THEORY OF CONTRAINTS (TOC)/

OPTIMIZED PRODUCTION
TECHNOLOGY (OPT)

Production System (TIN 307)

 20-2

Goldratt’s Five Focusing Steps in

TOC
1. Identify the system constraints
2. Exploit the system constraints
3. Subordinate everything else to that
decision
4. Elevate the system constraints
5. Repeat the process. If, in the previous steps,
the constraints have been broken, go back
to Step 1

2
 20-3

Goldratt’s Five Focusing Steps in

TOC
Identify the system constraints
• Look for work­in­process on the line. Inventory often 
accumulates immediately before the constraint.
• Review equipment performance data to determine 
which equipment has the longest average cycle time.
• Ask operators where they think equipment is not 
keeping up with demand. Pay close attention to these 
areas, but also look for other supporting indicators.

3
 20-4

Goldratt’s Five Focusing Steps in

TOC
Exploit the system constraints
the objective is to make the most of what you 
have – maximize throughput of the constraint 
using currently available resources. This step 
focuses on quick wins and rapid relief; leaving 
more complex and substantive changes for later.
• Create a suitably sized inventory buffer immediately 
in front of the constraint to ensure that it can keep 
operating even if an upstream process stops.
• Check quality immediately before the constraint so 
only known good parts are processed by the constraint.

4
 20-5

Goldratt’s Five Focusing Steps in

TOC
Exploit the system constraints
• Ensure that the constraint is continuously scheduled 
for operation (e.g. operate the constraint during 
breaks, approve overtime, schedule fewer changeovers, 
cross­train employees to ensure there are always 
skilled employees available for operating the 
constraint).
• Move routine maintenance activities outside of 
constraint production time (e.g. during changeovers).
• Offload some constraint work to other machines. Even 
if they are less efficient, the improved system 
throughput is likely to improve overall profitability.
• Offload some work to other companies. This should be 
a last resort if other techniques are not sufficient to 
relieve the constraint. 5
 20-6

Goldratt’s Five Focusing Steps in

TOC
1. Subordinate everything else to that
decision
In this step, the focus is on non­constraint equipment. The 
primary objective is to support the needs of the constraint (i.e. 
subordinate to the constraint).
By definition, all non­constraint equipment has some degree of 
excess capacity. This excess capacity is a virtue, as it enables 
smoother operation of the constraint. The manufacturing process 
is purposely unbalanced:
• Upstream equipment has excess capacity that ensures that 
the constraint buffer is continuously filled (but not 
overfilled) so that the constraint is never “starved” by the 
upstream process.
• Downstream equipment has excess capacity that ensures 
that material from the constraint is continually processed so 
the constraint is never “blocked” by the downstream 
processes 6
 20-7

Goldratt’s Five Focusing Steps in

TOC
1. Subordinate everything else to that
decision
Some useful techniques for this step include:
• Implement DBR (Drum­Buffer­Rope) on the constraint as a 
way of synchronizing the manufacturing process to the needs 
of the constraint.
• Subordinate maintenance to the constraint by ensuring that 
the constraint is always the highest priority for maintenance 
calls.
• Add spare capacity to non­constraint equipment to ensure 
that interruptions to their operation (e.g. breakdowns or 
material changes) can quickly be offset by faster operation 
and additional output.
• Operate non­constraint equipment at a steady pace to 
minimize stops. 
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 20-8

Goldratt’s Five Focusing Steps in

TOC
Elevate the system constraints
In this step, more substantive changes are implemented to “break” the 
constraint. These changes may necessitate a significant investment of 
time and/or money (e.g. adding equipment or hiring more staff). 
• Implement a setup reduction program to reduce the amount of 
productive time lost to changeovers.
• Evaluate the constraint for potential design updates and/or 
component upgrades.
• Purchase additional equipment to supplement the constraint (a 
last resort).

