Welcome

To
Our Presentation
Name of the Contributors

Name Roll no. Serial

No.
Md. Aminul Islam 8011 01

Md. Hadiuzzaman 8048 02

Monajit Roy 8075 05

Rokshana Islam 8169 30

 Topics:

Theory of Constraints
 What is constraint?

A constraint is anything that

prevents you from getting more of
what you want.
Definition of TOC:

Theory of constraint (TOC) is an

overall management philosophy that
aims to continually achieve more of the
goal of a system.
Types of constraint

On the basis of control area

Internal constraint


External constraint
 Internal constraint:

The constraint that can be controlled by

the planning decision of the management
and occurred with in the organization is
called internal constraint. Such as policies
or resources within the firm.
External constraint:
The constraint that governed by
outside forces that are beyond the
control of management is called
external constraint. such as laws of
nature, government regulations.
On the basis of physical appearance

 Physical constraint.
 Policy constraint.
Physical constraint:
Physical constraint exists when the demand for
a resource excess its physical capacity.

Policy constraint:
When the policy of management or government
limits the accomplishment of a goal is called
the policy constraint.
 The Five Focusing Steps
 Theory of Constraints is based on the premise that the
rate of revenue generation is limited by at least one
constraining process (i.e. a bottleneck). Only by
increasing throughput (flow) at the bottleneck process
can overall throughput be increased.
 The key steps in implementing an effective TOC
approach are:
 Articulate the goal of the organization. Frequently,
this is something like, "Make money now and in the
future.“
 Contd….
 Identify the constraint (the thing that prevents the
organization from obtaining more of the goal)
 Decide how to exploit the constraint (make sure the
constraint is doing things that the constraint uniquely
does, and not doing things that it should not do)
 Subordinate all other processes to above decision (align
all other processes to the decision made above)
 Elevate the constraint (if required, permanently
increase capacity of the constraint; "buy more")
 If, as a result of these steps, the constraint has moved,
return to Step 1.
 Contd….
This Process of Ongoing Improvement has
been applied to Manufacturing, Project
Management, Supply Chain /
Distribution, Marketing and Sales, and
Finance.
 Operations

Within manufacturing operations and

operations management, the solution seeks
to pull materials through the system, rather
than push them into the system.

 Drum-Buffer-Rope (DBR)
 Simplified Drum-Buffer-Rope (S-DBR)
 Drum-Buffer-Rope is a manufacturing execution
methodology, named for its three components. The
drum is the physical constraint of the plant: the work
center or machine or operation that limits the ability
of the entire system to produce more. The rest of the
plant follows the beat of the drum. They make sure
the drum has work and that anything the drum has
processed does not get wasted.
 The buffer protects the drum, so that it always has
work flowing to it. Buffers in DBR have time as their
unit of measure, rather than quantity of material. This
makes the priority system operate strictly based on the
time an order is expected to be at the buffered
operation. Traditional DBR usually calls for buffers at
several points in the system: the constraint,
synchronization points and at shipping. S-DBR
requires only a single buffer at shipping.
The rope is the work release mechanism for the
plant. Only a "buffer time" before an order is
due does it get released into the plant. Pulling
work into the system earlier than a buffer time
guarantees high work-in-process and slows
down the entire system.
2nd Presenter
Hadiuzzaman
Roll:8048 ;SL:02
 Supply chain / logistics
The solution for supply chain is to move to a
replenishment model, rather than a forecast
model.

 TOC-Distribution
 TOC-VMI (vendor managed inventory)
 Finance and accounting
 The solution for finance and accounting is to apply holistic
thinking to the finance application. This has been termed
Throughput accounting. Throughput accounting suggests
that one examine the impact of investments and operational
changes in terms of the impact on the throughput of the
business. It is an alternative to Cost accounting.
 The primary measures for a TOC view of finance and
accounting are: Throughput (T), Operating Expense (OE)
and Investment (I). Throughput is calculated from Sales (S)
- Totally Variable Cost (TVC). Total Variable Cost usually
considers the cost of raw materials that go into creating the
item sold.
 Project management

 Critical Chain Project Management Based on

the realization that all projects look like A-
plants: all operations must converge to a final
deliverable. As such, synchronization of
activities is a common problem that CCPM
seeks to address.
 Marketing and sales
While originally focused on manufacturing and
logistics, TOC has expanded lately into sales
management and marketing. For effective
sales management one can apply Drum Buffer
Rope to the sales process similar to the way it
is applied to operations. This technique is
appropriate when your constraint is in the sales
process itself or you just want an effective
sales.
3rd presenter
Aminul Islam
Roll-8011, SL-01
 The TOC Thinking Processes
The Thinking Processes are a set of tools to help managers walk
through the steps of initiating and implementing a project.
When used in a logical flow, the Thinking Processes help walk
through a buy-in process:
 Gain agreement on the problem

