Theory of Constraints (TOC) - 1

THEORY
OF
CONSTRAINTS
An introduction
THEORY OF CONSTRAINTS 1
(TOC) - IBKM
Continuous improvement
➢ Customers are demanding new, higher quality

products that provide more value and deliver
superior performance.
➢ Suppliers must therefore continually improve
the product and service they are providing.
➢ While competitive pressure is driving the
need to improve products and services there
is also internal pressure to improve
profitability and operational performance.
➢ With pressure on all fronts the need for
continuous improvement has been greater
today.
(TOC) - IBKM
Do we need to improve everything at
the same time?
What should we improve first?
(TOC) - IBKM
By using the ‘ Theory of constraints ’,
a logical five step process can be
followed that will focus our attention
on identifying and improving the
system constraint, resulting in overall
system improvement.
(TOC) - IBKM
System constraints
➢ A process is described as a series of continuous
actions that bring about a particular result.
➢ In other words, every system or process is a series
of linked activities or process steps.
➢ These process steps can be illustrated by looking at
a piece of chain.
➢ When visualizing a chain we can visualize a number
of individual links (process steps) interconnected to
form a length of chain (process)
(TOC) - IBKM
“A chain can only be as strong as the
weakest link”
When the chain is stretched it will fail at only

one link, the weakest link. The weakest link
determines the strength of the entire chain.
(TOC) - IBKM
THEORY OF CONSTRAINTS (TOC)
Theory of constraints is a thinking

process popularized by ELIYAHU
GOLDRATT and JEFF COX in the book
“THE GOAL”.
(TOC) - IBKM
(TOC) - IBKM
One basic assumption of TOC is that any
process (like a chain) is controlled by the
weakest link in the process. This weakest
link is the constraint of the system.
The constraint is the element of the process

that limits the organization from moving
closer to the goal.
(TOC) - IBKM
Referring back to the chain model,
what is the benefit of strengthening
any link other than the weakest link.
The chain will fail at the weakest link
regardless of the strength of the
strong links. Improving the other links
by 20%, 40% or 100% will not increase
the strength of the chain.
(TOC) - IBKM
In the chain model, it is evident that
improvement to any link other than
the weakest link does not improve the
chain whatsoever.
(TOC) - IBKM
•
In the book “ The Goal “ Goldratt reveals the

following Five steps of TOC.
They are :
1. IDENTIFY the system’s constraint (s)

2. Decide how to EXPLOIT the system’s
constraints.
3. SUBORDINATE everything else to the above
decision.
4. ELEVATE the system’s constraints.
5. Do not allow INERTIA to cause a system’s
constraint.
(TOC) - IBKM
If in the previous four steps, a constraint
has been broken, go back to Step 1 but
do not allow Inertia to cause a system’s
constraint.
These five steps are the guiding logic for

using TOC as a tool for ‘Continuous
Improvement ‘
(TOC) - IBKM
1. Identify the constraint
➢ Any bottle neck is “any resource whose

capacity is equal to or less than the demand
placed upon it.”
➢ Constraint identification can be achieved in a

number of different ways such as looking for
the pile of inventory or measuring machine
utilization ( cycle times ).
(TOC) - IBKM
➢ There is really no choice in the matter.
➢ Either you manage constraints or they

manage you.
➢ The constraints will determine the

output of the system whether they are
acknowledged and managed or not.
(TOC) - IBKM
2. Exploit the constraint
➢ Once the constraint is identified, we must

develop plans to squeeze the existing
constraints capacity as much as possible to
insure that it is not wasted.
➢ It means ensuring that it is productive all the

time.
(TOC) - IBKM
Example:
➢ A line that is working three shifts (24 hours/day) seven
days per week -
How can this capacity be exploited any further
➢ A close look at the constraint is required. The

constraint machine is running some of the time but on
occasion it is sitting idle.
➢ Looking at the causes of idle time leads to actions that

will help exploit the constraint.
➢ Investigate repair or rework methods (temporary

action root cause is determined)
(TOC) - IBKM
Example:
The constraint station is idle because :
a) A break-down at a station upstream to the constraint (

lack of material to process )
b) A break-down at a downstream station ( block the
constraint machine from producing )
Strategic placement of inventory buffer before and after the

constraining operation ( starved and space buffer ) can
insulate the constraint from interruptions that occur at
other non-constraint operations.
(TOC) - IBKM
➢Implementation of process controls prior to
the constraint will protect system throughput
while root causes of the most pressing issues
are identified and eliminated.
➢Actions that eliminate defects that occur after

the constraining operation are also
implemented.
(TOC) - IBKM
3. Subordinate everything to the system
constraint
The rest of the organization is synchronized with
the capabilities of the constraint and decisions
made regarding how to best utilize it.
1. Implement a starved buffer
2. Implement a space buffer
3. Implement QC prior to constraint.
4. Identify defects occurring after the constraint.
5. Identify and eliminate root cause of defects
occurring after the constraint.
(TOC) - IBKM
4. Elevate the constraint
➢Reducing the setup and cycle times.

➢Investing in the other process
improvements
➢Over time.
➢Sub-contracting
➢Buying another machine.
(TOC) - IBKM
5. Inertia
Once the constraint has been broken, the final step in
the TOC process is to go back to step 1 and start the
process over again.
Breaking the constraint is equivalent to strengthening

the weakest link in the chain. Once the weakest link is
strengthened, the next weakest link becomes the
system constraint. At this point, the five focusing steps
must be repeated beginning with the identification of the
new system constraints. At the same time, policies and
practices implemented to manage the previous
constraint must be reviewed and often revised.
(TOC) - IBKM
Success stories
1. Ford Motor Company, Electronics Division
The following figures are an average for all sites and all
products.
➢ Production Lead Time........................2/3 days or 2 shifts

➢ (was 10.6 days prior to TOC)
➢ Order Processing Lead Time.............1 day
➢ (was 16 days prior to TOC)
➢ Customer Satisfaction........................+75%
➢ Material handling and trucking.........-50%
➢ Available Floor Space......................+20%
(TOC) - IBKM
Success stories
2. Avery Denison
➢ The following figures represent the gains at

multiple locations.
➢ Market Share........................................+17% to
+25%
➢ Net Sales..............................................+23%
➢ Customer Complaints..........................-47%
➢ Customer Order Lead Time................-80%
➢ Inventory Days on Hand.....................-50% to -75%
(TOC) - IBKM
Your inputs please !
(TOC) - IBKM
Thank you and may God bless
you
(TOC) - IBKM

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THEORY

➢ Customers are demanding new, higher quality

What should we improve first?

When the chain is stretched it will fail at only

Theory of constraints is a thinking

The constraint is the element of the process

In the book “ The Goal “ Goldratt reveals the

1. IDENTIFY the system’s constraint (s)

These five steps are the guiding logic for

➢ Any bottle neck is “any resource whose

➢ Constraint identification can be achieved in a

➢ Either you manage constraints or they

➢ The constraints will determine the

➢ Once the constraint is identified, we must

➢ It means ensuring that it is productive all the

➢ A close look at the constraint is required. The

➢ Looking at the causes of idle time leads to actions that

➢ Investigate repair or rework methods (temporary

The constraint station is idle because :

a) A break-down at a station upstream to the constraint (

Strategic placement of inventory buffer before and after the

➢Actions that eliminate defects that occur after

➢Reducing the setup and cycle times.

Breaking the constraint is equivalent to strengthening

➢ Production Lead Time........................2/3 days or 2 shifts

➢ The following figures represent the gains at

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