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Combining the theory of constraints with systemdynamics: A general model (case study of thesubsidized milk industry)Hossein Mohammadia, Mehdi Ghazanfaria, Hamed Nozaria & Omid Shafiezada

a Department of Industrial Engineering, Iran University of Science and Technology,Tehran, IranPublished online: 29 May 2014.

To cite this article: Hossein Mohammadi, Mehdi Ghazanfari, Hamed Nozari & Omid Shafiezad (2014): Combining thetheory of constraints with system dynamics: A general model (case study of the subsidized milk industry), InternationalJournal of Management Science and Engineering Management, DOI: 10.1080/17509653.2014.920123

To link to this article: http://dx.doi.org/10.1080/17509653.2014.920123

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Combining the theory of constraints with system dynamics: A general model(case study of the subsidized milk industry)*

Hossein Mohammadi*, Mehdi Ghazanfari, Hamed Nozari and Omid Shafiezad

Department of Industrial Engineering, Iran University of Science and Technology, Tehran, Iran

(Received 2 February 2013; final version received 8 January 2014)

This article discusses multi-methodology approaches. The authors explain that multi-methodology approaches assist increating a complementary understanding of complexity through specific processes. A new Mohammadi–Ghazanfari modelis proposed for combining the theory of constraints with systems dynamics to deal with soft problems. This model consistsof two phases. The first phase is the appreciation and analysis of the problem. The second phase includes assessment andevaluation actions. The first phase is described using a subsidized milk industry study in Iran.

Keywords: theory of constraints; thinking process; system dynamics; evaporating clouds; causal loop diagrams

JEL Classification: I0; L0; P0; Q0

1. Introduction

The development of multi-methodology approaches has

received attention over recent years. In this paper, we look

to display how the unique tools, methods and method-

ologies known as the Theory of Constraints (TOC) can be

accommodated to make perfect the System Dynamics (SD).

The TOC is a management philosophy first introduced by

Goldratt and Cox (1984) in their book ‘The goal’. As a

result, the current theory is based on the idea that every

system has a few limitations to achieving its goals and that

there is always at least one limitation in any system. The

TOC is composed of a considerable body of knowledge

which may be summarized as including operations strategy

tools, performance measurement systems, and Thinking

Process (TP) tools (Gupta, 2003). The TOC method for

identifying and solving organizational problems is called

TP. TP tools include the various tree diagrams, evaporating

clouds, and audit processes/guidelines such as categories of

legitimate reservation and layers of resistance (Dettmer,

1997; Scheinkopf, 1999; Smith, 2000). The TOC approach

in change management requires answering three essential

questions (see Table 1).

The Theory of Constraints Thinking Process (TOCTP)

involves a set of six logical tools that create a structure for

understanding the current situation of organizations and

projects, and for determining the optimal strategy to

achieve the desired goals. Goldratt (1990) outlined that

there are two approaches to finding root causes: the first is

the typical CRT approach and the second is the EC

approach. An EC diagram is a conflict statement with a

common objective but no apparent solution. Next consider

whether the injections will direct desirable effects. With

the injections and the logical cause-and-effect relation-

ships, the desired effects can be connected and the future

outcome will be developed. This technique is called

building the future reality tree. The prerequisite tree gives

a plan for implementing the solution found in the previous

step. In fact, the PRT is a logical tool for determining

the barriers preventing the implementation of existing

solutions. The prerequisite tree uses the required logic

and alternatively asks ‘What is absolutely needed?’ Also,

the goal in TRT is the implementation of change.

The applications of the TOC philosophy and TOCTP are

classified in Table 2.

Systems Dynamics (SD), originally known as ‘indus-

trial dynamics’, is a creation of Jay Forrester in the 1960s

at the Massachusetts Institute of Technology (Forrester,

1961). SD aims to predict the behavior of a system, and for

doing this it depends on the use of a model which must

contain the complication of a complex structure and the

various feedback loops that link each element within that

structure (Nuhoglu, 2010). The SD process follows three

stages, which can be summarized as follows.

(a) Understanding the situation/problem definition.

(b) Model conceptualization/model building.

(c) Running the simulation model/using the results.

In general, papers that studied the combination of TOC

with SD are summarized in Table 3.

The newly proposed model consists of two phases. The

first phase is the appreciation and analysis of the problem.

