The theory of constraints (TOC) is a management paradigm that views any manageab

le system as being limited in achieving more of its goals by a very small number
of constraints. There is always at least one constraint, and TOC uses a focusin
g process to identify the constraint and restructure the rest of the organizatio
n around it.
TOC adopts the common idiom "a chain is no stronger than its weakest link." This
means that processes, organizations, etc., are vulnerable because the weakest p
erson or part can always damage or break them or at least adversely affect the o
utcome.
Contents [hide]
1 History
1.1 Key assumption
1.2 The five focusing steps
1.3 Constraints
1.4 Breaking a constraint
1.5 Buffers
1.6 Plant types
2 Applications
2.1 Operations
2.2 Supply chain / logistics
2.3 Finance and accounting
2.4 Project management
2.5 Marketing and sales
3 The TOC thinking processes
4 Development and practice
5 Criticism
5.1 Claimed suboptimality of drum-buffer-rope
5.2 Unacknowledged debt
6 Certification and education
7 See also
8 References
9 Further reading
10 External links
History[edit]
The theory of constraints (TOC) is an overall management philosophy introduced b
y Eliyahu M. Goldratt in his 1984 book titled The Goal, that is geared to help o
rganizations continually achieve their goals.[1] Goldratt adapted the concept to
project management with his book Critical Chain, published 1997.
An earlier propagator of the concept was Wolfgang Mewes[2] in Germany with publi
cations on power-oriented management theory (Machtorientierte Fhrungstheorie, 196
3) and following with his Energo-Kybernetic System (EKS, 1971), later renamed En
gpasskonzentrierte Strategie as a more advanced theory of bottlenecks. The publi
cations of Wolfgang Mewes are marketed through the FAZ Verlag, publishing house
of the German newspaper Frankfurter Allgemeine Zeitung. However, the paradigm Th
eory of constraints was first used by Goldratt.
Key assumption[edit]
The underlying premise of theory of constraints is that organizations can be mea
sured and controlled by variations on three measures: throughput, operational ex
pense, and inventory. Inventory is all the money that the system has invested in
purchasing things which it intends to sell. Operational expense is all the mone
y the system spends in order to turn inventory into throughput. Throughput is th
e rate at which the system generates money through sales. [3]
Before the goal itself can be reached, necessary conditions must first be met. T
hese typically include safety, quality, legal obligations, etc. For most busines
ses, the goal itself is to make money. However, for many organizations and non-p

rofit businesses, making money is a necessary condition for pursuing the goal. W
hether it is the goal or a necessary condition, understanding how to make sound
financial decisions based on throughput, inventory, and operating expense is a c
ritical requirement.[3]
The five focusing steps[edit]
Theory of constraints is based on the premise that the rate of goal achievement
by a goal-oriented system (i.e., the system's throughput) is limited by at least
one constraint.
The argument by reductio ad absurdum is as follows: If there was nothing prevent
ing a system from achieving higher throughput (i.e., more goal units in a unit o
f time), its throughput would be infinite
which is impossible in a real-life sys
tem.
Only by increasing flow through the constraint can overall throughput be increas
ed.[1]
Assuming the goal of a system has been articulated and its measurements defined,
the steps are:
Identify the system's constraint(s).
Decide how to exploit the system's constraint(s).
Subordinate everything else to the above decision(s).
Elevate the system's constraint(s).
Warning! If in the previous steps a constraint has been broken, go back to step
1, but do not allow inertia to cause a system's constraint.[4]
The goal of a commercial organization is: "Make more money now and in the future
",[5] and its measurements are given by throughput accounting as: throughput, in
ventory, and operating expenses.
The five focusing steps aim to ensure ongoing improvement efforts are centered o
n the organization's constraint(s). In the TOC literature, this is referred to a
s the process of ongoing improvement (POOGI).
These focusing steps are the key steps to developing the specific applications m
entioned below.
Constraints[edit]
A constraint is anything that prevents the system from achieving its goal. There
are many ways that constraints can show up, but a core principle within TOC is
that there are not tens or hundreds of constraints. There is at least one but at
most only a few in any given system. Constraints can be internal or external to
the system. An internal constraint is in evidence when the market demands more
from the system than it can deliver. If this is the case, then the focus of the
organization should be on discovering that constraint and following the five foc
using steps to open it up (and potentially remove it). An external constraint ex
ists when the system can produce more than the market will bear. If this is the
case, then the organization should focus on mechanisms to create more demand for
its products or services.
Types of (internal) constraints
Equipment: The way equipment is currently used limits the ability of the system
to produce more salable goods/services.
People: Lack of skilled people limits the system. Mental models held by people c
an cause behaviour that becomes a constraint.
Policy: A written or unwritten policy prevents the system from making more.
The concept of the constraint in Theory of Constraints is analogous to but diffe
rs from the constraint that shows up in mathematical optimization. In TOC, the c

