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THEORY OF CONSTRAINTS

 Focus: throughput maximization

 Three underlying assumptions-
THEORY OF  (i) Convergence (every complex system has inherent
CONSTRAINTS simplicity),
 (ii) Consistency (there are no conflicts in nature; if
two interpretations of a natural phenomenon are in
conflict, one or possibly both must be wrong), and
Dr. Dhananjay A. Jolhe
 (iii) Respect (people are not stupid; even they seem
stupid there is a reason for that)
Department of Mechanical Engineering,
Visvesvaraya National Institute of
Technology Nagpur © Dr. Dhananjay Jolhe 2

TOC: HISTORY TOC: BASICS

BASIC
 1980: Eliyahu M Goldratt: first paper on TOC PHILOSOPHY  In any business, there is at least one constraint
 1984: Eliyahu M Goldratt and Jeff Cox: ‘The Goal’ which limits the per formance.
FIVE FOCUSING  The constraint(s) must be identified and exploited to
 1986: Eliyahu M Goldratt and Robert E Fox: ‘The Race’- STEPS
improve the performance.
DBR
DRUM BUFFER
 If constraint is not exploited, it will exploit the entire
 1987: Term ‘TOC’ became popular ROPE system.
 1990: Eliyahu M Goldratt: ‘The Haystack Syndrome’ &
BUFFER
‘Theory of Constraints’- five focusing steps & TP MANAGEMENT
SYSTEM
 1994: Eliyahu M Goldratt: ‘It’s Not Luck’ tools in TP
 1997: Eliyahu M Goldratt: ‘Critical Chain’ TOC in project THINKING
PROCESS
management
 2003: Eliyahu M Goldratt: ‘Production the TOC Way’ NEW
PERFORMANCE
logical diagram & computer simulation MEASUREMENT
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TOC: BASICS TOC: BASICS

BASIC BASIC
PHILOSOPHY PHILOSOPHY

FIVE FOCUSING FIVE FOCUSING

STEPS
 Identify the constraint. STEPS
 Drum = the pace at which the constraint works.
 Exploit the constraint. (Bottleneck)
DRUM BUFFER  Subordinate ever ything else to constraint. DRUM BUFFER  Buffers = the inventories placed strategically to
ROPE ROPE
 Elevate the constraint. protect from variations
BUFFER  Repeat cycle for newly identified constraint. BUFFER  Rope = the communication mechanism (pulling
MANAGEMENT MANAGEMENT mechanism) which ensures the synchronization
SYSTEM SYSTEM
between critical control points.
THINKING THINKING  DBR is managed through time buf fers (T-Bs).
PROCESS PROCESS

NEW NEW
PERFORMANCE PERFORMANCE
MEASUREMENT MEASUREMENT
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TOC: BASICS TOC: BASICS

BASIC BASIC
PHILOSOPHY PHILOSOPHY

 Three T-Bs:
FIVE FOCUSING FIVE FOCUSING
STEPS  Constraint Buf fer = STEPS
 Three basic questions:
front of capacity  What to change?
DRUM BUFFER constraint resource DRUM BUFFER  What to change to?
ROPE ROPE
(CCR).  How to cause the change?

BUFFER
 Assembly Buf fer = in BUFFER
 Five basic logical tools:
MANAGEMENT front of assembly MANAGEMENT  Current Reality Tree
SYSTEM SYSTEM
operations that is fed  Evaporating Clouds (Conflict Resolution Diagram)
by both CCR and non-  Future Reality Tree
THINKING THINKING
PROCESS
CCR parts.. PROCESS  Pre-requisite Tree
 Shipping Buf fer = in  Transition Tree
NEW front of market. NEW  Negative Branch
PERFORMANCE PERFORMANCE
MEASUREMENT MEASUREMENT
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TOC: BASICS TOC: METHODOLOGY

BASIC
PHILOSOPHY
CONSTRAINT
IDENTIFICATION
 Physical constraint: visible and tangible. (easy
to identify but difficult to overcome).
FIVE FOCUSING
STEPS  Policy constraint: invisible and intangible.
EXPLOITING (difficult to identify and difficult to overcome).
CONSTRAINT
DRUM BUFFER
ROPE
 Internal constraint: Constrain within the
 Operational measurement: organization.
 Throughput (T) SUBORDINATE
BUFFER
TO  External constraint: Constraints outside the
MANAGEMENT  Inventory (I)
SYSTEM
CONSTRAINT organization.
 Operating Expenses (OE)
 Vendor: demand > capacity
THINKING  Global measurement:
PROCESS
ELEVATE  Market: demand < supply.
 Net profit (NP) = T - OE CONSTRAINT
 Return on Investment (ROI) = NP/I
NEW
PERFORMANCE  Cash Flow (CF)
REPEAT CYCLE
MEASUREMENT
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TOC: METHODOLOGY TOC: METHODOLOGY

CONSTRAINT CONSTRAINT
IDENTIFICATION IDENTIFICATION

 Constraint decides the throughput.

