite this document:
Shams-ur Rahman, (2002),"The theory of constraints’ thinking process approach to developing strategies in
supply chains", International Journal of Physical Distribution & Logistics Management, Vol. 32 Iss 10 pp. 809
- 828
Permanent link to this document:
http://dx.doi.org/10.1108/09600030210455429
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

Downloaded on: 01 December 2015, At: 11:06 (PT)

References: this document contains references to 59 other documents.
To copy this document: [email protected]
The fulltext of this document has been downloaded 3238 times since 2006*
Users who downloaded this article also downloaded:
Shams-ur Rahman, (1998),"Theory of constraints: A review of the philosophy and its applications",
International Journal of Operations & Production Management, Vol. 18 Iss 4 pp. 336-355 http://
dx.doi.org/10.1108/01443579810199720
Togar M. Simatupang, Alan C. Wright, Ramaswami Sridharan, (2004),"Applying the theory of constraints
to supply chain collaboration", Supply Chain Management: An International Journal, Vol. 9 Iss 1 pp. 57-70
http://dx.doi.org/10.1108/13598540410517584
Victoria J. Mabin, Steven J. Balderstone, (2003),"The performance of the theory of constraints methodology:
Analysis and discussion of successful TOC applications", International Journal of Operations &
Production Management, Vol. 23 Iss 6 pp. 568-595 http://dx.doi.org/10.1108/01443570310476636

Access to this document was granted through an Emerald subscription provided by emerald-srm:393177 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for
Authors service information about how to choose which publication to write for and submission guidelines
are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as
providing an extensive range of online products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee
on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive
preservation.
 *Related content and download information correct at time of download.
Downloaded by RMIT University At 11:06 01 December 2015 (PT)
 The research register for this journal is available at The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/researchregisters http://www.emeraldinsight.com/0960-0035.htm

The theory of constraints' Constraints'

thinking process
thinking process approach to approach

developing strategies in supply

chains Received May 2001
809

Shams-ur Rahman Revised May 2002

Institute of Transport Studies, School of Business, Accepted October 2002
The University of Sydney, Sydney, Australia
Keywords Logistics, Supply-chain management, Systems, Thinking styles
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

Abstract Many attempts have been made to study factors influencing the performance of
supply chains. These studies are generally quantitative and involve rigorous statistical analyses.
This paper describes an application of a systems approach known as the thinking process of the
theory of constraints not only to identify critical success factors in supply chain management, but
also to understand causal relationships between these factors. The study was conducted in a
group-based model building environment with a group of students who specialised either in
logistics management or e-commerce. The results suggest that understanding the dynamic nature
of supply chains through cause and effect relationships is critical to the formulation of supply
chain growth strategies.

Introduction
Over the last four decades implementation of operations management
principles and strategies, such as materials requirements planning (MRPI and
MRPII) (Orlicky, 1975), just-in-time (JIT) (Monden, 1981), total quality
management (TQM) (Deming, 1986; Juran, 1992), lean manufacturing (Womack
and Jones, 1996), and theory of constraints (TOC) (Goldratt, 1988), have helped
companies to reduce manufacturing costs as much as practically possible. As
the CEO of Hong Kong-based company Li & Fung highlighted:
. . . you can try to squeeze the cost of production down 10 cents or 20 cents per product, but
today you have to be a genius to do that because everybody has been working on that for
years and there's not a lot of fat left. It's better to look at the cost that is spread throughout the
distribution channels (Magretta, 1998, p. 108).
It is only recently that management of business enterprises have realised that
effective supply chain management is the competitive strategy that now has
the most potential to reduce costs further (Dyer, 1994, 1996; Lee et al., 1993).
Although the interest in supply chain management, both in industry and in
academia, has grown rapidly over the past few years, the concept can be traced
as far back as Forrester (1958, 1961). Using industrial dynamics techniques,
Forrester tracked the effects of delays (material flow lead time and information International Journal of Physical
flow lead time) and decision policies within a simple but representative supply Distribution & Logistics
Management,
chain consisting of a manufacturing plant and its warehouse, distributors, and Vol. 32 No. 10, 2002, pp. 809-828.
# MCB UP Limited, 0960-0035
retailers. In this seminal work, Forrester (1961) demonstrated the importance of DOI 10.1108/09600030210455429
 IJPDLM sharing information with partner organizations in the supply chain, strategic
32,10 alliances and supply base management, vendor-managed inventory, and the
impacts of delays across the supply chain at a time when these vocabularies
were not part of the business literature.
To date many attempts have been made to identify critical success factors in
supply chain management (Holmes, 1995; Power et al., 2001), investigate the
810 relationship between logistics strategy and business processes (Brewer and
Hensher, 2001), identify drivers behind successful strategic supplier alliances
(Monczka et al., 1998), assess the impact of TQM practices on logistics and
supply chain performance (Anderson et al., 1998; Tan et al., 1999), measure the
effect of supply management orientation on supplier performance (Shin et al.,
2000), examine the role of communication in supply chain management
(Ellinger et al., 1999), and investigate the impact of information technology on
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

logistics capability (Cross et al., 1997). These are quantitative studies that have
applied rigorous statistical analysis including factor analysis (Power et al.,
2001; Tan et al., 1999; Anderson et al., 1998), structural equation modelling
(Shin et al., 2000; Anderson et al., 1998) and canonical correlation analysis
(Brewer and Hensher, 2001).
In this study, a system approach known as thinking process (TP) was
applied to identify critical factors of effective supply chain management,
determine the causal relationships between these factors and investigate their
interrelationship with supply chain performance. These relationships would
help managers to analyse and develop growth strategies in supply chains.