onstraint is used as a focusing mechanism for management of the system. In optim

ization, the constraint is written into the mathematical expressions to limit th
e scope of the solution (X can be no greater than 5).
Please note: organizations have many problems with equipment, people, policies,
etc. (A breakdown is just that
a breakdown
and is not a constraint in the true s
ense of the TOC concept) The constraint is the limiting factor that is preventin
g the organization from getting more throughput (typically, revenue through sale
s) even when nothing goes wrong.
Breaking a constraint[edit]
If a constraint's throughput capacity is elevated to the point where it is no lo
nger the system's limiting factor, this is said to "break" the constraint. The l
imiting factor is now some other part of the system, or may be external to the s
ystem (an external constraint). This is not to be confused with a breakdown.
Buffers[edit]
Buffers are used throughout the theory of constraints. They often result as part
of the exploit and subordinate steps of the five focusing steps. Buffers are pl
aced before the governing constraint, thus ensuring that the constraint is never
starved. Buffers are also placed behind the constraint to prevent downstream fa
ilure from blocking the constraint's output. Buffers used in this way protect th
e constraint from variations in the rest of the system and should allow for norm
al variation of processing time and the occasional upset (Murphy) before and beh
ind the constraint.
Buffers can be a bank of physical objects before a work center, waiting to be pr
ocessed by that work center. Buffers ultimately buy you time, as in the time bef
ore work reaches the constraint and are often verbalized as time buffers. There
should always be enough (but not excessive) work in the time queue before the co
nstraint and adequate offloading space behind the constraint.
Buffers are not the small queue of work that sits before every work center in a
Kanban system although it is similar if you regard the assembly line as the gove
rning constraint. A prerequisite in the theory is that with one constraint in th
e system, all other parts of the system must have sufficient capacity to keep up
with the work at the constraint and to catch up if time was lost. In a balanced
line, as espoused by Kanban, when one work center goes down for a period longer
than the buffer allows, then the entire system must wait until that work center
is restored. In a TOC system, the only situation where work is in danger is if
the constraint is unable to process (either due to malfunction, sickness or a "h
ole" in the buffer if something goes wrong that the time buffer can not protect)
.
Buffer management, therefore, represents a crucial attribute of the theory of co
nstraints. There are many ways to apply buffers, but the most often used is a vi
sual system of designating the buffer in three colors: green (okay), yellow (cau
tion) and red (action required). Creating this kind of visibility enables the sy
stem as a whole to align and thus subordinate to the need of the constraint in a
holistic manner. This can also be done daily in a central operations room that
is accessible to everybody.
Plant types[edit]
There are four primary types of plants in the TOC lexicon. Draw the flow of mate
rial from the bottom of a page to the top, and you get the four types. They spec
ify the general flow of materials through a system, and they provide some hints
about where to look for typical problems. The four types can be combined in many
ways in larger facilities.
I-plant: Material flows in a sequence, such as in an assembly line. The primary

work is done in a straight sequence of events (one-to-one). The constraint is th

e slowest operation.
A-plant: The general flow of material is many-to-one, such as in a plant where m
any sub-assemblies converge for a final assembly. The primary problem in A-plant
s is in synchronizing the converging lines so that each supplies the final assem
bly point at the right time.
V-plant: The general flow of material is one-to-many, such as a plant that takes
one raw material and can make many final products. Classic examples are meat re
ndering plants or a steel manufacturer. The primary problem in V-plants is "robb
ing" where one operation (A) immediately after a diverging point "steals" materi
als meant for the other operation (B). Once the material has been processed by A
, it cannot come back and be run through B without significant rework.
T-plant: The general flow is that of an I-plant (or has multiple lines), which t
hen splits into many assemblies (many-to-many). Most manufactured parts are used
in multiple assemblies and nearly all assemblies use multiple parts. Customized
devices, such as computers, are good examples. T-plants suffer from both synchr
onization problems of A-plants (parts aren't all available for an assembly) and
the robbing problems of V-plants (one assembly steals parts that could have been
used in another).
For non-material systems, one can draw the flow of work or the flow of processes
and arrive at similar basic structures. A project, for example is an A-shaped s
equence of work, culminating in a delivered project.[citation needed]
Applications[edit]
The focusing steps, this process of ongoing improvement, have been applied to ma
nufacturing, project management, supply chain/distribution generated specific so
lutions. Other tools (mainly the "thinking process") also led to TOC application
s in the fields of marketing and sales, and finance. The solution as applied to
each of these areas are listed below.
Operations[edit]
Within manufacturing operations and operations management, the solution seeks to
pull materials through the system, rather than push them into the system. The p
rimary methodology use is drum-buffer-rope (DBR)[6] and a variation called simpl
ified drum-buffer-rope (S-DBR).[7]
Drum-buffer-rope is a manufacturing execution methodology, named for its three c
omponents. The drum