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Capacity Planning and Theory of Constraints

The Theory of Constraints (TOC) is a methodology that identifies the most limiting constraint in a process, and focuses improvement efforts on systematically removing that constraint to improve profitability. TOC provides tools like the five focusing steps to identify constraints, thinking processes to analyze problems, and throughput accounting to measure performance and guide decisions. Implementing TOC can increase profit, improve capacity, reduce lead times and inventory by prioritizing the removal of bottlenecks.

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133 views7 pages

Capacity Planning and Theory of Constraints

The Theory of Constraints (TOC) is a methodology that identifies the most limiting constraint in a process, and focuses improvement efforts on systematically removing that constraint to improve profitability. TOC provides tools like the five focusing steps to identify constraints, thinking processes to analyze problems, and throughput accounting to measure performance and guide decisions. Implementing TOC can increase profit, improve capacity, reduce lead times and inventory by prioritizing the removal of bottlenecks.

Uploaded by

Kl Oteen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Capacity planning and theory of constraints

Every process has a constraint (bottleneck) and focusing improvement efforts


on that constraint is the fastest and most effective path to improved
profitability.
The Theory of Constraints is a methodology for identifying the most important
limiting factor (i.e. constraint) that stands in the way of achieving a goal and
then systematically improving that constraint until it is no longer the limiting
factor.
So what is the ultimate goal of most manufacturing companies? To make a
profit – both in the short term and in the long term. The Theory of Constraints
provides a powerful set of tools for helping to achieve that goal, including:
--A methodology for identifying and eliminating constraints (the
five focusing steps)
--Tools for analyzing and resolving problems (the thinking
processes)
--A method for measuring performance and guiding management
decisions (throughput accounting)
Capacity planning and theory of constraints
One of the appealing characteristics of the Theory of Constraints is that it
inherently prioritizes improvement activities. The top priority is always the
current constraint. In environments where there is an urgent need to improve,
TOC offers a highly focused methodology for creating rapid improvement.
A successful Theory of Constraints implementation will have the following
benefits:
• Increased profit (the primary goal of TOC for most companies)
• Fast improvement (a result of focusing all attention on one critical
area – the system constraint)
• Improved capacity (optimizing the constraint enables more product to
be manufactured)
• Reduced lead times (optimizing the constraint results in smoother and
faster product flow)
• Reduced inventory (eliminating bottlenecks means there will be less
work-in-process)
Capacity planning and theory of constraints

The Theory of Constraints uses a process known as the Five Focusing Steps
to identify and eliminate constraints (i.e. bottlenecks).
Capacity planning and theory of constraints
Thinking Processes 
Throughput Accounting
Theory of Constraints emphasizing Throughput Accounting, which uses as
its core measures: Throughput, Investment, and Operating Expense.
Throughput Accounting
In addition, throughput accounting has four derived measures:

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