8
 20-9

Goldratt’s Five Focusing Steps in

TOC
Repeat the process.
In this step, the objective is to ensure that the Five Focusing 
Steps are not implemented as a one­off improvement project. 
Instead, they should be implemented as a continuous 
improvement process.
• If the constraint has been broken (the normal case), 
recognize that there is a new constraint. Finding and 
eliminating the new constraint is the new priority (restart 
at Step One).
• If the constraint has not been broken, recognize that more 
work is required, including verifying that the constraint has 
been correctly identified (restart at Step One)

9
Exhibit 1 : A Constrained
Production Process

P r o fit/u n it = $ 8 0 P ro d u c t P ro d u c t P r o fit/u n it = $ 5 0
M a rk e t d e m a n d = A B
1 0 0 /w e e k M a rk e t d e m a n d =
2 0 0 /w e e k

P r o d u c tio n p r o c e s s
P ro d u c t A P ro d u c t B
A v a ila b ilit y : 6 0 h r s . / w e e k 0 . 4 h r s . / u n it 0 .2 h r s ./u n it

R a w m a t e r ia ls U n lim ite d

10
 20-11

Exhibit 2 (without TOC)

• A has a higher profit/unit --> maximize A

• Production process for A:
 100 units x 0.4 hours/unit = 40 hours
• Remaining time for B:
 60 hours - 40 hours = 20 hours
 20 hours / (0.2 hours/unit) = 100 units
• Profit:
 For A: 100 units x $80/unit = $8,000
 For B: 100 units x $50/unit = $5,000
Total = $13,000

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Types of Constraints
• Internal Resource =
resource within
organization which limits
performance
• Market = market demand
less than production
capacity
• Policy = Any policy that
limits performance

12
Constrained Resource
Utilization
for Each Product

13
 20-14

Exhibit 3 (with TOC)

• B has a higher profit/hour --> maximize B

• Production process for B:
 200 units x 0.2 hours/unit = 40 hours
• Remaining time for A:
 60 hours - 40 hours = 20 hours
 20 hours / (0.4 hours/unit)= 50 units
• Profit:
 For A: 50 units x $80/unit = $4,000
 For B: 200 units x $50/unit = $10,000
Total = $14,000
vs. $13,000 (without TOC)
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 20-15

Application in
Manufacturing

15
 20-16

P Q
A,B,C,D: 1 each
Available Time: $90/U $100/U
2400 Min/Wk 100 U/Wk 50 U/Wk
OE not including
RM: $6000 per wk
D D
10 min./U 5 min./U

Purchase
Part
$5/U C C B
10 min./U 5 min./U 15 min./U

A B A
15 min./U 15 min./U 10 min./U

RM1 RM2 RM3

$20/U $20/U $20/U

16
Step 1: Identify the system’s
constraint(s).
P Q
A,B,C,D: 1 each
Available Time: $90/U $100/U
2400 Min/Wk 100 U/Wk 50 U/Wk
OE not including
RM: $6000 per wk
D D
10 min./U 5 min./U

Purchase
Part
$5/U C C B
10 min./U 5 min./U 15 min./U

A B A
• What is the Goal? 15 min./U 15 min./U 10 min./U

• What is Throughput? RM1 RM2 RM3

$20/U $20/U $20/U
• What is Inventory?
• What is Operating Expense?

17
To Identify the Resource
Constraint
• Compute the load on each production resource
assuming market demands.
• Compare the resource loads with the resource
capacities.
• Those resources for which the loads exceed the
capacities are constraints (bottlenecks).
• If no production resource load exceeds its
capacity,
– the market demands are the constraints.
– the constraints are external to the manufacturing
system.
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Compute the loads and
compare with capacities.
• Processing requirement (in minutes):
PRODUCT A B C D
P 15 15 15 10
Q 10 30 5 5

• Production P=100, Q=50

PRODUCT LOAD
RESOURCE TOTAL CAPACITY % LOAD
P Q
A 1500 500 2000 2400 83.33
B 1500 1500 3000 2400 125
C 1500 250 1750 2400 72.92
D 1000 250 1250 2400 52.08

What is the constraint?

19
Step 2: Decide how to exploit the
system’s constraint(s).
P Q
A,B,C,D: 1 each
Available Time: $90/U $100/U
2400 Min/Wk 100 U/Wk 50 U/Wk
OE not including
RM: $6000 per wk
D D
10 min./U 5 min./U

Purchase
Part
$5/U C C B
10 min./U 5 min./U 15 min./U

A B A
15 min./U 15 min./U 10 min./U

RM1 RM2 RM3

$20/U $20/U $20/U

20
Exploiting the constraint

• Assume a single constraint is identified.

• Rank the products in order of the ratio:
– Throughput dollars per minute of constraint use.
• Select the product mix so that the products with
greater ratios are produced in preference to the
products with smaller ratios.
• What goal is this method trying to achieve?
• How does this method achieve the goal?

