Theory of Constraints

• Presented By
Upma Joshi
Mohd.Arish
Bablu
Rajib Lochan
Sonalika
 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 system’s

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

If you don’t 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
Inventory
Productivity

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:
Constraints
:

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 ne w

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.
 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.
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…
 Once 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
 Supply chain logistic
 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
 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" .