Theory of constraints and its TP

This section provides an overview of the TOC and its TP. For a complete
description, readers can refer to Goldratt (1990) and Cox and Spenser (1998).
Rahman (1998) provides a detailed description of the TOC methodology
including its concepts, principles, tools and performance measures and
presents a comprehensive review of the TOC literature.
Developed by Goldratt (1988) in the mid-1980s, TOC evolved from the
Optimized Production Timetables (OPT) system (Goldratt, 1980) and was later
known under the commercial name of Optimized Production Technology
(OPT1). As part of a marketing tool for the OPT system, Goldratt illustrated
the concepts of OPT in the form of a novel, The Goal (Goldratt and Cox, 1984),
in which the theory is gradually unravelled through the context of an everyday
production situation. A second book, titled The Race (Goldratt and Fox, 1986),
was written to overcome difficulties encountered in the implementations and,
gradually, the focus of the concept has moved from the production floor to
encompass all aspects of business. By 1987, the overall concept became known
as TOC, which Goldratt (1988, p. 453) viewed as ``an overall theory for running
an organisation''.
The TOC has two major components. First, a philosophy which underpins
the working principles of TOC. This is often referred to as TOC's ``logistics
paradigm'' and consists of five steps for on-going improvement, the
 drum-buffer-rope (DBR) scheduling methodology, and the buffer management Constraints'
information system. This philosophy suggests that the main constraint in most thinking process
organizations may not be physical, but in fact managerial-policy related. To approach
address the policy constraints and effectively implement the process of on-
going improvement, Goldratt (1990, 1994) developed a generic approach called
the TP. This is the second component of TOC. Experts believe that it is the TP
which will ultimately have the most lasting impact on business. The working 811
principles of TOC and the application procedure of the TP are discussed in the
following two subsections.

Philosophy of TOC
The working principle of TOC provides a focus for a continuous improvement
process. The principle consists of five focusing steps (Goldratt, 1990, p. 5)
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

which are summarised in Figure 1. The steps are:

(1) Identify the system's constraint(s). These may be physical (e.g. materials,
machines, people, demand level) or managerial. It is important to
identify these constraints and also necessary to prioritise them
according to their impact on the goal(s) of the organization.
(2) Decide how to exploit the system's constraint(s). If the constraint is
physical, then the objective should be to make the constraint as effective
as possible. A managerial constraint should not be exploited but should
be eliminated and replaced with a policy which will support increased
throughput.
(3) Subordinate everything else to the above decision. This means that every
other component of the system (non-constraints) must be adjusted to
support the maximum effectiveness of the constraint. Because
constraints dictate a firm's throughput, resource synchronisation with
the constraint will lead to more effective resource utilisation.

Figure 1.
Process of on-going
improvement
 IJPDLM (4) Elevate the system's constraint(s). If existing constraints are still the
32,10 most critical in the system, rigorous improvement efforts on these
constraints will improve their performance. As the performance of the
constraints improves, the potential of nonconstraint resources can be
better realised, leading to improvements in overall system performance.
Eventually the system will encounter a new constraint.
812 (5) If in any of the previous steps a constraint is broken, go back to step 1. Do
not let inertia become the next constraint. TOC is a continuous process
and no policy (or solution) will be appropriate (or correct) for all time or
in every situation. It is critical for the organization to recognise that as
the business environment changes, business policy has to be refined to
take account of those changes.
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

The implementation of the five focusing steps to a typical production

environment can yield rapid and substantial improvements in operations as
well as profits (Noreen et al., 1995). However, this process of continuous
improvement will eventually shift constraints from factory floor to the market.
Insufficient demand is a managerial or policy constraint rather than a physical
constraint. Policy constraints are generally difficult to identify and evaluate,
and frequently require involvement and cooperation across functional areas.
Goldratt (1994) developed the TP methodology to address policy constraints
and create breakthrough solutions using common sense, intuitive knowledge
and logic.

The thinking process

According to Goldratt (1990), managers are required to make three generic
decisions while dealing with constraints. These are:
(1) decide what to change;
(2) decide what to change to;
(3) decide how to cause the change.
To address these questions, the TP prescribes a set of five tools in the form of
cause-and-effect diagrams. The questions, associated tools and their purposes
are summarised in Table I. The TP process starts with the first decision
question, ``What to change?'', i.e to identify core problems. Current reality tree
(CRT) is used for this purpose. Dettmer (1997) defined a CRT as a logical

Generic questions Purpose TP tools

What to change? Identify core problems Current reality tree

What to change to? Develop simple, practical solutions Evaporative cloud
Table I. How to cause the change? Implement solutions Future reality tree
Thinking process tools Prerequisite tree
and their roles Transition tree
 structure that depicts the state of reality as it currently exists in a given system. Constraints'
Once a core problem has been identified, the next question becomes ``What to thinking process
change to''. The second step in the process is therefore to search for a plausible approach
solution to the core problem. This requires other tools such as evaporating
cloud (EC) and future reality tree (FRT). According to Dettmer (1997) FRT is a
strategic tool used to plan major changes. The implementation of these changes
is likely to improve a system. Once the ``what to change to'' question is decided, 813
the organization is left with the question ``How to do it'' or ``how to change''. The
prerequisite tree (PRT) and transition tree (TT) diagrams are used to identify
obstacles to implementation and devise detailed plans for overcoming these
obstacles.
It is not the purpose of this paper to discuss these tools in great detail. For a
detailed discussion readers are referred to Goldratt (1994), Noreen et al. (1995)
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

and Kendall (1998). The purpose of this study is to address the first question:
what to change, i.e to identify core problems which reduce the effectiveness and
efficiency of supply chains. The CRT tool was used for this purpose.

