Review of Learning, Part 5: Systems Thinking

Post date: Oct 24, 2014 3:47:15 PM

Awareness of Systems Thinking | Inventory, Flow, Constraints and Throughput

Systems Thinking or The Systems Approach

A system is defined as a set of things working together as parts of a mechanism or an interconnecting network; a complex whole. The act of systems thinking is to be cognisant of the whole when considering the parts.

Mullins (2009) references Bertalanffy (1951) as the founder of Systems Theory, and General System Theory (GST), and refers to the business organisation as an open system, part of a broader environment with which the organisation is constantly interacting with.

Deming (1986) suggests that production should be viewed as a system, and to improve quality the whole system from the incoming materials to the consumer should be considered. In his 14 points for Management his 5th point states that the system of production should be constantly improved to increase quality, productivity and therefore decrease cost.


Ohno (1988) defines one of the seven non-value adding wastes in a process as excess inventory. Suggesting that excess raw materials, work-in-progress or unshipped goods cause longer lead times, obsolescence and delay. Inventory obsolescence is a term used to refer to a deterioration in value of inventory over time.

Ladis (2008) suggests that specifications (or requirements) that have not been implemented, designs that have not been reviewed and code that has not been tested and deployed, can all be considered inventory. He goes on to suggest a chain or system that is self-limiting, where teams should not build features which people do not yet need, or define more requirements than the team can code, or write more code than can be tested, or test more code than can be deployed into an environment where a user can use it.

Eisenmann (2013) presents Spolsky’s (2012) view of Software Inventory, where he describes items in a feature backlog which will never get implemented, therefore, the time taken to write down, define, design, think about and discuss those items can all be considered wasteful.

Theory of Constraints

Goldratt (1992) introduced the Theory of Constraints (ToC), the suggestion that all systems have bottlenecks, which aren’t necessarily bad or good, but just the reality of any system. Goldratt states that the bottlenecks within a system determines the effective capacity of the system, and we can use those bottlenecks (or constraints) to control the flow through a system. He suggests that bottlenecks govern both throughput and inventory, and only by increasing flow through those constraints can the overall throughput of a system be increased.

To improve the throughput of a system, Goldratt suggests starting with identifying the system’s constraint(s), then exploit (make the most of) and use the identified constraint as the control (or heartbeat) for the system. Then focus on increasing the constraint(s) capacity while being conscious of breaking other constraints in doing so.

Flow and Pull

To reduce waste within a system, and therefore reduce costs and increase quality, Ohno (1988) suggests that the ideal state of production is to have the least amount of inventory along with just-in-time flow of that inventory to the right place, at the right time in the right quantity. Understanding that it would be extremely difficult to apply zero-inventory and just-in-time to every process in a system, he proposed the use of Kanban as a way to visually control and prevent overproduction and reduce waste.

Kanban is the Japanese word for billboard, sign and is more broadly used in lean manufacturing to mean a signal or tag. Ohno observed that by having each step in a system signal to the previous step when its inventory needed to be replenished, a pull process is created back through the system, which reduces the amount of inventory and the overall lead time of the system; the time it takes to realise value from the system’s input.

Key points:

  • Consider the whole system, organisations are not closed systems

  • Be aware of the cost of inventory, and waste within a system

  • Identify, exploit and alleviate constraints within a system

  • Use flow and pull to understand the capacity and constraints of a system


Mullins, L. (2009). Management and Organisational Behaviour, 8th edition, Pearson Educational.

Deming, W. E. (1986). Out of the crisis. Cambridge, MA: Massachusetts Institute of Technology. Center for Advanced Engineering Study, 6.

Ohno, T. (1988) Toyota Production System, Productivity Press

Ladas, C. (2009). Scrumban-essays on kanban systems for lean software development.

Eisenmann, T (2013) Managing Startups: Best Blog Posts & Spolsky, J (2012) Software Inventory

Goldratt, E. M., Cox, J., & Whitford, D. (1992). The goal: a process of ongoing improvement (Vol. 2). Great Barrington, MA: North River Press.