A PROJECT ON

Theory of constraints

PRSENTED BY Mr. Babar Sagar Suresh (P.G.D.B.M. 2010-2012) ROLL NO.-P1003

Abstract
Sometimes known as constraint analysis, the theory of constraints (TOC) is a systematic and iterative approach to management that emphasizes adapting business practices in order to best cope with limitations, or constraints, that stand in the way of key objectives. The goal of TOC is to maximize the efficiency of a process selectively at the most critical points and thereby maximize profitability, quality, or other corporate objectives. TOC is often contrasted with traditional cost accounting or margin contribution approaches to problem solving, which, according to TOC proponents, may not truly optimize profits and the use of resources because they tend to have a unit focus rather than a system/process focus like TOC.

Keywords: theory of constraints, business practices, profitability, quality, processes

The title Theory of Constraints (TOC) adopts the common idiom "A chain is no stronger than its weakest link" as a new management paradigm. This means that processes, organizations, etc., are vulnerable because the weakest person or part can always damage or break them or at least adversely affect the outcome . Theory of Constraints (TOC) is an overall management philosophy introduced by Dr. Eliyahu M. Goldratt in his 1984 book titled The Goal, that is geared to help organizations continually achieve their goal.[1] The title comes from the contention 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. 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. The underlying assumption of Theory of Constraints is that organizations can be measured and controlled by variations on three measures: throughput, operating expense, and inventory. Throughput is money (or goal units) 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 Theory of Constraints states that every system must have atleast one constraint limiting its output. Consequences of the Theory: 1. The more complex the system, the less independent process paths exist, so the lower the number of constraints. (Usually, complex systems have only one constraint at a given time.) 2. A system of optimum processes can not be an optimum system. 3. An optimum system runs the constraint (or bottleneck) at optimum capacity (focused on the goal of the system), and all other process steps must have excess capacity.

The five focusing steps Theory of Constraints is based on the premise that the rate of goal achievement is limited by at least one constraining process. Only by increasing flow through the constraint can overall throughput be increased. Assuming the goal of the organization has been articulated (e.g., "Make money now and in the future") the steps are: 1. Identify the systems constraints. Example: look for inventory accumulating before the constraint [i.e. manufacturing cell]. Solution: the inventory buffer [work-in-process] represents the waste or inefficiency of the constraint. The greater the inefficiency, the bigger the constraint. 2. Exploit or maximize the efficiency of the systems constraint. Example: if a constraint has only 24 hours available per day and the system [all company operating expenses] costs $500,000 per month to operate then each hour of the constraint costs $1,041.67 [$500,000 / (24 hours * 20 business days per month)] per hour of use or down time. Solution: keep the constraints utilization as close to 100% as possible in order to squeeze every available hour out of the constraint. 3. Subordinate everything else to the constraint. Example: inventory results from other processes producing more than demand. Solution: keep as little inventory as possible by balancing the other processes output to only whats needed to fill the constraints needs. 4. Elevate the systems constraints [reduce unnecessary demand on the constraint]. Example: the constraint is the most expensive process in a system because it restricts throughput. Solution: ensure the constraint is only producing product committed for sale to a customer and not for inventory. Inspect before the constraint to ensure only good inputs are used. Find alternative resources or processes to reduce demand on the constraint.

5. If within the previous steps, a constraint has been broken, go back to step 1 [but do not allow inertia to cause a system constraint]. Example: the systems conditions change when constraints are broken violating old rules, or policies. Solution: review the systems components again including existing policies. Policy constraints typically have the greatest effect on limiting system performance.The five focusing steps aim to ensure ongoing improvement efforts are centered around the organization's constraints. In the TOC literature, this is referred to as the "Process of Ongoing Improvement" (POOGI). The five focusing steps aim to ensure ongoing improvement efforts are centered around the organization's constraints. In the TOC literature, this is referred to as the "Process of Ongoing Improvement" (POOGI).

Constraints
A constraint is anything that prevents the system from achieving more of its goal. There are many ways that constraints can show up, but a core principle within TOC is that there are not tens or hundreds of constraints. There is at least one and at most a few in any given system. Constraints can be internal or external to the system. An internal constraint is in evidence when the market demands more from the system than it can deliver. If this is the case, then the focus of the organization should be on discovering that constraint and following the five focusing steps to open it up (and potentially remove it). An external constraint exists when the system can produce more than the market will bear. If this is the case, then the organization should focus on mechanisms to create more demand for its products or services. Types of (internal) constraints Equipment: The way equipment is currently used limits the ability of the system to produce more salable goods/services. People: Lack of skilled people limits the system. Mental models held by people can cause behaviour that becomes a constraint. Policy: A written or unwritten policy prevents the system from making more.