Guidelines for constructing CRT

The CRT identifies cause-and-effect relationships in a system. It is constructed
from the top-down by identifying undesirable effects (UDEs), and depicting
probable causes for those effects (effect-cause). It is, however, read from
bottom-up (cause-effect), when the construction is complete. The following
steps should be taken to develop a CRT (Noreen et al., 1995, p. 156):
(1) Identify a list of UDEs that describe the area being analysed. It is
recommended to begin with a list of five to ten UDEs.
(2) Connect one or more UDEs to other UDEs if they are causally related.
Depict cause-and-effect relationships with an arrow as shown in the
categories of legitimate reservations (CLR) (see Appendix, Figure A1).
(3) Connect all other UDEs to the result of step 2. Scrutinise each entry and
arrow along the way via the CLR. Stop when all the UDEs have been
connected.
(4) Read the tree from bottom up, scrutinising again each arrow and entry
along the way via the CLR. Make any necessary corrections.
(5) Ask yourself if the tree as a whole reflects your intuition about the area
being analysed. If not, check for each arrow for additional cause
reservations (point 6 in the Appendix, Figure A1).
(6) Do not hesitate to expand the tree to connect other UDEs that exist but
were not included in the original UDE list.
(7) Present the tree to someone or a group who will help you surface and
challenge the assumptions captured within.
(8) Decide that the CRT is complete. Identify the core problem or problems.
 IJPDLM A simple example. A simple storage problem is chosen to illustrate how a CRT
32,10 is constructed. The UDEs of the problem (adapted from Noreen et al. (1995) are
presented below:
(1) Note enough space in the store.
(2) Too much make-to-stock inventory.
814 (3) Items piled up waiting to be stored.
(4) Cycle times are longer than necessary.
The corresponding CRT is presented in Figure 2.
Suppose the management of a company is concerned with problems in a
warehouse and have identified four UDEs. These UDEs can be used to
construct a CRT in order to deduce possible causes. The management believes
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

that the lack of space in the warehouse (UDE1) is due to excess inventories that
resulted from making parts to stock (UDE2) and items being stockpiled prior to
storage (UDE3). So, UDE2 and UDE3 were connected to UDE1. The reason for
UDE3 happening is suggested to be due to parts being delivered to the
warehouse in large quantities as well as a result of delivery schedules not
matching the rate of usage. (This has been identified in Figure 2 as R1, which is
simply a reference number and has no significance). R1 is, therefore, connected
to UDE3 and is read ``if R1 then UDE3''. Management suggested that the main
reason why parts were delivered in too large quantities (R1) was that work
orders were larger than division's needs (R2). It was also suggested that cycle

Figure 2.
A current reality tree
 times were longer than necessary (UDE4) and that UDE2 was related to the size Constraints'
of the work order (R2). Therefore, R2 was connected to R1, UDE2 and UDE4. thinking process
Note that of all the UDEs and Rs only UDE1 is linked to two UDEs (UDE2 and approach
UDE3). This must be read with a ``logical AND''. Thus, the relationship between
UDE1, UDE2, and UDE3 should be read as follows: if there are excess
inventories that result from making parts to stock (UDE2) and items that are
piled up waiting to be stored (UDE3), then there is not enough space in the 815
warehouse (UDE1).
The tree was constructed starting with the UDEs and working down
(Figure 2). However, the tree should be read ``bottom-up''. The management
confirmed that the tree (Figure 2) represented the issue at hand and identified
R2 (work orders are often larger than division's needs) as the core problem.
In this example the process of building the CRT was illustrated using a
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

simple problem. It has to be remembered that TP should be applied only in a

complex problem situation where a solution is not intuitive and the
relationships between effects and causes are not clear.

Developing strategies in supply chains using TP

Group model building process
Today's global business environment is characterised by expanding foreign
markets, comprehensive information networks, improved transportation, higher
customer expectations, and high wage-rates. Effective and efficient supply
chain management offers a means of gaining competitive advantage in an
environment increasingly characterised by fierce competition and uncertainty.
Shimchi-Levi et al. (2000, p. 1) defined supply chain management as:
. . . a set of approaches utilised to efficiently integrate suppliers, manufacturers, warehouses,
and stores, so that merchandise is produced and distributed at the right quantities, to the
right locations, and at the right time, in order to minimise system-wide costs while satisfying
service level requirements.

Thus the objective of supply chain management is to increase efficiency and

minimise costs across the entire supply chain. Identification and application of
appropriate supply chain performance metrics are critical to the success of
supply chains.
Students undertaking a course in international logistics management at the
Institute of Transport Studies (ITS), University of Sydney, were invited to
participate in a group-based model building exercise in supply chains. The
purpose of this exercise was to:
. identify the consequences (effects) of failing to organise and run efficient
supply chains;
. determine possible causes of these consequences; and
. develop causal relationships between causes and effects.
The course was offered in February 2001 and was taught by the author of this
paper in an intensive mode. A total of 44 students who enrolled in this course
 IJPDLM were pursuing masters degrees in either logistics management or e-commerce
32,10 at the University of Sydney. About 35 percent were international students and
the rest were local students. Some 15 percent of the students had very little or
no experience, 40 percent had two to five years experience and about 45 percent
had more than five years of experience. Two students had more than 20 years
of experience. About 35 percent of the students had experience with logistics
816 companies. About 30 percent of the students took a logistics management
course prior to taking the international logistics management course.
Six groups were formed. Although it was difficult, a conscious attempt was
made to ensure that groups were composed of both local and international
students, with moderate and extensive experience as well experience with
logistics organizations.
The group-based model building exercise was run in two sessions. In the
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