The second phase includes the assessment and evaluation

actions. The first phase of the Mohammadi–Ghazanfari

(M-G) model using the subsidized milk industry study is

explained. The implementation of the second phase is

beyond the scope of this article. There are two important

issues about the appreciation and analysis of the problem.

First, the roots of conflicts within the problem will be

detected. Second, the variables and their impact on

each other will be identified in order to understand the

problem better. These issues have been investigated by

q 2014 International Society of Management Science and Engineering Management

*Corresponding author. Email: Hossein_mohammadi@ind.iust.ac.ir; Tel: þ 98-912-7972574; Fax: þ 98-21-88782485

International Journal of Management Science and Engineering Management, 2014

http://dx.doi.org/10.1080/17509653.2014.920123

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the Evaporating Clouds (EC) and Causal Loop Diagram-

ming (CLD) tools.

In this paper, we propose a general M-G model for

combining the TOCTP with SD to deal with soft issues.

To do this at the practitioner level, the necessity for clarity

about the characteristics, ability to replace or comple-

mentarity of different methodologies has been addressed

by the progression of systematically arranging systems and

frameworks. Here, we use the work of Mingers (1997a,

1997b, 2000, 2003) and Mingers and Brocklesby (1997).

We look for how the particular methods known as

TOCTP can be used to complement CLD.Wemap conflicts

in the subsidized milk industry by EC. Modeling the

problem situation as an EC diagram not only emphasizes

the acceptance of the systems perspective, but also

describes the assumptions that underpin conflicts in EC.

Next, according to the knowledge gained through drawing

EC, CLD is drawn. This diagram presents relationships that

are difficult to describe verbally, because normal language

presents interrelations in linear cause-and-effect chains,

while the diagram shows that the actual system has circular

chains of cause-and-effect. We choose here to draw

attention to how TOC methods may complement those of

SD in building an understanding of the problem situation.

However, for combining two tools, the philosophical

foundation of Mabin, Davies, and Cox (2006) has been

applied. In particular, the items that distinguish this paper

can be summarized as follows.

(1) Proposed generalmodel ofM-G that shows combining

TOC with SD.

(2) Defining the problem of the subsidized milk industry

in Iran as a soft problem.

Table 1. Thinking process steps.

Tools of the logical thinking process Change step

Current Reality Tree (CRT),Evaporating Clouds (EC)

What to change?

Future Reality Tree (FRT),Negative Branch Reservation (NBR)

What to change to?

Prerequisite Tree (PRT),Transition Tree (TRT)

How to cause the change?

Table 3. Combined approach: TOC with SD.

References EC/CRT DBRsPerformancemeasurement FRT/NBR PRT/TRT CLR CLD

Simulationmodel/flow diagram

Sterman, Forrester, Graham, and Senge (1983) † †Reid and Koljonen (1999) † † † †Davies, Mabin, and Cox (2004) † † †Mabin et al. (2006) † † †Wixson and Mills (2003) † †Politou and Georgiadis (2008) † †Sadat (2009) † † †Latorre, Roberts, and Riley (2010) † †

Table 2. Application of the TOC philosophy and TOCTP.

References EC CRT FRT NBR PRT TRT CLRTOCperspective Review Case study

Reid and Cormier (2003) † † † † Mexican food restaurantScoggin, Segelhorst, and Reid (2003) † † † † Organization’s production facilityChaudhari and Mukhopadhyay (2003) † † † Poultry industryRitson and Waterfield (2005). † † † † † † Mental health servicesWalker and Cox (2006) † † Large service companyUmble, Umble, and Murakami (2006) † † Hitachi tool engineeringLloyd, Taylor, andThomas (2008)

† † † † Invoicing system of an oil andgas firm

Lacerda, Cassel, and Rodrigues (2010) † † Institution of Higher EducationChou, Lu, andTang (2012)

† † † Electronic operational processfor sales

Dalci and Kosan (2012) † † † Hotel managementRahman (1998) †Blackstone (2001) †Watson, Blackstone, andGardiner (2007)

†Kim, Mabin, and Davies (2008) †Gupta and Snyder (2009) †Reid (2007) †Fekri, Shafiabady, Nooranipour,and Ahghar (2012)

†Naor, Bernardes, and Coman (2013) †Tsou (2013) †Zhao, Feng, Chu, and Ma (2014) †

H. Mohammadi et al.2

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(3) Application of CLDs – part of SD and EC – tools of

TOCTP in the problem of the subsidizedmilk industry

for the appreciation and analysis of the problem.

