The Theory of Constraints (TOC) is an overall philosophy developed by Dr. Eliyahu M. Goldratt, usually applied to running and improving an organization. TOC consists of Problem Solving and Management/Decision-Making Tools called the Thinking Processes (TP). TOC is applied to logically and systematically answer these three questions essential to any process of ongoing improvement:
- “What to change?”
- “To what to change?”
- “How to cause the change?”
More specific uses of the Thinking Processes can be used to significantly enhance vital management skills, such as:
- Win-win conflict resolution
- Effective communication
- Team building skills
TOC postulates that the goal is to make (more) money. It describes three avenues to this goal:
- Increase Throughput
- Reduce Inventory
- Reduce Operating Expense
In order to achieve the goal, there are also 5 Focusing Steps:
- IDENTIFY the system’s constraint.
- Decide how to EXPLOIT the system’s constraint.
- SUBORDINATE everything else to the above decision.
- ELEVATE the system’s constraint.
- If in the previous step the constraint has been broken, go back to Step 1.
Dr. Goldratt’s Theory of Constraints is being used by thousands of corporations, and is taught in over 200 colleges, universities and business schools. His books have sold over 6 million copies and have been translated into 23 languages.
Additional TOC topics (click below for more information):
- Operations & Scheduling (Drum Buffer Rope)
- Finance & Measure (Throughput Accounting)
- Critical Chain Project Management (CCPM)
- Distribution & Supply Chain (Replenishment)
- TOC on Sales
- TOC on People Management
- TOC on Marketing (Mafia Offer)
- TOC on Strategic & Tactics
- TOC Thinking Processes
Here are descriptions from other outside organization and writers:
-A management philosophy developed by Dr. Eliyahu M. Goldratt that can be viewed as three separate but interrelated areas-Iogistics, performance measurement, and logical thinking. Logistics include drum-buffer-rope scheduling, buffer management, and VAT analysis. Performance measurement includes throughput, inventory and operating expense, and the five focusing steps. Thinking process tools are important in identifying the root problem (current reality tree), identifying and expanding win-win solutions (evaporating cloud and future reality tree), and developing implementation plan; (prerequisite tree and transition tree). APICS Dictionary, James F. Cox III and John H. Blackstone Jr., Editors, 9th edition, Falls Church,VA, 1998.
“TOC is a multifaceted management philosophy … a systematic reexamination of some of the most fundamental beliefs in today‘s management, culminating in a new approach to address problems facing us today.” *Mabin, Victoria J.; Balderstone, Steven J. (1999). The World of the Theory of Constraints: A Review of the International Literature, St. Lucie Press.
“TOC is more than a set of tools or techniques, though it certainly contains these. It is more fundamentally a paradigm shift which demands that we think about our problems and solutions, our goals and objectives, policies, procedures and measures, in a different way.” *
“TOC is also known by various other names, including Constraint(s) Management, Synchronous Flow Manufacturing (SFM), Synchronous Production (SP), and OPT. These terms are sometimes used synonymously with TOC, but are more often (and more correctly) used to describe the earlier components of TOC rather than the more recent parts, such as the Thinking Processes.” *