Universidad Tecnológica de Nuevo Laredo

Student: Luis Fernando Gloria Vasquez

Teacher: Ricardo Ramirez Aguilar

Subject: Supply Networks Design

Grade and group: 8.c

June 29TH , 2022

WHAT IS THE THEORY OF CONSTRAINTS?

The Theory of Constraints is a methodology for identifying the most important limiting factor
(i.e., constraint) that stands in the way of achieving a goal and then systematically improving that
constraint until it is no longer the limiting factor. In manufacturing, the constraint is often
referred to as a bottleneck.
The Theory of Constraints takes a scientific approach to improvement. It hypothesizes that every
complex system, including manufacturing processes, consists of multiple linked activities, one of
which acts as a constraint upon the entire system (i.e., the constraint activity is the “weakest link
in the chain”).
So what is the ultimate goal of most manufacturing companies? To make a profit – both in the
short term and in the long term. The Theory of Constraints provides a powerful set of tools for
helping to achieve that goal, including:

¨*The Five Focusing Steps: a methodology for identifying and eliminating constraints
*The Thinking Processes: tools for analyzing and resolving problems
*Throughput Accounting: a method for measuring performance and guiding management
decisions

A successful Theory of Constraints implementation will have the following benefits:

*Increased Profit: the primary goal of TOC for most companies
*Fast Improvement: a result of focusing all attention on one critical area – the system constraint
*Improved Capacity: optimizing the constraint enables more product to be manufactured
*Reduced Lead Times: optimizing the constraint results in smoother and faster product flow
*Reduced Inventory: eliminating bottlenecks means there will be less work-in-process.

The Five Focusing Steps are further described in the following table.
Example
For example, the part production slowdown and the subsequent delivery delays caused by the
upstream supplier would increase the lead time for the downstream manufacturer and distributor
and then result in product shortages at the retailer.
These product shortages would not allow the retailer to meet customer needs and consequently
would deteriorate customer services. In this example, the supplier’s production capacity will
become the system’s (supply chain’s) constraint. In TOC terms, the supplier production capacity
will be regarded as the “drum” that sets the beat for the entire supply chain.
The size of the inventory held by the supplier will be viewed as the “buffer,” because it buys
time needed to recover from the anticipated disruptions occurring in the upstream supply chain.
The “rope” is symbolic of the link between the upstream and downstream supply chains, where
the rate of the final sales or distribution does not exceed the supplier’s production capacity.

This drum-buffer-rope (DBR) logic of TOC thinking would protect against variability at the
constraint and ensure the continuous improvement of the supply chain processes.
Considering the usefulness of TOC thinking to supply chain management, the supply chain
partners may consider the following TOC focusing steps to optimize the supply chain benefits
(see Dettmer, 1997 for the detailed discussion of the five TOC focusing steps).

Identify the weakest link in the supply chain.

*Decide what to do to get the most out of the weakest link (constraint) without committing to
potentially expensive changes.
*Adjust the rest of the supply chain processes to a “setting” that would enable the constraint to
operate at the maximum effectiveness.
*Take whatever action is required to eliminate the constraint.
*Once the current constraint is broken, keep on looking for other constraints to continuously
improve the supply chain performances.