EXPLOITING
 Use constraint to maximum possible extent. EXPLOITING
CONSTRAINT
 Divert some load to non-constraint. CONSTRAINT

 Synchronize the speed of non-constrained

 Make minor changes.
SUBORDINATE SUBORDINATE resources with the that of constraint
TO TO
CONSTRAINT CONSTRAINT resources.
 Inventory will build up if non-constrained
ELEVATE ELEVATE resources will work at their normal speed.
CONSTRAINT CONSTRAINT

REPEAT CYCLE REPEAT CYCLE

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TOC: METHODOLOGY TOC: METHODOLOGY

CONSTRAINT CONSTRAINT
IDENTIFICATION IDENTIFICATION

EXPLOITING EXPLOITING
CONSTRAINT CONSTRAINT

SUBORDINATE SUBORDINATE
TO TO
CONSTRAINT CONSTRAINT
 Improve utilization of the constraint.
 Carry out major alteration and investment.
ELEVATE ELEVATE  Once the existing constraint is broken, new
CONSTRAINT
 Duplication, if required, may done. CONSTRAINT
constraint is formed.
 Identify new constraints and repeat the cycle.
REPEAT CYCLE REPEAT CYCLE
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TOC: TOOLS AND TECHNIQUES TOC: TOOLS AND TECHNIQUES

IMPORTANT Tree: set of logical relations between various facts. IMPORTANT

TERMS Entity: rectangular block containing statement. TERMS

Connector: lines joining two entities.

Arrow: arrow mark to indicate direction of entity’s
dependencies.
 Clarity
Undesirable effect (UDE): event which is not
 Entity existence
desirable.
 Casualty existence
Desirable effect (DE): event which is desirable
 Cause insufficiency
Banana: a flat ellipse drawn over two or more
 Additional cause
connector to indicate simultaneous and essential
 Cause-effect reversal
effect of two or more causes.
LOGIC LOGIC
 Predicted effect existence
RULES RULES  Tautology
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TOC: EIGHT LOGIC RULES (CATEGORIES TOC: EIGHT LOGIC RULES (CATEGORIES
OF LEGITIMATE RESERVATION) OF LEGITIMATE RESERVATION)

CLARITY  Connection between cause and effect should be CLARITY

ENTITY clear and logical. ENTITY  Idea in the block must be valid,
EXISTENCE EXISTENCE
 Express the idea as quantitative as possible,
CASUALTY
EXISTENCE
CASUALTY
EXISTENCE
 Sentence must be grammatically correct,
CAUSE CAUSE
 Sentence must be simple.
INSUFFICIENCY INSUFFICIENCY

ADDITIONAL ADDITIONAL
CAUSE CAUSE

CAUSE-EFFECT CAUSE-EFFECT
REVERSAL REVERSAL

PREDICTED PREDICTED
EFFECT EFFECT
EXISTENCE EXISTENCE

TAUTOLOGY TAUTOLOGY
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TOC: EIGHT LOGIC RULES (CATEGORIES TOC: EIGHT LOGIC RULES (CATEGORIES
OF LEGITIMATE RESERVATION) OF LEGITIMATE RESERVATION)

CLARITY CLARITY

ENTITY ENTITY
EXISTENCE EXISTENCE
 ‘Direct’ and ‘unavoidable’ relationship between
CASUALTY
EXISTENCE
cause and effect. CASUALTY
EXISTENCE  All possible causes must be connected to the
CAUSE CAUSE effect.
INSUFFICIENCY INSUFFICIENCY

ADDITIONAL ADDITIONAL
CAUSE CAUSE

CAUSE-EFFECT CAUSE-EFFECT
REVERSAL REVERSAL

PREDICTED PREDICTED
EFFECT EFFECT
EXISTENCE EXISTENCE

TAUTOLOGY TAUTOLOGY
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TOC: EIGHT LOGIC RULES (CATEGORIES TOC: EIGHT LOGIC RULES (CATEGORIES
OF LEGITIMATE RESERVATION) OF LEGITIMATE RESERVATION)

