Theory of Constraints (TOC)

Concepts of Theory of Constraints (TOC)

The overriding goal of the TOC is to improve speed in the manufacturing process by
optimizing throughput rather than simply measuring output. The premise behind the
theory of constraints is that every system is pursuing a goal and that every goal is constrained
by a limit. If a system is a series of connecting processes that work together to accomplish
some aim, then a constraint is a limiting factor, bottleneck, or barrier that slows a product’s
total cycle time .

(1) Throughput ⇒ is the flow of the product within the system.

(2) Cycle time ⇒ is the time it takes to complete a process from beginning to end.

Constraint management; is the process of identifying process barriers, analyzing and
understanding the barriers, and removing them so as to reduce cycle time and optimize the
system’s efficiency.

There is only one constraint in a system at any given time but that this bottleneck limits the
output of the entire system. The remaining components of the system are known as non-constraints (non-bottlenecks or nonbinding constraints). Overall, the TOC emphasizes fixing
the system constraint and temporarily ignoring the non-constraints. In this way, the theory has
a profound impact on cycle time and process improvement rather than spreading limited time,
energy, and resources across an entire system, which may or may not have tangible results.
However, when one constraint is strengthened the system does not become infinitely stronger.
The constraint simply migrates to a different component of the system, i.e. some other factor
becomes a bottleneck or barrier. The system is stronger than it was but still not as strong as it
could be.

The theory of constraints focuses on limitations due to resource constraints. Its approach to
scheduling is to firstly focus on the processes where bottlenecks occur, and then schedule the other activities such that they alleviate the bottleneck. Some processes or resources cause bottlenecks, and therefore they control the flow of products through the system. To reduce the impact of these bottlenecks, these processes or resources should always have raw material readily available, spend as much time as possible on productive activities, be fully staffed, and should be the focus of continuous improvement. Synchronous manufacturing is the application of the theory of constraints, and optimized throughput is the initial system’s objective (scheduling and software) that applied the theory of constraints.

T.O.C is a systems approach to continuous improvement (looking at the system as a chain).

Note : A theory of constraints (TOC) analysis proceeds from the assumption that only direct materials costs are truly variable in the short run. This is calledthroughput, or supervariable, costing. Thus under TOC throughput C.M is the relevant margin to be considered.