first session, students used nominal group technique (NGT) to brainstorm the
problem and identify five to ten UDEs of failing to organise and run an efficient
supply chain. Groups then identified factors most likely to cause such effects
and developed cause-effect relationships in the form of a casual diagram.
The actual models were developed in the second session. The TP was
applied to develop the casual relationship between causes and effects. Since the
students had no prior knowledge of TP and its analytical tools such as the
CRT, the author of this paper developed the causal trees on white board with
feedbacks and suggestions agreed by the groups.

Results of the brainstorming sessions

The number of UDEs identified by these groups in the first session of the
exercise ranged between four and eight. The first task in the second session
was to decide which UDEs were to be considered for the model building
process. The groups agreed on the following UDEs:
. long cycle time;
. high cost of managing inventory;
. low customer service;
. high distribution cost;
. high cost of supply chain.
It is interesting to notice that the list of identified UDEs can be considered as
the main performance metrics of supply chains and include both cost and
non-cost measures. Many authors have suggested these items as measures of
performance in supply chain models (Lee and Billington, 1992; Christopher,
1998; Mason-Jones and Towill, 1999).
The branches of the CRT were developed choosing one UDE at a time at
random and following the guidelines mentioned earlier. When all the UDEs
were considered and branches were constructed, these branches were put
together and developed into a CRT for the entire supply chain system. The
following paragraphs discuss the construction of each of the branches.
 High inventory management cost Constraints'
The groups identified high inventory management costs as one of the major thinking process
consequences of failing to organise and execute an efficient supply chain. approach
Overstock and understock of inventory were considered to be the root causes of
this problem. Inventory management costs generally account for a significant
percentage of total business costs. For a typical retail company, inventory can
account for 10 to 20 percent of product cost. Given these high costs, production 817
technologies and strategies developed over the last four decades, such as MRP,
JIT and TOC, have been heavily focused on managing inventory. The major
causes for high inventory cost were identified in the second session to be lack of
communication, long cycle times and low usage of information technologies
(IT). The CRT is shown in Figure 3.
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

Long cycle time

The criticality of cycle time or delay in a supply chain (including both product
flow time and information flow time) was highlighted by Forrester (1958) some
40 years ago. Recently, Stalk and Hout (1990) and Mason-Jones and Towill
(1999) have emphasised the importance of reduction of total cycle time. In order
to avoid what is now called ``bullwhip effect'' (Lee et al., 1997) or ``Forrester
effect'' (Hines et al., 2000), total cycle time must be reduced by improved

Figure 3.
Causal relationships
based on inventory
management cost
 IJPDLM coordination and communication among supply chain partners and by aligning
32,10 product-process design with appropriate supply chain structure (see Figure 4).

Low customer satisfaction

Although cost is the performance measure of choice for many supply chains,
one must realise that cost alone might not be adequate to describe system
818 performance. During the second session, the group identified low level of
customer satisfaction, a non-cost type of supply chain performance measure, as
one of the UDEs. There are several ways to measure customer satisfaction in
supply chains, such as responsiveness (Lee and Billington, 1993) and flexibility
(Voudouris, 1996). Long cycle times adversely affect responsiveness and
flexibility in a supply chain and this ultimately affects customer satisfaction
(see Figure 5).
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

Management may define customer service as inadequate due to a lack of

appreciation of the performance of the supply chain as a whole, which in turn
may affect customer satisfaction (Lee and Billington, 1992). Lack of
environmental appreciation on the part of the companies can also lead to
customer dissatisfaction (see Figure 6).

High distribution cost

Lack of coordination contributes to low levels of integration across supply
chains, which in turn affects distribution costs (see Figure 7).

Figure 4.
Causal relationships
based on cycle time
 Constraints'
thinking process
approach

819
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

Figure 5.
Causal relationships
based on customer
satisfaction

Figure 6.
Causal relationships
based on customer
satisfaction

High cost of supply chain

The cost of supply chains is an aggregation of inventory management cost,
distribution cost, and costs resulting from lack of environmental policies (see
Figure 8). Inventory costs can be reduced by compressing lead times,
appropriately adopting IT, and improving communication with the partners of
the supply chain. A synchronised supply chain based on common goals among
partner organizations ensures lower distribution cost, whereas lack of product
 IJPDLM retake policy contributes to expenses through increasing resource costs and
32,10 losses in market share (Vandermerwe and Oliff, 1990).

Discussion
This research not only identified elements of successful SCM but also
developed the causal relationships between these elements. Understanding
820 the dynamic nature of the supply chain through cause and effect relationships
is critical to the formulation of supply chain growth strategies. For instance,
consider the case of ``long cycle times'' shown in Figure 4. The cause and
effect diagram in Figure 4 identified cycle time as an element of successful
SCM and the following two factors or ``paths'' show the main causes of this
problem:
Path I. No appreciation for SC-wide performance ! product-process
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

design without SC consideration ! product unavailability ! long

cycle time.
. Path II. Lack of trust ! no common goals ! lack of coordination !
low synchronised supply chain ! long cycle time.

