What is Theory Of Constraints(TOC)?

What is Theory Of Constraints(TOC)?

TOC (Theory of Constraints) is a Management Philosophy developed by an Israeli Physicist, Dr. Eliyahu M. Goldratt. TOC assumes that the principles underlying the development of hard sciences such as physics/chemistry, can be applied to management as well. Thus, TOC can simply be stated as the application of scientific thinking to management. Here, scientific thinking implies Cause and Effect thinking i.e dig deeper and identifying the a few cause/causes for the observed multiple effects.

Dr. Eli Goldratt introduced the TOC philosophy through his first business novel “The Goal”. In the book, the application of TOC principles was demonstrated for production environment. And it was convincingly shown that the methodology produces stellar results. Apart from 'The Goal', there are multiple books written by Dr. Goldratt and his peers on the TOC and now, the TOC principles are considered as one of best in the business management.

Apart form operations, TOC principles have been applied to solving business problems in sales and distribution, project management, finance and accounting, retail, warehouse management, healthcare, and service sector. Apart from solving business problems, TOC philosophy has been successfully applied to education, prison reform, and personal improvement initiatives.

The core principle of TOC is that every system has a single or at most a few constraints, and that the total system throughput (output) can only be improved when the output through the constraint is improved. A constraint is anything that prevents the system from achieving its goal. It can be a machine, policy, people or market.

Let us take an example to understand constraint and system improvement.

Example: Let's consider a system “S” consisting of 4 operations at four machine A, B, C, & D. Raw material goes into Machine A and finished product comes from Machine D. A product has to undergo operation in all the machines.

The goal of the system is to manufacture maximum items/hr.

What do you think would be the maximum output from the system? '20, 25, 12 or 28'. Pause and think about it for a minute.

The maximum output/hr from the system would be 12/hr (Minimum of 4 operations) as item has to pass all of the machines to become a finished product. Thus, Machine C is the constraint for this system, it is the weakest link. And, if we can improve the output of machine C even by 1 units/hr the output of entire chain goes up. The only way to improve the output from the system is to improve the output from Machine C.

Once the goal of the system has been verbalized, TOC’s five focusing steps provide a clear-cut and sustained focus on improving the current constraint until it no longer limits the throughput of the system. At this point, the focus shifts to the next constraint of the system which is preventing it from achieving its goal.

The underlying power of TOC comes from its proficiency to generate a remarkably strong focus towards a single 'goal'. In fact, Dr. Goldratt considered focus to be the crux of TOC. According to him, ‘FOCUS’ is the single word, which summarizes the entire TOC philosophy.

‘FOCUS’ has two parts: first- ‘what should be done’; and the second and the most important part ‘what should not be done’.

Continuing the above example to understand the meaning of 'what should be done' and 'what should not be done'.

‘What should be done’ for system “S”: All improvement initiatives to be taken for machine C.

‘What should not be done’- do not work on improvement initiatives on any other machine (Until machine C is the constraint). As any improvement on them will not improve the output of the system

Thus, whenever-wherever TOC is applied to any environment be it distribution, project management, production, service etc. - it gives a clear direction by listing out ‘what should be done’ and ‘what should not be done’ for achieving a quantum jump in the performance.


PS: For understanding the application of TOC on distribution environment, pls read the following article.

https://www.linkedin.com/pulse/what-right-inventory-mohit-saini/



Shelvia Loveridge

Energised and curious about enabling joyful collaboration for a diverse set of people in pursuit of excellence

4y
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Julian Poniewierski

Professional Mining Engineer |Strategic Planning & Scheduling, Reserves, Tech Governance, Due Diligence, Reconciliation

6y

Mohit, If you are passionate about TOC, you might find the following article interesting: https://www.linkedin.com/pulse/mining-berlin-airlift-theory-constraints-julian-poniewierski

Niranjan Mahatma

Head-Network Development & Credit Control at Tata Motors Limited - Commercial Vehicles

7y

great mohit

Ankita Mehra

Lead Engineer at Eaton Bussmann

7y

Comprehensive..

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Rahul Gautam

Aftermarket, Planning, Supply Chain, Customer Relationship

7y

Well explained ...

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