2. M-B frameworks for mapping and classifying

methodologies

Using a two-dimensional grid mapping the appropriateness

of different methodologies in different contexts, a

foundation for linking the methodology to problem content

and problem-solving activity can be provided by the

original M-B framework. The first dimension is regarding

the problem domain, particularly the nature of the world

being examined – be it social, personal or material – and

the second relates to the methodology, particularly the

conceptually distinct but highly related phases of

‘intervention’. Phases of intervention are depicted within

the M-B framework. In Table 4, phases of intervention and

problem domain related to EC are given (Davies, Mabin, &

Balderstone, 2005).

Also, Mabin et al. (2006) examined the origin of

different domain of problems with CLD. Boldface

indicates the domains of the problem with the intervention

phase approach (Table 5).

3. Proposed model for the soft problem

Studies show that there is no comprehensive model that

combines TOC with SD as described. A comprehensive

model would be provided to help analysts to choose

different tools according to the nature of the problem. We

want to suggest the Mohammadi–Ghazanfari (M-G) model

for dealingwith the soft problem. This model consists of two

phases. The first phase is the appreciation and analysis of the

problem. In this phase, the composition of the CRT or EC

with CLD is used for the appreciation and analysis of the

problem. The second phase includes the assessment and

evaluation actions. At this stage, considering that we are

looking for creative or anticipated solutions, simulation or

FRT is used. Details of the proposedM-Gmodel can be seen

in Figure 1. In particular, to describe the first phase of the

model, a case study is used. The case study relates to the

subsidized milk industry. The implementation of the second

phase is beyond the scope of this article.

4. Subsidized milk industry in Iran

Milk is an excellent source of vitamins and minerals,

particularly calcium. It has long been recognized for its

important role in bone health. Nutritionists recommend

that milk and other dairy products should be consumed

daily as part of a balanced diet.

Consumption of milk and dairy products is associated

with numerous health benefits including glowing skin,

healthy bones and teeth, weight loss, less stress and a

healthy body. Currently, the annual average consumption

of milk per person in the world is 180 kg, and in developed

countries it is about 300 kg. Unfortunately, Iran’s milk

consumption per capita is about 100 kg per year.

So, per capita consumption of milk in a country is a

sign of development, improving the social, public health,

economic development and health of the society. An

important issue is the payment or non-payment of subsidy

for milk in Iran. Some claim that subsidies to increase per

capita consumption of milk will bring about benefits from

the positive effects of milk consumption. In contrast, some

people think that such payments are inappropriate and

believe prior methods should be corrected. Hence, this soft

problem is used to verify the proposed approach.

4.1 M-B frameworks for the subsidized milk industry

According to the subsidized milk discussions, it can be

stated that the problem in personal domain includes

Table 5. Mingers–Brocklesby framework for mapping methodologies – CLD.

Phases of intervention

Problem domain Appreciation of . . . Analysis of . . . Assessment of . . . Action to . . .

Social Social practices,power relations

Distortions, conflictsof interest

Ways of challenging andaltering power structures

Generate empowermentand enlightenment

Personal Individuals’ beliefs,meanings, emotions

Different perceptions andWeltanschauung

Alternative conceptualizationsand constructions

Generate accommodationsand consensus

Material Physicalcircumstances

Underlying causalstructure

Alternative physical andstructural arrangements

Select and implementbest alternative

Table 4. Mingers–Brocklesby framework for mapping methodologies – EC.

Phases of intervention

Problem domain Appreciation of . . . Analysis of . . . Assessment of . . . Action to . . .

Social Social practices,power relations

Distortions, conflictsof interest

Ways of challenging andaltering power structures

Generate empowermentand enlightenment

Personal Individuals’ beliefs,meanings, emotions

Different perceptionsand Weltanschauung

Alternative conceptualizationsand constructions

Generate accommodationsand consensus

Material Physicalcircumstances

Underlyingcausal structure

Alternative physical andstructural arrangements

Select and implementbest alternative

Theory of constraints/system dynamics 3

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individual health and the problem in the social domain

includes social health, productivity, efficiency, employ-

ment, etc. (Table 6).

There are two important issues about the appreciation

and analysis of the problem. First, the roots of conflict in

problems will be detected. Second, the variables and their

impact on each other will be identified in order to gain a

better understanding of the problem. In the following, two

steps are performed by the EC and CLD tools.

