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Theory of Constraints

Theory of Constraints (TOC) is a management philosophy that views any managed system as being limited in achieving more of its goals by a small number of constraints. The core of TOC is that one must first identify the most important constraint, then ensure that it is being optimized, and subordinate all other organizational processes to support its removal. TOC outlines five focusing steps: identify the constraint, exploit the constraint, subordinate everything else to the constraint, elevate the constraint, and repeat as new constraints emerge. Buffers are also used to protect constrained resources and prevent them from being starved. TOC has applications in operations, finance, project management, and more.

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191 views

Theory of Constraints

Theory of Constraints (TOC) is a management philosophy that views any managed system as being limited in achieving more of its goals by a small number of constraints. The core of TOC is that one must first identify the most important constraint, then ensure that it is being optimized, and subordinate all other organizational processes to support its removal. TOC outlines five focusing steps: identify the constraint, exploit the constraint, subordinate everything else to the constraint, elevate the constraint, and repeat as new constraints emerge. Buffers are also used to protect constrained resources and prevent them from being starved. TOC has applications in operations, finance, project management, and more.

Uploaded by

Mariver Llorente
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Theory of Constraints

Presented By
Upma Joshi
Mohd.Arish
TOC - History
1970s and 1980s
Increase in Computer Power
Tremendous effort in line balancing
More balanced => more problems
Dr. Eli Goldratt showed:
How to perfectly balance line
That a perfectly balanced line led to bankruptcy
Led to development of Theory of Constraints
Theory of constraints
Theory of Constraints (TOC) is an overall
management philosophy introduced by Dr. Eliyahu M.
Goldratt in his 1984 book titled The Goal, that is
geared to help organizations continually achieve their
goal.

The title helps in achieving more of its goal by a very


small number of constraints, and that there is always
at least one constraints.
Definitions
A bottleneck is any resource with a capacity equal to
or less than the demand placed upon it

A constraint is anything that limits a systems


performance, relative to the system goal
Core of TOC
There is a constraint in the system

If you dont impact the


constraint, you have no effect
The rest is commentary
Assumptions of Toc
The underlying assumption of Theory of Constraints is
that organizations can be measured and controlled by
variations on three measures:

Throughput
Operating expense
inventory
TOC Terms of
Productivity
Through
put

Term of
Productivity Inventory

Operating
expense
Constraints
A constraint is anything that
prevents the system from
achieving more of its goal.
There are many ways that
constraints can show up, but
a core principle within TOC is
that there are not tens or
hundreds of constraints.
There is at least one and at
most a few in any given
system. Constraints can be
internal or external to the
system.
Types of Constraints:

Constrain
ts:

Physical Logical
Constraints Constraints
Fundamental Principles
of the Theory Of Constraints
As a numerical example, consider the operation
producing product A in Figure.
Steps of TOC
The TOC process seeks to identify the constraint and
restructure the rest of the organization around it,
through the use of the Five Focusing Steps:
1. Identify the Constraint

2. Exploit the Constraint

3. Sub ordinate everything


to the Constraint

4. Elevate the Constraint

5. Repeat for the new


Constraint
Improving the Process using
TOC Principles

Identify the Constraint

This implies the need to examine the entire process to


determine which process limits the throughput.

For example, in the example on slide 10, suppose the


sales department was only selling the product output at
the rate of 3 per hour.
Exploit the Constraint

Find methods to maximize the utilization of the


constraint toward productive throughput.

For example, in many operations all processes are


shut down during lunchtime or during breaks.

If a process is a constraint, the operation should


consider rotating lunch periods so that the constraint
is never allowed to be idle.
Subordinate Everything to the Constraint
Effective utilization of the constraint is the most
important issue. Everything else is secondary.

Elevate the Constraint


Essentially this means to find ways to increase the
available hours of the constraint, including adding
more of it.
Once the constraint is a constraint no longer, find the
new one and repeat the steps

As the constraint effective utilization increases, it may


cease to be a constraint as another process becomes
one.