The

concept

of

the

constraint

in Theory

of

Constraints differs

from

the constraint that shows up in mathematical optimization. In TOC, the constraint is used as a focusing mechanism for management of the system. In optimization, the constraint is written into the mathematical expressions to limit the scope of the solution (X can be no greater than 5). Please note: Organizations have many problems with equipment, people, policies, etc. (A breakdown is just that - a breakdown - and is not a constraint in the true sense of the TOC concept) The constraint is the thing that is preventing the organization from getting more Throughput (typically, revenue through sales). Buffers Buffers are used throughout Theory of Constraints. They appear as part of the EXPLOIT and SUBORDINATE steps of the five focusing steps. Buffers are placed before the key constraint, thus ensuring that the constraint is never starved. Buffers used in this way protect the constraint and should allow for normal variation of processing time and the occasional upset before the constraint.

Buffers can be a bank of physical objects before a work center, waiting to be processed by that work center. Buffers can also be represented by time, as in the time before work reaches the constraint. There should always be enough (but not excessive) work in the time queue before the constraint.

Buffers are not the small queue of work that sits before every work center in a system. The assumption in Theory of Constraints is that with one constraint in the system, all other parts of the system have sufficient capacity to keep up with the work at the constraint. In a balanced line, when one work center goes down, then the entire system must wait until that work center is restored. In a TOC system, the only situation where work is in danger is if the constraint is unable to process (either due to malfunction, sickness or a "hole" in the buffer). Applications The focusing steps, or this Process of Ongoing Improvement has been applied to Manufacturing, Project Management, Supply Chain/Distribution generated specific

solutions. Other tools (mainly the "Thinking Process") also led to TOC applications in the fields of Marketing and Sales, and Finance. The solution as applied to each of these areas are listed below. Operations Within manufacturing operations and operations management, the solution seeks to pull materials through the system, rather than push them into the system. The primary methodology use is Drum-Buffer-Rope (DBR)[6] and a variation called Simplified Drum-Buffer-Rope (S-DBR).[7] 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 drum. Traditional DBR usually calls for buffers at several points in the system: the constraint, synchronization points and at shipping. S-DBR has a buffer at shipping and manages the flow of work across the drum through a load planning mechanism. The rope is the work release mechanism for the plant. Orders are released to the shop floor at one "buffer time" before they are due. In other words, if the buffer is 5 days, the order is released 5 days before it is due at the constraint. Putting work into the system earlier than this buffer time is likely to generate too-high work-in-process and slow down the entire system. Supply chain / logistics In general, the solution for supply chains is to create flow of inventory so as to ensure greater availability and to eliminate surpluses. The TOC distribution solution is effective when used to address a single link in the supply chain and more so across the entire system, even if that system comprises many different companies. The purpose of the TOC distribution solution is to establish a

decisive competitive edge based on extraordinary availability by dramatically reducing the damages caused when the flow of goods is interrupted by shortages and surpluses. This approach uses several new rules to protect availability with less inventory than is conventionally required. Before explaining these new rules, the term Replenishment Time must be defined. Replenishment Time (RT) is the sum of the delay, after the first consumption following a delivery, before an order is placed plus the delay after the order is placed until the ordered goods arrive at the ordering location. 1. Inventory is held at an aggregation point(s) as close as possible to the source. This approach ensures smoothed demand at the aggregation point, requiring proportionally less inventory. The distribution centers holding the aggregated stock are able to ship goods downstream to the next link in the supply chain much more quickly than a make-to-order manufacturer can. Following this rule may result in a make-to-order manufacturer converting to make-to-stock. The inventory added at the aggregation point is significantly less than the inventory reduction downstream. 2. In all stocking locations, initial inventory buffers are set which effectively create an upper limit of the inventory at that location. The buffer size is equal to the maximum expected consumption within the average RT, plus additional stock to protect in case a delivery is late. In other words, there is no advantage in holding more inventory in a location than the amount that might be consumed before more could be ordered and received. Typically, the sum of the on hand value of such buffers are 25-75% less than currently observed average inventory levels. 3. Once buffers have been established, no replenishment orders are placed as long as the quantity inbound (already ordered but not yet received) plus the quantity on hand are equal to or greater than the buffer size. Following this rule causes surplus inventory to be bled off as it is consumed. 4. For any reason, when on hand plus inbound inventory is less than the buffer, orders are placed as soon as practical to increase the inbound inventory so that the relationship On Hand + Inbound = Buffer is maintained. 5. To ensure buffers remain correctly sized even with changes in the rates of demand and replenishment, a simple recursive algorithm called Buffer Management is used. When the on hand inventory level is in the upper third of the buffer for a full RT,

