Glossary of Theory of Constraints (TOC) Terms -

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Please note that a comprehensive Dictionary of TOC terminology can be found on the
TOCICO website.

Activation
The employment of a nonconstraint resource for the sake of keeping busy unrelated to
whether it is useful in supporting system throughput. A measure of how intensively a
resource is being used to produce a good or service. Activation compares actual time used to
available time.

Batch Processing
A manufacturing technique in which parts are accumulated and processed together in a lot.

Bottleneck
A facility, function, department, or resource whose capacity, if properly scheduled, is less
than, or exactly equal to, the demand placed upon it in a comparable period of time.

Buffer
A quantity of materials awaiting further processing. In theory of constraints, buffers can be
time or material and support throughput and/or due date performance. Buffers can be
maintained at constraints, convergent points (with a constraint part), divergent points, and
shipping points.

Buffer Management
A theory of constraints process in which all expediting and remedial action in a shop is driven
by what is scheduled to be in the buffers (constraint, assembly, and shipping buffers).

Constraint
Any element or factor that prevents a system from achieving a higher level of performance
relative to its goal. Constraints can be physical/logistical, managerial/procedural or
behavioral/psychological.

Constraint Management
The practice of managing resources and organizations in accordance with theory of
constraints.

Contribution Margin
The net of the variable money flow. An amount equal to the difference between sales revenue
and all totally variable expenses associated with that sales revenue.

Control points
Strategic locations in the logical product structure for a product or family that simplify the
planning, scheduling and control functions. Control points include gating operations,
convergent points, divergent points, constraints, and shipping points.
Convergent point
A control point in the logical product structure where nonconstraint parts are assembled with
constraint parts.

Current reality tree

A logic-based tool for using cause-and-effect relationships to determine root problems that
cause the observed undesirable effects of the system.

Divergent point
A control point in the logical product structure where a common part or assembly can be
directed to two or more end items.

Efficiency
A measure (as a percentage) of the actual output to the standard output expected. Efficiency
measures how well something is performing relative to expectations; it does not measure
output relative to any input.

Evaporating cloud
A logic based tool for surfacing assumptions related to a conflict or problem.

Five focusing steps

A process to continuously improve organizational profit by evaluating the production system
and market mix to determine how to make the most money using the system constraint.
The steps consist of:
1) identifying the system constraint,
2) deciding how to exploit the system constraint,
3) subordinating all nonconstraints to the system constraint,
4) elevating the system constraint,
5) repeating the process if the constraint is broken, while not allowing inertia to set in.

Flow network
A total system of resources required to produce a part or product.

Future reality tree

A logic-based tool for constructing and testing potential solutions before implementation. The
objectives are to 1) develop, expand, and complete the solution and 2) identify and solve or
prevent new problems created by implementing the solution.

Global Measures
That set of measurements that refers to the overall performance of the company. Net profit,
return on investment and cash flow are examples of financial measures; and throughput,
inventory, and operating expense are examples of operational measures.

Inventory
1) Those stocks or items used to support production, supporting activities, and customer
service.
2) TOC: All the money invested in things purchased for sale, valued at purchase price with
no value added for applied labor or allocated overhead.
Just-in-Time (JIT)
A philosophy of manufacturing based on planned elimination of all waste and continuous
improvement of productivity.

Kanban
Scheduling system developed and used by Toyota. A method of Just-In-Time production that
uses standard containers or lot sizes with a single card (Kanban) attached to each. It is a pull
system in which work centers signal with a card that they wish to withdraw parts from
feeding operations or suppliers.

Local Measures
That set of measurements that relates to a resource, operation, process, or part and usually has
low correlation to global organization measures.

Missynchronized Resource
A non-bottleneck resource overloaded due to management policy or improper subordination
to the requirements of the system constraint.

MRP II system
Manufacturing resource planning. A method for the planning of all resources of a
manufacturing company. It is made up of linked functions for business planning, sales and
operations planning, production planning, master production scheduling, materials
requirements planning, capacity requirements planning, and execution support.

Non-bottleneck
A facility, function, department, or resource whose capacity, if properly scheduled, is greater
than the demand placed upon it in a comparable period of time.

Operating Expense
All the money spent by the system to convert inventory into throughput.

Opportunity time
Inherent idle time of a non-bottleneck available for improvement activities when not required
for processing as protective capacity.

Point of control
A defining resource or cell process that can be used to synchronize all activities within a
product flow network.

Prerequisite tree
A logic-based tool for determining the obstacles that block implementation of a problem
solution or idea. Once obstacles have been identified, objectives for overcoming obstacles
can be determined.

Process batch
The number of units made between sequential setups at a work center.

Productivity
An overall measure of the ability to produce a good or service. It is the actual output of
production compared to the actual input of resources. Productivity is a relative measure
across time or against common entities.

Protective capacity
A given amount of extra capacity at non-constraints above the system constraint’s capacity,
used to protect against statistical fluctuation (breakdowns, late receipts of materials, quality
problems, etc.). Protective capacity provides non-constraints with the ability to catch up to
"protect" throughput and due date performance.

Queue
The jobs at a given work center waiting to be processed.

Queue time
The amount of time a job waits at a work center before setup or work is performed on the job.

Space Buffer
A physical space allocated to prevent a bottleneck from stopping production because no room
exists to offload finished material from that operation.

Synchronized manufacturing
A systematic way that moves material quickly and smoothly through the various resources of
the plant in concert with market demand. A manufacturing management philosophy that
includes a consistent set of principles, procedures, and techniques where every action is
evaluated in terms of the global goal of the system.

Synchronous Flow Management

A management philosophy that adapts the Theory of Constraints to the entire organization of
a manufacturing company as a way of doing business. It encompasses the entire process of
decision making and execution for the core business issues of product development, business
acquisition, business fulfillment, and strategic direction.

Theory of Constraints
A management philosophy developed by Dr. Eliyahu M. Goldratt that can be viewed as three
separate but interrelated areas - logistics, performance measurement, and logical thinking.

TOC performance measures

Throughput, Inventory, operating expense, and the five focusing steps (identify, exploit,
subordinate, elevate, repeat).

Throughput
The rate at which the system generates money through sales of its products or services.

Throughput contribution
The incremental element of throughput contributed by each unit of product or service sold.

Transfer batch
The quantity of an item moved between sequential work centers during production.

Transition tree
A logic-based tool for identifying and sequencing actions in accomplishing an objective. The
transitions represent the states or stages in moving from the present situation to the desired
objective.

Utilization
The ratio of actual time a resource is producing (run time only) to the clock time the resource
is scheduled to produce.

V, A & T Analysis
A constraints management procedure for determining the general flow of parts and products
from raw materials to finished products (logical product structure). A V logical structure
starts with one or a few raw materials, and the product expands into a number of different
products as it flows through its routings. The shape of an A logical structure is dominated by
converging points. Many raw materials are fabricated into a few finished products. A T
logical structure consists of numerous similar finished products assembled from common
assembles and subassemblies.