CLARITY CLARITY

ENTITY ENTITY
EXISTENCE EXISTENCE

CASUALTY CASUALTY
EXISTENCE EXISTENCE

CAUSE CAUSE
INSUFFICIENCY INSUFFICIENCY

ADDITIONAL ADDITIONAL
CAUSE  ‘Additional cause’ (the cause which is not CAUSE

CAUSE-EFFECT essentially required for the effects but increases CAUSE-EFFECT

 Show cause to effect relationship.
REVERSAL
the intensity of effect) should be shown. REVERSAL

PREDICTED PREDICTED
 Do not reverse.
EFFECT EFFECT
EXISTENCE EXISTENCE

TAUTOLOGY TAUTOLOGY
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TOC: EIGHT LOGIC RULES (CATEGORIES TOC: EIGHT LOGIC RULES (CATEGORIES
OF LEGITIMATE RESERVATION) OF LEGITIMATE RESERVATION)

CLARITY CLARITY

ENTITY ENTITY
EXISTENCE EXISTENCE

CASUALTY CASUALTY
EXISTENCE EXISTENCE

CAUSE CAUSE
INSUFFICIENCY INSUFFICIENCY

ADDITIONAL ADDITIONAL
CAUSE CAUSE

CAUSE-EFFECT CAUSE-EFFECT
REVERSAL REVERSAL

PREDICTED PREDICTED
EFFECT  Show all the effects due to one single cause. EFFECT
EXISTENCE EXISTENCE

TAUTOLOGY TAUTOLOGY  Show looping effect in cause-effect relationship.

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TOC: TOOLS AND TECHNIQUES TOC: TOOLS AND TECHNIQUES

CRT  Current Reality Tree CRT

 To identify the core problem accurately
CRD  Connects UDEs with logical relationship CRD
 Conflict Resolution Diagram (Evaporating Clouds)
 To resolve the conflicts between two opinions.
 ‘One opinion is correct. Other is always wrong’
FRT FRT
 Opposite conflicts: ‘To do’ or ‘Not to do’
 Different alternatives conflicts: ‘Choice’ type
NEGATIVE NEGATIVE
BRANCH BRANCH

PRT PRT

TRT TRT
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TOC: TOOLS AND TECHNIQUES TOC: TOOLS AND TECHNIQUES

CRT CRT

CRD CRD
 Future Reality Tree
FRT  To points out the impact of ‘selected solution’ on FRT
the business.
NEGATIVE  ‘Pros’ & ‘Cons’ of ‘selected solution’ NEGATIVE  Sub-tool of FRT
BRANCH BRANCH  To shows the possible negative effects of the
‘selected solution’ on the organization.
PRT PRT

TRT TRT
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TOC: TOOLS AND TECHNIQUES TOC: TOOLS AND TECHNIQUES

CRT CRT

CRD CRD

FRT FRT

 Prerequisite Tree
NEGATIVE  To identify prerequisites for implementing the NEGATIVE
BRANCH BRANCH  Transition Tree
proposed solution.
 To provide step-by-step plan of actions for
 To identify the obstacles that may come in the way
PRT of implementation PRT implementing the solution.
 To find the way to overcome the obstacles  Starts with injections, i.e., action or intermediate
TRT TRT
objective leading to DE.
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TOC: CASE STUDY TOC: CASE STUDY

 ABC Company
 Product: Animal feed
 UDEs:
 Business process:  UD1. Excessive urgent orders for the plant.
 Customers purchase products from dealer shops in the city.  UD2. Frequent stock out in depots.
 Dealers buy from the company. The firm’s salesperson is responsible
for acquiring orders from dealers and supplying the required material.  UD3. High transportation cost of the feed.
 The company has depots at district places, from where dealers are  UD4. Excessive costs of production and distribution.
served.
 The company maintains stocks of finished goods, as per the
 UD5. High finished goods’ inventory in the plant.
instructions from salesperson, in depots.  UD6. High working capital in the business.
 The salesperson places orders with the plant through the sales  UD7. Low market share.
manager and manufacturing manager, depending on the stock
positions in the depots.  UD8. Delayed deliveries by plant.
 The plant manufactures as per the orders and then supplies to depots.  UD9. Too many order cancellations.
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TOC: CASE STUDY: CRT TOC: CASE STUDY: CRT

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TOC: CASE STUDY: CRT TOC: CASE STUDY: CRT

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TOC: CASE STUDY: EVAPORATING CLOUD TOC: CASE STUDY: FRT

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TOC: CASE STUDY: FRT WITH NEGATIVE

TOC: CONCLUSION
BRANCH

 TOC’s strength lies in its logical toolset

 Provides basic and fundamental logic
 Need for quantitative toolset that will
complement the reasoning strength of TOC

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