Theory of Constraints (TOC) Basic Concepts and Decision Making
Theory of Constraints (TOC) Basic Concepts and Decision Making
About the Book
This eBook explains the basic concepts of Theory of Constraints (TOC).
The eBook discusses in detail the Five Focusing Steps. It defines the basic measurements prescribed by TOC and shows how to use them for decision making.
The eBook contains several Figures, Tables, Diagrams, Pictures, Charts, Graphs, examples, Quotes, Exercises and Games as appropriate. Most chapters are summarized in “Points to Ponder” at the end of certain chapters.
The eBook has some Multiple Choice Self-assessment questions. These questions help you to assess yourself the knowledge gained by you by reading this eBook.
These eBooks series is an excellent guide for those who want to learn TOC and its applications.
Copyright Information 4
This book is dedicated to 5
I am thankful to… 8
TOC’s process of on-going improvement 14
TOC and Strategy 14
TOC’S assumptions 15
TOC is about paradigm shift 16
TOC is about focusing 19
TOC is about improving the flow 21
TOC shows us: 22
TOC is about managing the weakest link 23
What is the GOAL? 27
The Goal Measurements 31
Investment (I) 40
Operating Expenses (OE) 42
Summary of T, I and OE43
Five Focusing Steps - Background 44
What is Constraint? 45
Types of Constraints 45
A note on Policy Constraints 46
Five Focusing Steps 48
Five Focusing Steps – A Simplified Explanation 50
Step 1: Identify the System’s Constraint 53
Step 2: Decide how to Exploit the Constraint 55
Step 3: Subordinate everything else (to the above decision) 57
What is subordination?57
What does subordination practically mean? 59
How to subordinate the decision of exploiting?60
How easy or difficult is to subordinate?61
Step 4: (Evaluate Various Alternatives to) Elevate the System’s Constraint 62
Step 5: Go back to Step 1 65
Basic rules for managing the Constraint67
How do you know that you are managing the Constraint? 68
An Example of Five Focusing Steps 70
Where should we focus our improvement efforts? 76
Self-assessment questions 79
More discussion on Throughput (T), Investments (I) and Operating Expenses (OE) 81
Scale of importance of T, I and OE 86
Using Measurements for Judging Various Decisions and Actions 89
Typical judgments provided by Finance90
Judgment of the performance of the System as a whole 93
Judgment on Investment in Equipment95
Make or Buy Judgment98
Judgment of Sub-systems 101
Judgment of Product / Service Viability 102
Throughput per Constraint Unit of Time (T/CU)106
Decision Making Based on Δ T, ΔI and ΔOE 107
Cost World Paradigm and Throughput World Paradigm 108
Throughput-Dollar-Days (TDD) 114
Inventory-Dollar-Days (IDD) 117
Summary of TOC Measurements 121
Culture & Mindset 123
Self-assessment questions 125
eBooks published by Rajeev Athavale 127
Learner’s Guides 127
Article Repository 128
TOC Applications: Implementation Guidance for Small and Medium Size Enterprises 129
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