A “policy constraint” is a constraint theory term for a policy that is preventing a firm from improving its performance. Policies here are, for example, internal company rules, measurement standards, and other human-made decisions. In other words, policy constraints are “constraints created by the human mind.
The “process in large batch sizes” rule for manufacturing products is a common example. This rule is seemingly desirable because it lowers the production cost per unit. But there are some negative effects, such as an increase in work in progress and inventory, and an increase in the time it takes to deliver the product to the customer.
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