4.1.1 Applying TOC – the evaporating cloud (EC)

We will demonstrate how EC can frame the natural

conflict in this dilemma between credible alternatives and

reciprocal exclusive actions. Using EC, an attempt at

discovery not only illustrates the dilemma but also makes

appreciation better in its underpinning assumptions, so that

one search can recognize breakthrough actions that can

solve the initial complicated situation. Underlying most

complicated situations is a conflict or dilemma. In the

illustration captured as Figure 2, we depict the dilemma of

whether or not to keep subsidizing milk from the

perspectives of the supporters and the opponents.

4.1.2 Applying SD’s CLD

Perhaps it could be said that the main phase of using a

system dynamics approach attempts to understand and

Phases of interventtion:Appreciation of ...

Analysis of ...

Use the TOCTPs and SD combinitedapproach for soft problem

Phases of interventtion:Assessment of ...

Action of ...

assessmentof policies

Select the bestpolicy by SD

If you’re Seeking solutionsthat have extracted of

creative ideas by TOCTPs

If you’re seeking policythat the consequences have

been predicted by SD

Comparison final solutionsand policies regard

to political,economical and socialcondition and organization environment

Select the best soution(s)opolicy in SD and TOCTPs

combinated approach

Do find the problemsolution with one of the SD or

TOCTPs approach?

Determination ofproblem domain

System analyser orDecision maker

Determination of phasesof intervention

yes

System Dynamics

Appreciation ofproblem

Causal LoopDiagrams

Stock and flowModel

Simulation

NO

yes

Theory of constraintsThinking process

CRT,EC

FRT,NBR

PRT,TrT

Figure 1. Proposed M-G model for developing basic solutions in the TOCTP/SD combined approach.

H. Mohammadi et al.4

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identify the feedback loops of the system under study. One

of the methods used for this is drawing a causal loop

diagram. This diagram illustrates relationships that are

difficult to describe verbally because normal language

presents interrelations as linear cause-and-effect chains,

while the diagram shows that the actual system has

circular chains of cause and effect. Figure 3 shows the

CLD for the subsidized milk industry.

5. Conclusion

Quantitative modeling to deal with soft problems such as

managerial policies and organizational behavior have

faced a challenge. This article has discussed multi-

methodology approaches to dealing with soft problems.

In particular, the combination of TOC with SD has been

discussed and then the M-G model was proposed. This

model consists of two phases. The first phase is the

appreciation and analysis of the problem. The second

phase includes the assessment and evaluation of actions.

The subsidized milk industry was used to describe the first

phase of the model. Usually, governments try to increase

milk consumption using financial assistance. In Iran,

theoretical differences have grown up concerning the

payment or non-payment of milk subsidies. So we have

studied this conflict by applying TOC using evaporating

Reduce the cost of health care peopleand government which is caused bythe lack of milk consumptionIncreasing employment opportunitiesespecially in rural and small urban

Increasing labor productivity indexand positive effects on the economy

Enhance personal and social health

Save finacial resources andimprove economic idicators

Increase the milk supply andpublic accessPeople are more willing toconsume the cheaper milk

Increase in per capitaconsumption and investmetnt

and production in milkindustry

Manage costs,improveproductivity,eliminate

irregularities and long lines

Milk subsidies notbe eliminated

Conflict

Milk subsidies notbe eliminated

Fertility of resources, including humanresources,work spaces and warehouses

Eliminating milk subsidies reduceviolence and long lines to buy milk Dispatching all the milk produced to the market)lack

of maintenance (and Balancing the market

Increasing competitiveness and the use of newtechnologies in the supply,production anddistribution of dairy products

• •

••

Figure 2. Evaporating clouds of the subsidized milk industry.

Table 6. Mingers–Brocklesby framework for mapping methodologies in the subsidized milk industry.

Phases of intervention

Problem domain Appreciation of . . . Analysis of . . . Assessment of . . . Action to . . .

Social Social practices,power relations

Distortions, conflictsof interest

Ways of challenging andaltering power structures

Generate empowermentand enlightenment

Personal Individuals’ beliefs,meanings, emotions

Different perceptionsand Weltanschauung

Alternative conceptualizationsand constructions

Generate accommodationsand consensus

Material Physical circumstances Underlying causal structure Alternative physical andstructural arrangements

Select and implementbest alternative

Tools EC/CLD EC/CLD

Theory of constraints/system dynamics 5

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clouds (EC). The SD’s CLD was used to identify the

variables and their impact on each other in order to gain a

better understanding of the problem. Applying these tools

utilized the advantages of both methods.

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