Operations Management

Theory of Constraints (TOC)

Topic 2
BITS Pilani PB Venkataraman
Mechanical Engineering
Pilani Campus
TOC Basics

• The goal of every business is to make surplus.

• The measures of performance (productivity) are:
• Throughput (Sales)
• Inventory turn
• Operating expense

• Bottleneck constraints operation from reaching its goal.

• Bottleneck is aka constraint.
• Bottleneck is the process whose capacity is less than
demand.
• Bottleneck is an essential part of every operations.
• Increasing capacity is not an option to remove bottleneck

BITS Pilani, Pilani Campus

Managing Bottleneck

https://www.youtube.com/watch?v=mWh0cSsNmGY
• Identify the bottleneck.
• Exploit the bottleneck through kaizen, waste reduction,
SMED etc.
• Subordinate all non-bottleneck processes to bottleneck.
• Elevate the bottleneck.
• Go back and identify the next bottleneck.
• Repeat this cycle till the bottleneck is moved to market.

BITS Pilani, Pilani Campus

Two Key Concepts

• Process interdependency and Statistical fluctuation.

• They cause bottleneck to move from one process to
another causing confusion.
• The approach should be to reduce statistical fluctuations
in the processes when there is process interdependency.
• Budget time, resource and money to reduce variation in
process.
• Play the game ‘Monkey Business Inc.’

BITS Pilani, Pilani Campus

Is TOC applicable to IT

• Read the book ‘Phoenix Project’ to know how.

• Throughput = Number of orders completed.
• Raw material = Algorithms, apps etc.
• Processes = System protocols.
• Resources = Manpower.
• Infrastructure = Network, server, storage systems.

BITS Pilani, Pilani Campus

 BITS Pilani
Pilani Campus

Questions…