INTRODUCTION

• What is
TOC ??
 What is the Theory of Constraints?

 Developed by Eliyahu Goldratt in the mid 1980’s with his business novel The Goal.

 A constraint is any factor that limits the organization from getting more of whatever
it strives for, which is usually profit.

 The Theory of Constraints is an organizational change method that is focused on

profit improvement

 The essential concept of TOC is that every organization must have at least one
constraint.
 TOC STEP BY
STEP

• TOC Step:

1) Identify the organization Constraint(s)

2) Exploit the binding Constraint(s)
3) Subordinate everything (step 2)
4) Elevate the binding Constraint(s)
5) Repeat the process
The Five Steps of the Theory of Constraints

 Identify the System Constraint

The part of a system that constitutes its weakest link can be either physical or a policy.

 Decide How to Exploit the Constraint

Goldratt instructs the change agent to obtain as much capability as possible from a constraining component, without
undergoing expensive changes or upgrades.

 Subordinate Everything Else

The non-constraint components of the system must be adjusted to a "setting" that will enable the constraint to operate at
maximum effectiveness. Once this has been done, the overall system is evaluated to determine if the constraint has shifted to
another component. If the constraint has been eliminated, the change agent jumps to step five.

 Elevate the Constraint

"Elevating" the constraint refers to taking whatever action is necessary to eliminate the constraint. This step is only considered
if steps two and three have not been successful. Major changes to the existing system are considered at this step.

 Repeat the same process

Goldratt also provides a foundation for achieving change through TOC by defining a set of
three essential measurements that drive the change process.

The following measures are the only way to increase profit through
TOC:

 Throughput

 Inventory

 Operating Expense
 INTRODUCTI
O N

• TOC Focus on
3Activities
– Throughput
– Inventory
– Operating Expense
Theory of Constraints
Case Study
BACKGROUN
D
BACKGROUN
D

• Founded in :1970
• Company Type : Manufacturing
• Product : Semiconductor,
Fiber Optic, Fiber
Cable.
THE
PROBLEM

1. How Lucent become more productive ?

2. How Lucent improve their
performance ?
3. How Lucent can Increase their profit ?
 Case Study
Problem Simulation
TOC IMPLEMENTATION

Source: Tocca.com
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TOC
Implementation

Step 1: Identify
Constraints
TOC
Implementation

Step 2: Squeeze or exploit the

constraint
TOC
Implementation

Step 3: Subordinate to the

constraint “Remove all
excessive WIP”
TOC
Implementation

Step 3: Subordinate to the

constraint
TOC
Implementation

Step 4: Elevate the

constraint
TOC
Implementation

Step 5: Repeat the

process
TOC
Implementation

After Implementing TOC

Throughput from : 10/ Day
Become : 14/ Day
TOC
RESULT“LUCENT”

1. The Product can developed twice

Fast
2. The Project can be completed on time
3. Increase in profit