Figure 7.
Causal relationships
based on distribution
cost

Figure 8.
Causal relationships
based on cost of supply
chain
 Problems like long cycle times are influenced by complex inter-relationships Constraints'
between many factors. With a better understanding of these relationships, thinking process
managers would be able to devise strategies for further improvement and approach
growth in supply chains.
During the second session of the group-based model building exercise, two
important aspects of SCM emerged which were not identified during the
nominal group discussions. These are supply base management and 821
environmental policy. The following subsections will describe the impact of
these two aspects of SCM and develop branches for the CRT.

Supply base management

Low supply base management is the result of lack of common goals among the
partner organizations in supply chains. Mistrust is likely to be a result of not
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

sharing information as well as unwillingness to share risks and rewards (see

Figure 9). The importance of supply base management on supply chain
performance has been reported for many companies. Recently, Shin et al. (2000)
suggested that better supply base orientation improves both the suppliers' and
buyers' performance. The critical elements that improve the supply base
management among organizations are long-term partnerships with channel
participants (Choi and Hartley, 1996; De Toni and Nassimbeni, 1999), reducing
the number of suppliers (Dyer, 1996; Hahn et al., 1983; Kekre et al., 1995),
sharing risks and rewards (Handfield and Nicholas, 1999), involving suppliers
in product development (Dyer, 1994), developing trust among channel partners
(Newman, 1988).

Figure 9.
Causal relationships
based on supply base
management
 IJPDLM Environmental policy
32,10 Inadequate environmental policy can result in a number of adverse effects.
These can include direct effects on costs of running businesses through low
usage of recycled resources and indirect effects of degrading the local and
global environment on customer satisfaction and market share (see Figure 10).
Today, many researchers are in agreement that the environment makes good
822 business sense and is an opportunity rather than a threat (Porter and Van der
Linde, 1995; Shivastava, 1995; Hutchinson, 1996). A number of case studies
have demonstrated that that there is compatibility between environmental and
business goals (see Eden, 1994). By considering the environment in the design
stage of its products, Xerox improved its ability to recover and reuse parts for
future equipment. Implementing an end-of-life equipment take-back policy,
Xerox's European operations saved over $80 million in 1997 (Maslennikova
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

and Foley, 2000). Recently, several European countries have enforced

environmental legislation, making producers responsible to take back products
at the end of their life cycles (Cairncross, 1992).
Pressure to consider environmental aspects from legislation is not the only
concern for companies. A ``green'' image has become an important marketing
opportunity. Thus, it is imperative for companies to revisit their supply chain
performance metrics in response to growing external institutional pressure and
customers' environmental requirements.

The big picture

The conceptual CRT map developed during the group model building exercise
is shown in Figure 11. In addition to the five UDEs identified by the groups,

Figure 10.
Causality due to lack of
product retake policy
 Constraints'
thinking process
approach

823
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

Figure 11.
A CRT for a supply
chain system
 IJPDLM four other UDEs were identified during the model building exercise. These are
32,10 responsiveness, flexibility in the supply chain, incomplete orders, and
percentage of products recovered, recycled and reused. All four measures are
non-cost measures of supply chain performance and are related to customer
satisfaction.
Responsiveness and incomplete orders have frequently been suggested in
824 the literature as measures for supply chain performance (Altiok and Ranjan,
1995; Cook and Rogowski, 1996). Responsiveness can be considered as
response time and on-time delivery, whereas incomplete orders can be
considered as fill rate (Beamon, 1999).
Measures such as flexibility, and recovery and reuse rates are seldom used
in supply chain analysis. Flexibility can measure a supply chain's ability to
accommodate variety, volume and schedule fluctuations from the chain
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

participants such as suppliers, producers, and customers. Since the supply

chain exists in an uncertain environment, Beamon (1999, p. 284) emphasised
that ``flexibility is vital to the success of the supply chain''. The use of recovery
and reuse rate as a measure of supply chain performance is a recent
phenomenon (Maslennikova and Foley, 2000). The EU Producers
Responsibility Obligations (packaging waste) Regulation, 1996, is required to
ensure that companies recover 60 percent of packaging waste by 2001
(McIntyre et al., 1998). Researchers identified two types of motivation for
companies to engage in product take-back process:
(1) economical; and
(2) environmental (Fleischmann et al., 1997).
These issues are intertwined, as ``increasing disposal costs make waste
reduction more economical, and environmentally conscious customers
represent new market opportunities'' (Fleischmann et al., 1997, p. 3).
The core problem appears to be with management (Figure 11). Owing to
their limited vision, the management of many organizations fails to see and
appreciate the importance of system-wide performance measures. Several
other factors (causes) which may affect the performance of supply chains
are:
. communication;
. trust among channel participants;
. investment and usage of IT;
. common goals;
. coordination;
. product-process design without supply chain consideration;
. lack of appreciation for supply chain wide performance measures;
. sharing risks and rewards;
. supply base orientation, inadequate definition of customer service.
 Many empirical and case studies have identified these factors. For instance, Constraints'
Power et al. (2001) found that ``more agile'' supply chains are more customer thinking process
focused, have greater involvement with suppliers and better utilise IT approach
compared to the ``less agile'' supply chains. Many have suggested channel-wide
management of inventories, coordination, shared visions, reduced supplier
base (Cooper and Ellram, 1993; Shin et al., 2000), and fair sharing of risks and
rewards (Handfield and Nichols, 1999) as characteristics of integrated supply 825
chain management.