 Gain agreement on the direction for a solution

 Gain agreement that the solution solves the problem

 Agree to overcome any potential negative ramifications

 Agree to overcome any obstacles to implementation

 TOC practitioners sometimes refer to these in the negative as

working through layers of resistance to a change.
 The Thinking Processes, as codified by Goldratt and others:
 How to manage constraint
Hypothetical example
The manufacturer has a total of 1000 machine
hour available per period and that it can sell only
600 units of product A and 500 units of product
B . The contribution margin of product A & B is
2 and 1.50 per unit respectively. The machine
hour required for product A& B is 1 and 4 per
unit respectively.
Particular Product A Product B
(Units) (units)
Demand 600 500

Machine hour 1 4

Contribution 2 1.5
margin

Total machine hour available 1000

There are two questions to be answered.

The first: what is the maximum amount of

money the company is capable of earning in a
week?
The second: what is the appropriate product mix
if the goal is to be achieved?
Objective function:
Z=2.00A+1.50B

Subject to constraint:
A≤ 600
B ≤ 500
A+4B ≤ 1000
And A≥0, B≥0
1000

900

800

700

600
Marketing Constraint of B
500

400
Marketing Constraint of A
300
b Machine Hour Constraint
200
c
100
a d
100 200 300 400 500 600 700 800 900 1000
 Combination of different option

Corner point Units of A Units of B Contribution margin

a 0 0 0*

b 0 250 375

c 600 100 1350

d 600 0 1200
 4th Presenter
Rokshana Islam
Roll:8169,SL:30
 Combination approach
Combinations Projects Outlay NPV Capital
1. A 1,800,00 750,000 Budget
0 constraint
2. B 1,500,00 600,000 Of
0 Tk.3,000,000
3. C 1,200,00 500,000
0
4. D 750,000 360,000
5. A and C 3,000,00 1,250,000
0
6. A and D 2,550,00 1,110,000
0
7. B and D 2,250,00 960,000
0
8. C and D 1,950,00 860,000
0
 Graphic & Combination method
Vs
Simplex method

The graphic approach works best for two dimensional treatment.

The combination approach suitable for more then two projects

Simplex method: to solve more complex problems involving

many cost centers and products.
 LINEAR PROGRAMMING MODEL
Solution of problem 5

The linear programming formulation of the capital budgeting

problem under various constraints is as follows:
Objective function
Maximise
10 X1 + 15 X2 + 25 X3 + 40 X4 + 60 X5 + 100 X6

Rupees are expressed in ’000s.

 Subject to
15 X1 + 12 X2 + 8 X3 + 35 X4
+ 100 X5 + 50 X6 + SF1 = 150 Funds constraint for year 1 

5 X1 + 13 X2 + 40 X3 + 25 X4 +
10 X5 + 110 X6 ≤ 200 + 1.08 SF Funds constraint for year 2
5 X1 + 6 X2 + 5 X3 + 10 X4 + 12 X5
+ 40 X6 ≤ 60 Power constraint
15 X1 + 20 X2 + 30 X3 +
35 X4 + 40 X5 + 60 X6 ≤ 120 Managerial constraint

 0 ≤ Xj ≤ 1 (j = 1,….8) and SF1 ≥ 0

 SOLUTION FOR THE MAIN ROOTS
 1.A robust planning process.
 2. Effective scheduling process.
 3. Methodology for introducing work.
 4.Execution process.
 5.Work behavior.

www.goldratt .com
 Project planning
Network building
Combined meeting
of project stakeholder
Identifying task,path,
resource deficiencies

Estimate potential
variability
Identify iteration
variability
 Project scheduling
Critical chain scheduling

Analyze task, resource dependencies

Project separates fixed & variable

component of work

Develop a critical path

Buffer
 Synchronized project work
introduction
 The act of introducing project work that
exceeds the organization’s capacity.
 Results further capacity reductions because of
increased bad multitasking
Project control and impact visibility
Senior Watches project buffer performance vs
manager progress along critical chain.

Assign resource to tasks’ using the

Functional associated project buffer status to
manager determine the relative urgency of
available tasks.

Project Monitor projects status using project

manager buffer and critical chain status.
 Appropriate work behavior
 RELAY RUNNER WORK ETHIC:
This behavior calls for people to begin work as soon as
they have been assigned to a task ‘to work
continuously until the task’s completion criteria have
been met, and to provide immediate notification of
that completion. Synchronized project work introduction
 The act of introducing project work that exceeds the

organization’s capacity.
 Results further capacity reductions because of

increased bad multitasking

 Conclusion
 Theory of constraints (TOC) is a overall
management philosophy. Every projects must
have constrain because of scarce resource,
time and competitiveness in decision making.
Theory of constraints focuses on maximization
of volume of production through bottleneck
process and short run optimization of
throughput contribution. Managing constraints
a company as the key to improving profit.
QUERY