In that case the emphasis shifts to the new process


constraint.

It is also possible that a sales-related change in the


product mix will cause a different process to become
the constraint.
Understanding and
Managing
The Constraints
A system Optimal performance is not the sum of
local Optima.

Any system that is performing as well as possible


usually implies that not more than one part of the
system is performing at an optimal level.
1. Identify And How To Exploit The System Constraint

2. Subordinate The Constraint

3. Elevate The System Constraint


Buffers
They appear as part of the EXPLOIT and
SUBORDINATE steps of the five focusing steps.

Buffers are placed before the key constraint, thus


ensuring that the constraint is never starved. Buffers
used in this way protect the constraint and should
allow for normal variation of processing time and the
occasional upset before the constraint.
Multiple-time Buffers
Time buffers are used to make sure the constraint is
not "starved," but other time buffers are also
necessary.

An example may help to Illustrate:

Suppose you have a product made from three


components.

Component 1 is processed from raw material and then


assembled with component 2 after it is processed
from raw material after that Processing Operation is
start in component 3
Multiple-time Buffers
Multiple-time Buffers
The subassembly is then assembled with component
3 after it is processed from raw material.

The final product is then shipped to the customer.

The constraint in the system is located in the middle of


the processing for component 1.
Multiple-time Buffers
Component 1 has been processed on the constraint,
its value to the system has risen significantly because
constraint time has been invested.

Nothing should, therefore, impede the progress of


component 1.

The problem could arise, however, that component 1


will arrive at the Assembly 1 area before component 2
because of some problem with component 2.
Multiple-time Buffers
Since we would never want constraint-invested
material to wait for non-constrained material, we
should stage a time buffer of material for component 2
before the Assembly 1 area.

This is done by releasing it earlier-the amount earlier


depending on the time buffer based on the time
estimate needed to overcome any unanticipated
shock in the system.

In this case the time buffer is called an assembly time


buffer, as opposed to the time buffer before the
constraint, which is usually called a constraint time
buffer.
Multiple-time Buffers
The same argument applies to the Assembly 2 area.

The subassembly from components 1 and 2 have


constraint time invested, so we would not want them
waiting for component 3.

This calls for another assembly time buffer to be


generated at the Assembly 2 area.

Unfortunately, the need for buffers has not been


fulfilled.
Multiple-time Buffers
It is possible that the final product with its constraint-
invested material could be held up at shipping, since
the processes that take place between assembly and
shipping have not been part of the protection.

This implies an additional time buffer before the shipping


area, referred to as a shipping time buffer.
Multiple-time Buffers
PLANT TYPES

PLANT TYPES

I-Plant A-Plant V-Plant T Plant


Applications of Theory of Constraints

There are various applications of toc:

Operations
Finance and accounting
Project management
Marketing and sales
Real business example
The Lessons plant of Baxter International makes medical products
such as sterile bags. Management of the plant is actually aware of
the necessity to actively manage its constraints. For example, when
materials are a constraint, management may go to a secondary
vendor and purchase material at a higher cost than normal. When a
machine is the constraint, a weekend shift is often added on the
machine. If a particular machine is chronically the constraint and
management has exhausted the possibilities of using it more
effectively, then additional capacity is purchased. For example when
the constraint was the plastic extruding machines, a new extruding
machine was ordered. However even before the machine arrived,
management had determined that the constraint would shift to the
blenders once the new extruding capacity was added. Therefore a
new blender was already planned. By thinking ahead and focusing on
the constraints, management is able to increase the plant's real
capacity at the lowest possible cost.
Conclusion
What is the Theory of Constraints and How Should it
be Implemented?","Beyond The Goal". That is
acknowledges the sources of information and
inspiration for the Thinking Processes and Critical
Chain methodologies. Theory of Constraints
referenced foundational materials. "Standing on the
Shoulders of Giants" .

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