Conclusion
To date, most of the studies undertaken on supply chain management have
focused on a wide range of issues and are generally quantitative in nature. This
research applied a qualitative approach not only to identify the critical success
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

factors in a supply chain, but also the causal relationships between these
factors. Management can use these relationships to develop growth strategies
for their companies. However, these relationships need to be tested by large-
scale empirical studies.
References
Altiok, T. and Ranjan, R. (1995), ``Multi-stage, pull-type production/inventory systems'', IIE
Transactions, Vol. 27 No. 2, pp. 190-200.
Anderson, R.D., Jerman, R.E. and Crum, M.R. (1998), ``Quality management influences on
logistics performance'', Transportation Research Part E, Vol. 34 No. 2, pp. 137-48.
Beamon, B.M. (1999), ``Measuring supply chain performance'', International Journal of Operations
and Production Management, Vol. 19 No. 3, pp. 275-92.
Brewer, A. and Hensher, D. (2001), ``Identifying the overarching logistics strategy of business
processes: an exploratory analysis'', International Journal of Logistics: Research and
Applications, Vol. 4 No. 1, pp. 1-41.
Cairncross, F. (1992), ``How Europe's companies reposition to recycle'', Harvard Business Review,
March-April, pp. 34-45.
Choi, T.Y. and Hartley, J.L. (1996), ``Supplier development: customers as a catalyst of process
change'', Business Horizons, July-August, pp. 37-44.
Christopher, M. (1998), Logistics and Supply Chain Management: Strategies for Reducing Cost
and Improving Service, 2nd ed., Prentice-Hall, London.
Cook, R.L. and Rogowski, R.A. (1996), ``Applying JIT principles to continuous process
manufacturing supply chains'', Production and Inventory Management Journal, First
Quarter, pp. 12-17.
Cooper, M.C. and Ellram, L.M. (1993), ``Characteristics for supply chain management and the
implications for purchasing and logistics strategy'', Journal of Logistics Management,
Vol. 4 No. 2, pp. 13-24.
Cox, J.F. and Spenser, M.S. (1998), The Constraints Handbook, St Lucie Press/APICS Series on
Constraints Management, Boca Raton, FL.
Cross, D.J., Goldsby, T. and Clinton, S.R. (1997), ``Information technology influences on world
class logistics capability'', International Journal of Physical Distribution & Logistics
Management, Vol. 27 No. 1, pp. 4-17.
Deming, E. (1986), Out of the Crisis, MIT, Cambridge, MA.
 IJPDLM De Toni, A. and Nassimbeni, G. (1999) ``Just-in-time purchasing: an empirical study of operational
practices, supplier development and performance'', Omega, Vol. 28 No. 6, pp. 631-51.
32,10 Dettmer, H.W. (1997), Goldratt's Theory of Constraints: A System Approach to Continuous
Improvement, ASQC Quality Press, Milwaukee, WI.
Dyer, J.H. (1994), ``Dedicated assets: Japan's manufacturing edge'', Harvard Business Review,
November-December, pp. 174-8.
826 Dyer, J.H. (1996), ``How Chrysler created an American keiretsu'', Harvard Business Review, July-
August, pp. 42-56.
Eden, S.E. (1994), ``Using sustainable development ± the business case'', Global Environment
Change, Vol. 4 No. 2, pp. 160-7.
Ellinger, A.E., Daugherty, P.J. and Plair, Q.J. (1999), ``Customer satisfaction and loyalty in supply
chain: the role of communication'', Transport Research Part E, Vol. 35, pp. 121-34.
Fleischmann, M., Bloemhof-Ruwaard, J.M., Dekker, R., Van der Laan, E., Van Nunen, J.A.E.E.
and Van Wassenhove, L.N. (1997), ``Quantitative models for reverse logistics: a review'',
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

European Journal of Operational Research, Vol. 103, pp. 1-17.

