Theory of Constraints (TOC) Basic Concepts and Decision Making
Theory of Constraints (TOC) Basic Concepts and Decision Making
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Theory of Constraints (TOC) Basic Concepts and Decision Making

Last updated on 2016-11-25

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.

 

Table of Contents

Copyright Information   4

This book is dedicated to              5

Preface                6

I am thankful to…             8

Introduction       9

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

Throughput (T)36

Investment (I)   40

Operating Expenses (OE)             42

Summary of T, I and OE43

Five Focusing Steps - Background             44

Introduction       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

Summary             78

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

Control Measurements112

Throughput-Dollar-Days (TDD)   114

Inventory-Dollar-Days (IDD)        117

Local-Operating-Expense             120

Summary of TOC Measurements              121

Summary             122

Methodology    122

Measurements122

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

Bibliography       130

Bundles that include this book

Theory of Constraints (TOC) - Application for Manufacturing
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About the Author

Rajeev Athavale
Rajeev Athavale

I am a TOC consultant. I teach and implement TOC. I have been studying and trying TOC over a decade.

I am an ardent fan of ToC. For past few years, reading about TOC has moved me from “I am impressed” to “I like it” to “I want to know more…”. I did not realize when it became a passion for me. Now, I eat, sleep, walk and breath TOC.

By sheer accident, I came across the famous book “The Goal” and that changed my life. I went on reading Goldratt’s next book “Its not luck” and thereafter I read all his books. Fortunately, Internet is a great source of information and it opened up the wealth of knowledge for me.

As I did more and more research on TOC, I felt the need for crystallizing and documenting the knowledge that I gained. I created my own training material and conducted a two-day workshop on TOC in my company. Thanks to Internet, I kept on enriching my Training material.

Apart from my own consulting, I had the opportunity to work on a large TOC implementation called "Viable Vision". The project was implemented by Goldratt Consulting.

As a part of the project, I had undergone training from various experts from Goldratt Schools such as Oded Cohen, Mickey Granot, Philip Wiljoen, Eli Schragenheim, Humberto Baptista, Kiran Kothekar and Martin Powell.

Apart from the training and on the job experience, study of Goldratt’s webcast, Strategy & Tactics Trees, TOC Insights, TOC Simulators (GSIM, MICSS, PM SIM, and Distribution), TOC Games and TOC SLPs have helped me to enrich his TOC related knowledge.

My passion for learning, experimenting, sharing knowledge and achieving results continues…

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