21
What and how much to produce?

PRODUCT P Q
PRICE/UNIT $90 $100
MATERIAL COST $45 $40
CONTRIBUTION $45 $60
PROCESSING TIME OF B 15 MIN 30 MIN
RATIO $3/MIN $2/MIN

22
Calculate Solution
• Produce as much P as possible
P  100

• Use the remainder of the constraint resource for Q

Q
2400  15 100   900  30
30 30
• What is the profit for this product mix?
Profit = TP ­ OC 
=  100 45   30 60   3000
 4500  1800  6000  300
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Step 3: Subordinate everything
else to the decisions of Step 2.
P Q
A,B,C,D: 1 each
Available Time: $90/U $100/U
2400 Min/Wk 100 U/Wk 50 U/Wk
OE not including
RM: $6000 per wk
D D
10 min./U 5 min./U

Purchase
Part
$5/U C C B
10 min./U 5 min./U 15 min./U

A B A
15 min./U 15 min./U 10 min./U

RM1 RM2 RM3

$20/U $20/U $20/U

24
Subordinating Production
• Production P=100, Production Q=30
• A: Load =1800, Capacity = 2400 Minutes
• B: Load =2400, Capacity = 2400 Minutes
• C: Load =1650, Capacity = 2400 Minutes
• D: Load =1150, Capacity = 2400 Minutes
• What determines the load on the non-
constraints?

25
Step 4: Elevate the system’s
constraint(s).
P Q
• Where should process A,B,C,D: 1 each
Available Time: $90/U $100/U
100 U/Wk 50 U/Wk
improvements be 2400 Min/Wk
OE not including
RM: $6000 per wk
focused? D
10 min./U
D
5 min./U

• What is the benefit of Purchase

Part
elevating the constraint? $5/U C
10 min./U
C
5 min./U
B
15 min./U

• What is the benefit of A B A

elevating a non- 15 min./U 15 min./U 10 min./U

constraint? RM1 RM2 RM3

$20/U $20/U $20/U

26
Step 5: If a constraint is broken
in Step 4, go back to Step 1.

• What might happen A,B,C,D: 1 each

Available Time:
P

$90/U
Q

$100/U

if the constraint is 2400 Min/Wk 100 U/Wk 50 U/Wk

OE not including
RM: $6000 per wk

elevated? D
10 min./U
D
5 min./U

• What happens if Purchase

Part
$5/U C C B

there are no more 10 min./U 5 min./U 15 min./U

internal A
15 min./U
B
15 min./U
A
10 min./U

constraints? RM1 RM2 RM3

$20/U $20/U $20/U

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 20-28

Linear Programming Model (1)

• Ft.  Max Z = 45P + 60Q

• S/t.
 15 P + 10 Q ≤ 2400 (WC A)
 15 P + 30 Q ≤ 2400 (WC B)
 15 P + 5 Q ≤ 2400 (WC C)
 10 P + 5 Q ≤ 2400 (WC D)
 P ≤ 100 (demand product P)
 Q ≤ 50 (demand product Q)
 P, Q ≥ 0 (non-negative constraints)

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 20-29

Linear Programming Model (2)

• Solution: Optimal
– P=100, Q=30
– S1=600 (WC A is NBR)
– S2=0 (WC B is BR)
– S3=750 (WC C is NBR)
– S4=1250 (WC D is NBR)
– S5=0 (All demand P is fulfilled)
– S6=20 (demand Q not fulfilled)

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Example 2
• Hart Furniture Company produces two products, End Tables and Sofas 
that are processed in five departments, Saw Lumber, Cut Fabric, Sand, 
Stain, and Assemble. End tables are produced from raw lumber. Sofas 
require lumber and fabric. Glue and thread are plentiful and represent a 
relatively insignificant cost that is included in operating expense. The 
specific requirements for each product are provided in the table below.
Resource or Activity &
(Quantity available per Required per End Table Required per Sofa
month)
Lumber (4,300 board feet) 10 board ft @ $10 = $100 7.5 board ft @ $10 = $75
Fabric (2,500 yards) - 10 yards @ 17.50 = $175
Saw Lumber (280 hours) 30 minutes 20 minutes
Cut Fabric (140 hours) - 20 minutes
Sand (280 hours) 30 minutes 10 minutes
Stain (140 hours) 20 minutes 30 minutes
Assemble (700 hours) 60 minutes 90 minutes

30
The Company's operating expenses are $75,000 per month. 
Based on current demand, the company can sell 300 End Tables 
and 180 Sofas per month. Sales prices are $300 for End Tables 
and $500 for Sofas.
Required:
• Determine Hart Company's constraint.
• Determine the throughput per minute of the constrained 
resource for each product.
• Determine the product mix needed to maximize throughput, 
i.e., the number of End Tables and Sofas that should be 
produced per month.
• Determine the maximum net income per month for Hart 
Company.