Forrester, J. (1958), ``Industrial dynamics: a major breakthrough for decision makers'', Harvard
Business Review, July August, pp. 37-66.
Forrester, J. (1961), Industrial Dynamics, MIT Press, Cambridge, MA.
Goldratt, E.M. (1980), ``Optimized production timetable: beyond MRP: something better is finally
here'', paper presented at APICS 23rd Annual International Conference Proceedings.
Goldratt, E.M. (1988), ``Computerized shop floor scheduling'', International Journal of Production
Research, Vol. 26 No. 3, pp. 443-55.
Goldratt, E.M. (1990), What Is this Thing Called Theory of Constraints and How Should It Be
Implemented?, North River Press, New York, NY.
Goldratt, E.M. (1994), It's Not Luck, Gower, Aldershot.
Goldratt, E.M. and Cox, J. (1984), The Goal: An Ongoing Improvement Process, Gower, Aldershot.
Goldratt, E.M. and Fox, J. (1986), The Race, North River Press, New York, NY.
Hahn, C.K., Pinto, P.A. and Bragg, D.J. (1983), ```Just-in-time' production and purchasing'', Journal
of Purchasing and Materials Management, Vol. 19 No. 3, pp. 2-10.
Handfield, R. and Nichols, E. Jr (1999), Introduction to Supply Chain Management, Prentice-Hall,
Englewood Cliffs, NJ.
Hines, P., Lamming, R., Jones, D., Cousins, P. and Rich, N. (2000), Value Stream Management:
Strategy and Excellence in the Supply Chain, Prentice-Hall, London.
Holmes, G. (1995), Supply Chain Management: Europe's New Competitive Battleground, EIU
Research Report.
Hutchinson, C. (1996), ``Integrating environment policy with business strategy'', Long Range
Planning, Vol. 29 No. 1, pp. 11-26.
Juran, J.M. (1992), Juran on Quality by Design, Free Press, New York, NY.
Kekre, S., Murthi, B.P.S. and Srinivasan, K. (1995), ``Operating decisions, supplier availability and
quality: an empirical study'', Journal of Operations Management, Vol. 12 No. 3/4,
pp. 387-96.
Kendall, G.I. (1998), Securing the Future: Strategies for Exponential Growth Using the Theory of
Constraints, St Lucie Press/APICS Series on Constraints Management, Boca Raton, FL.
Lee, H.L. and Billington, C. (1992), ``Managing supply chain inventory: pitfalls and opportunities'',
Sloan Management Review, Vol. 33, pp. 65-73.
Lee, H.L. and Billington, C. (1993), ``Material management in decentralized supply chains'',
Operations Research, Vol. 41 No. 5, pp. 835-47.
 Lee, H.L., Billington, C. and Carter, B. (1993), ``Hewlett Packard gains control of inventory and Constraints'
service through design for localisation'', Interfaces, Vol. 23, July-August, pp. 1-11.
Lee, H.L., Padmannabhan, V. and Whang, S. (1997), ``The bullwhip effect in supply chains'', Sloan
thinking process
Management Review, Vol. 38 No. 3, pp. 93-102. approach
McIntyre, K., Smith, H.A., Henham, A. and Pretlove, J. (1998), ``Logistics performance
measurement and greening supply chains: diverging mindsets'', International Journal of
Logistics Management, Vol. 9 No. 1, pp. 57-68.
Magretta, J. (1998), ``Fast, global, and entrepreneurial: supply chain management, Hong Kong
827
style: an interview with Victor Fung'', Harvard Business Review, September-October,
pp. 103-14.
Maslennikova, I. and Foley, D. (2000), ``Xerox's approach to sustainability'', Interfaces, Vol. 30
No. 3, pp. 226-33.
Mason-Jones, R. and Towill, D.R. (1999), ``Total cycle time compression and the agile supply
chain'', International Journal of Production Economics, Vol. 62, pp. 61-73.
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

Monczka, R., Peterson, K., Handfield, R. and Ragatz, G. (1998), ``Determinants of successful vs
non-successful strategic supplier alliances'', Decision Sciences, Vol. 29 No. 3, pp. 553-77.
Monden, Y. (1981), ``What makes the Toyota production system really tick'', Journal of Industrial
Engineering, January, pp. 36-46.
Newman, R.G. (1988), ``The buyer-supplier relationship under just-in-time'', Production and
Inventory Management Journal, Vol. 29 No. 3, pp. 45-50.
Noreen, E., Smith, D. and Mackey, J. (1995), The Theory of Constraints and Its Implications for
Management Accounting, North River Press, MA.
Orlicky, J. (1975), Material Requirement Planning, McGraw-Hill, New York, NY.
Porter, M. and Van der Linde, C. (1995), ``Green and competitive: ending the stalemate'', Harvard
Business Review, September, pp. 120-34.
Power, D., Sohal, A.S. and Rahman, S. (2001), ``Critical success factors in agile supply chain
management: an empirical study'', International Journal of Physical Distribution &
Logistics Management, Vol. 31 No. 4, pp. 247-65.
Rahman, S. (1998), ``Theory of constraints ± a review of the philosophy and its application'',
International Journal of Operations and Production Management, Vol. 18 No. 4, pp. 336-55.
Shin, H., Collier, D.A. and Wilson, D.D. (2000), ``Supply management orientation and supply/
buyer performance'', Journal of Operations Management, Vol. 18, pp. 317-33.
Shrivastava, P. (1995), ``Environmental technologies and competitive advantage'', Strategic
Management Journal, Vol. 16, pp. 183-200.
Shimchi-Levi, D., Kaminsky, P. and Shimchi-Levi, E. (2000), Designing and Managing the Supply
Chain: Concepts, Strategies, and Case Studies, McGraw-Hill International Edition,
Singapore.
Stalk, G. and Hout, T. (1990), Competing against Time, Free Press, London.
Tan, K., Kannan, V.R., Handfield, R.B. and Ghosh, S. (1999), ``Supply chain management: an
empirical study of its impact on performance'', International Journal of Operations and
Production Management, Vol. 19 No. 10, pp. 1034-52.
Vandermerewe, S. and Oliff, M.D. (1990), ``Customer drive corporations green'', Long Range
Planning, Vol. 23 No. 6, pp. 10-16.
Voudouris, V.T. (1996), ``Mathematical programming techniques to debotteneck the supply chain
of fine chemical industries'', Computers and Chemical Engineering, Vol. 20, Part B,
pp. 1269-74.
Womack, J.P. and Jones, D.T. (1996), Lean Thinking, Simon and Schuster, New York, NY.
 IJPDLM Appendix
32,10

828
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

Figure A1.
Categories for legitimate
reservations
 This article has been cited by:

1. Tillmann Böhme, Sharon J. Williams, Paul Childerhouse, Eric Deakins, Denis Towill. 2015. Causes,
effects and mitigation of unreliable healthcare supplies. Production Planning & Control 1-14. [CrossRef]
2. Thawani Mpatama Sanjika, Carel Nicoolas Bezuidenhout. 2015. A primary influence vertex approach to
identify driving factors in complex integrated agri-industrial systems – an example from sugarcane supply
and processing systems. International Journal of Production Research 1. [CrossRef]
3. Tillmann Böhme, Eric Deakins, Matthew Pepper, Denis Towill. 2014. Systems engineering effective
supply chain innovations. International Journal of Production Research 52, 6518-6537. [CrossRef]
4. Mansoureh Abdi, Alireza Hasanzadeh, Ali-Asghar Fani, Seyed Hassan Ghodsi Poor. 2014. Exploring the
bottleneck of Iran's national innovation system by TOC thinking process. Technological and Economic
Development of Economy 20, 601-623. [CrossRef]
5. Xiaofeng Zhao, Jianrong Hou. 2014. Analyzing the time buffer in the Theory of Constraints based lean
operations. Journal of Management Analytics 1, 185-199. [CrossRef]
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

