Theory of Constraints (TOC) is an overall management philosophy introduced by Dr. Eliyahu M. Goldratt that is geared towarding help organizations continually achieve their goals. The theory contends that any manageable system is limited in achieving more of its goal by a very small number of constraints and that there is always at least one constraint. A constraint is anything that prevents the system from achieving more of its goal. The underlying assumption of TOC is that organizations can be controlled by variations on three measures: throughput, operating expense, and inventory. Throughput is money generated through sales. Inventory is money the system invests in order to sell its goods and services. Operating expense is all the money the system spends in order to turn inventory into throughput
The TOC process seeks to identify the constraint and restructure the rest of the organization around it, through the use of the Five Focusing Steps.
- Identify the constraint.
- Decide how to exploit the constraint.
- Subordinate all other processes to above decision.
- Elevate the constraint
- If the constraint has moved, return to Step 1.
The five focusing steps aim to ensure ongoing improvement efforts are centered around the organization’s constraints. Though Goldratt is still the main driving force behind the development and practice of TOC (sometimes labeled “constraint management”), there is a network of individuals and small companies loosely coupled as practitioners around the world. TOC has a large body of knowledge with a strong guiding philosophy of growth
