Theory of Constraints
What is ToC?
Everyone has heard the saying that the chain is only strong as its weakest link and this is exactly what the theory of constraints actually defines and reflects. Constructed by Dr. Eli Goldratt, the theory was published in the book The Goal, in 1984. According to this book, any organization’s performance is greatly dependent on the constraints. These constraints prevent the enterprise from delivering its optimal performance and thereby failing to reach the designated goals. This is the weakest link and it can be anything right from the hired resource to the people, supplies, data, equipments and even regulatory policies. No matter how well the organization performs, there are always constraints. When the enterprise identifies the constraints, it can change the way the work is done to achieve the results that will help in overcoming it. The first time that the theory was used was in the manufacturing sector, however, it is not limited only there. It can also be used for other situations and it is the most useful when the theory is being applied in the frequently used processes held within the organizations.
Key assumptions
The main assumption in the theory is that the constraints are measured and controlled by three main variations that include the throughput, inventory and the operational expense. While throughput is the method by which sales generates money, inventory tracks the money that the system invests in buying the things that it intends to sell. Lastly, the operational expense is basically all the money in the system that is spend in order to turn inventory into throughput.
5 focusing steps
The five focusing steps are taken into account by assuming the goal of the system and defined measurements.
• Firstly, it is imperative to identify the constraints of the system
• The second step is in deciding how to exploit the system constraints and thereby getting the most out of it.
• Thirdly, it is important to subordinate everything else
Everyone has heard the saying that the chain is only strong as its weakest link and this is exactly what the theory of constraints actually defines and reflects. Constructed by Dr. Eli Goldratt, the theory was published in the book The Goal, in 1984. According to this book, any organization’s performance is greatly dependent on the constraints. These constraints prevent the enterprise from delivering its optimal performance and thereby failing to reach the designated goals. This is the weakest link and it can be anything right from the hired resource to the people, supplies, data, equipments and even regulatory policies. No matter how well the organization performs, there are always constraints. When the enterprise identifies the constraints, it can change the way the work is done to achieve the results that will help in overcoming it. The first time that the theory was used was in the manufacturing sector, however, it is not limited only there. It can also be used for other situations and it is the most useful when the theory is being applied in the frequently used processes held within the organizations.
Key assumptions
The main assumption in the theory is that the constraints are measured and controlled by three main variations that include the throughput, inventory and the operational expense. While throughput is the method by which sales generates money, inventory tracks the money that the system invests in buying the things that it intends to sell. Lastly, the operational expense is basically all the money in the system that is spend in order to turn inventory into throughput.
5 focusing steps
The five focusing steps are taken into account by assuming the goal of the system and defined measurements.
• Firstly, it is imperative to identify the constraints of the system
• The second step is in deciding how to exploit the system constraints and thereby getting the most out of it.
• Thirdly, it is important to subordinate everything else