6. Andrew C. Lyons, Azanizawati Ma’aram. 2014. An examination of multi-tier supply chain strategy
alignment in the food industry. International Journal of Production Research 52, 1911-1925. [CrossRef]
7. Silvia Inês Dallavalle de Pádua, Janaina Mascarenhas Hornos da Costa, Mayara Segatto, Melchior Aparecido
de Souza Júnior, Charbel José Chiappetta Jabbour. 2014. BPM for change management: two process
diagnosis techniques. Business Process Management Journal 20:2, 247-271. [Abstract] [Full Text] [PDF]
8. Janaina M.H. Costa, Henrique Rozenfeld, Creusa Sayuri Tahara Amaral, Ricardo M. Marcacinit, Solange
Oliveira Rezende. 2013. Systematization of Recurrent New Product Development Management Problems.
Engineering Management Journal 25, 19-34. [CrossRef]
9. Hilmi YükselApplication of Theory of Constraints’ Thinking Processes in a Reverse Logistics Process
97-112. [CrossRef]
10. Ying-Chyi Chou, Ching-Hua Lu, Ya-Yun Tang. 2012. Identifying inventory problems in the aerospace
industry using the theory of constraints. International Journal of Production Research 50, 4686-4698.
[CrossRef]
11. Jianqing ChenWorkshop Scheduling for Order Change of Machinery Enterprises 1033-1035. [CrossRef]
12. Jinlou Zhao, Xinliang Xu, Yuting Zhao, Zhenzhong ZhangThe KPI-based Interface Design of Hull Block
Fabrication Process Optimization System 108-112. [CrossRef]
13. Jennifer Blackhurst, Kaitlin S. Dunn, Christopher W. Craighead. 2011. An Empirically Derived
Framework of Global Supply Resiliency. Journal of Business Logistics 32:10.1111/jbl.2011.32.issue-4,
374-391. [CrossRef]
14. Xin-liang XuHull subsection production crisis early warning system design based on the KPI 118-122.
[CrossRef]
15. C. KasemsetA review on quality improvement and Theory of Constraints (TOC) 327-330. [CrossRef]
16. Fernando Bernardi de Souza, Sílvio R.I. Pires. 2010. Theory of constraints contributions to outbound
logistics. Management Research Review 33:7, 683-700. [Abstract] [Full Text] [PDF]
17. R. Anthony Inman, Martha Lair Sale, Kenneth W. Green Jr. 2009. Analysis of the relationships
among TOC use, TOC outcomes, and organizational performance. International Journal of Operations &
Production Management 29:4, 341-356. [Abstract] [Full Text] [PDF]
 18. Jian Cai, Xiangdong Liu, Zhihui Xiao, Jin Liu. 2009. Improving supply chain performance management:
A systematic approach to analyzing iterative KPI accomplishment. Decision Support Systems 46, 512-521.
[CrossRef]
19. Archie Lockamy III. 2008. Examining supply chain networks using V‐A‐T material flow analysis. Supply
Chain Management: An International Journal 13:5, 343-348. [Abstract] [Full Text] [PDF]
20. Seonmin Kim, Victoria Jane Mabin, John Davies. 2008. The theory of constraints thinking processes:
retrospect and prospect. International Journal of Operations & Production Management 28:2, 155-184.
[Abstract] [Full Text] [PDF]
21. Pierre Hadaya, Luc Cassivi. 2007. The role of joint collaboration planning actions in a demand‐driven
supply chain. Industrial Management & Data Systems 107:7, 954-978. [Abstract] [Full Text] [PDF]
22. Kevin J. Watson, John H. Blackstone, Stanley C. Gardiner. 2007. The evolution of a management
philosophy: The theory of constraints. Journal of Operations Management 25, 387-402. [CrossRef]
23. Hilma Raimona Zadry, Sha'ri Mohd Yusof. 2006. Total Quality Management and Theory of Constraints
Implementation in Malaysian Automotive Suppliers: A Survey Result. Total Quality Management &
Downloaded by RMIT University At 11:06 01 December 2015 (PT)

Business Excellence 17, 999-1020. [CrossRef]

24. Shams‐ur Rahman. 2006. Quality management in logistics: an examination of industry practices. Supply
Chain Management: An International Journal 11:3, 233-240. [Abstract] [Full Text] [PDF]
25. Amit Sachan, Subhash Datta. 2005. Review of supply chain management and logistics research.
International Journal of Physical Distribution & Logistics Management 35:9, 664-705. [Abstract] [Full Text]
[PDF]
26. Guy Lubitsh, Christine Doyle, John Valentine. 2005. The impact of theory of constraints (TOC) in an
NHS trust. Journal of Management Development 24:2, 116-131. [Abstract] [Full Text] [PDF]
27. B. Esra Aslanertik. 2005. Model‐supported supply chains for cost‐efficient intelligent enterprises. Journal
of Manufacturing Technology Management 16:1, 75-86. [Abstract] [Full Text] [PDF]
28. Shams RahmanThe Theory of Constraints 136-156. [CrossRef]

View publication stats