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1. Determine Hart Company's binding constraint.
Resource requirements to meet demand for each department are 
calculated as follows:

Activity & (Quantity Total Amount of Resource

End Table Sofa
available per month) Required Per Month
Lumber (4,300 board feet) (10 board ft)(300) (7.5 board ft)(180) 4,350 board feet
Fabric (2,000 yards) - (10 yards)(180) 1,800 yards
Saw (16,800 min) (30 min)(300) (20 min)(180) 12,600 minutes
Cut &Trim (8,400 min) - (20 min)(180) 3,600 minutes
Sand (16,800 min) (30 min)(300) (10 min)(180) 10,800 minutes
Stain (8,400 min) (20 min)(300) (30 min)(180) 11,800 minutes
Assemble (42,000 min) (60 min)(300) (90 min)(180) 34,200 minutes

The Stain activity is the binding constraint because it does not

have enough capacity to process 300 End Tables and 180 Sofas
per month.
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2. Determine the throughput per minute of the constrained resource for each product.
• First we need to determine the throughput per unit for each product so that we 
can determine how to use the constraint to maximize throughput. Throughput per 
unit is as follows:

Sales price - Materials

Product Throughput Per Unit
Cost
End Tables $300 - 100 $200
Sofas $500 - 250 $250

Then we can determine the throughput per minute of the constrained resource for
each product as follows.
Throughput Per Unit ÷
Product Throughput Per Minute
Minutes required in Stain
End Tables $200 ÷ 20 $10.00
Sofas $250 ÷ 30 $8.33
33
3. Determine the product mix needed to maximize throughput, i.e., the 
number of End Tables and Sofas that should be produced per month.

• Maximizing throughput requires producing as much of the product with 
the highest throughput per minute of the constrained resource as 
needed to meet demand. So the company should produce 300 End 
Tables. This requires (300 units)(20 minutes) = 6,000 minutes of time in 
the constraint and leaves 8,400 ­ 6,000 = 2,400 minutes for the 
production of 80 Sofas, i.e., 2,400 minutes ÷ 30 minutes per unit = 80.

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Graphic Analysis

• First, plot the constraints to find the feasible solution space. The staining constraint 
is 20ET + 30S = 8,400 minutes, so staining could produce 420 ETs (8,400/20) or 280 
Sofas (i.e., 8,400/30), or some combination of ETs and Sofas indicated by the 
constraint line connecting those two points on the graph. The Staining constraint 
and demand constraints define the feasible solution space indicated by the green 
area on the graph. The lumber constraint is 10ET + 7.5S = 4,300 so the company 
could produce 430 ETs (4,300/10) or 573.33 Sofas (4,300/7.5) with the available 
lumber. Plotting the lumber constraint shows that it is not a binding constraint, i.e., 
it does not limit the feasible solution space on the graph.
• Next, check the amount of throughput that could be obtained at each corner point, 
or plot the objective function 200 ET + 250S and move it up and to the right as far 
as possible without leaving the feasible solution space. The first objective function is 
plotted to indicate the slope of the function (200/250 = .8 means that it takes only .8 
of a Sofa to produce as much throughput as 1 ET) and shows that 250 ETs produces 
the same throughput as 200 Sofas, i.e., (250 ETs)($200) = (200 Sofas)($250) = 
$23,500. Either approach (checking the corner points or using the objective function) 
reveals that 300 ETs and 80 Sofas is the optimum solution.

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36
4. Determine the maximum net income per month for Hart Company.

Sales:
300 End Tables = (300)($300) $90,000
80 Sofas = (80)($500) 40,000 $130,000
COGS:
300 End Tables = (300)($100) $30,000
80 Sofas = (80)($250) 20,000 50,000
Throughput 80,000
Less Operating expense 75,000
Net income $5,000

Note: An assumption in this illustration is that

there are no beginning or ending inventories
of work in process or finished goods.
37