the buffer is reduced by one third (and dont forget rule 3). Alternatively, when the on hand inventory is in the bottom one third of the buffer for too long, the buffer is increased by one third (and dont forget rule 4). The definition of too long may be changed depending on required service levels, however, a general rule of thumb is 20% of the RT. Moving buffers up more readily than down is supported by the usually greater damage caused by shortages as compared to the damage caused by surpluses. Once inventory is managed as described above, continuous efforts should be undertaken to reduce RT, late deliveries, supplier minimum order quantities (both per SKU and per order) and customer order batching. Any improvements in these areas will automatically improve both availability and inventory turns, thanks to the adaptive nature of Buffer Management. A stocking location that manages inventory according to the TOC should help a non-TOC customer (downstream link in a supply chain, whether internal or external) manage their inventory according to the TOC process. This type of help can take the form of a Vendor Managed Inventory (VMI). The TOC distribution link simply extends its buffer sizing and management techniques to its customers inventories. Doing so has the effect of smoothing the demand from the customer and reducing order sizes per SKU. VMI results in better availability and inventory turns for both supplier and customer. More than that, the benefits to the non-TOC customers are sufficient to meet the purpose of capitalizing on the decisive competitive edge by giving the customer a powerful reason to be more loyal and give more business to the upstream link. When the end consumers buy more the whole supply chain sells more. One caveat should be considered. Initially and only temporarily, the supply chain or a specific link may sell less as the surplus inventory in the system is sold. However, the immediate sales lift due to improved availability is a countervailing factor. The current levels of surpluses and shortages make each case different. Finance and accounting The solution for finance and accounting is to apply holistic thinking to the finance application. This has been termed throughput accounting.[8] 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). Totally Variable Cost usually considers the cost of raw materials that go into creating the item sold. Project management Critical Chain Project Management (CCPM) is utilized in this area.[9] CCPM is based on the idea that all projects look like A-plants: all activities converge to a final deliverable. As such, to protect the project, there must be internal buffers to protect synchronization points and a final project buffer to protect the overall project. Marketing and sales While originally focused on manufacturing and logistics, TOC has expanded lately into sales management and marketing. Its role is explicitly acknowledged in the field of sales process engineering.[10]For effective sales management one can apply Drum Buffer Rope to the sales process similar to the way it is applied to operations (see Reengineering the Sales Process book reference below). This technique is appropriate when your constraint is in the sales process itself or you just want an effective sales management technique and includes the topics of funnel management and conversion rates.

Case Study 1:

But you dont want too much buffer inventory that can clog up the operation, and actually again reduce the output of the constrained process. That, in fact, is exactly what was happening at Intel. So, said Edwards, you need to monitor the process and send feedback upstream the rope to pull enough work-in-process (in Intels case picked and staged bulk product) to keep the constrained packing operation fully utilized, but not awash in product. Edwards said Intel used several tools to send the demand signals, including low tech but effective tools such as walkie-talkies, as well as electronic signals based on scanning activity by pickers with Radio Frequency devices. (See figure nearby.) Flow, not Utilization Edwards noted that nearly all distribution centers focus heavily on worker utilization keeping associates fully busy and minimizing indirect time (work not directly associated with processing goods or orders). He suggested that many operations would benefit from a stronger focus on product flow even at the cost of sometimes letting workers in certain areas be idle for periods of time.

We were rewarding and incenting our pickers for their output, even though the downstream packing process couldnt handle that volume, Edwards said. As a result, inventory piled up. When the new process was implemented, results were seen almost immediately, and eventually delivered substantial improvements in many areas across eight Intel DCs: Average order cycle times decreased by 75% Variability in cycle times decreased at a similar level Total throughput actually increased somewhat, as the constrained packing area was more fully utilized by better buffer management These improvements were achieved with no investment other than travel costs to facilities. At the beginning, Intel used a three-hour buffer before the packing stations, but over time was able to reduce it to just a one hour planned buffer. A planned buffer under one hour sometimes led to the packing stations not having work.[2]

Applications The focusing steps, and the Theory of constraints has been applied to Manufacturing, Project Management, Supply Chain / Distribution generated specific solutions. Advantages Improves capacity decisions in the short-run Avoids build up of inventory Aids in process understanding Avoids local optimization Improves communication between departments

Disadvantages Negative impact on non-constrained areas Diverts attention from other areas that may be the next constraint Temptation to reduce capacity Ignores long-run considerations

Introduction of new products Continuous improvement in non-constrained areas May lead organization away from strategy Not a substitute for other accounting methods

Case Study 2: Every individual organization faces at least one constraint. So it is not difficult to find examples of constraints. For example, I may not have time to study thoroughly for every subject and to go out with my friends on the weekend, so time is your constraint. Since a constraint prevents you from getting more of what you want, the theory of constraints (TOC) maintains that effectively managing the constraint is the key to success. As an example, long waiting surgery is a chronic problem in the National Health Service. For example up to 100 referrals from general practitioners can be processed in a day. 100 patients per day 100 patients day 50 per patients day 150 per patients day Add to surgery waiting list 15 per patients day per 60 140

patients per day patients per day

General practitioner referral

Appoin t made

Outpati ent visit

Surgery

Followup visit

Discharg e

Processing surgery patients at an NHS facility This diagram originally appeared in the February 1999 issue of the U.K. Magazine Health Management The constraint, or bottleneck, in the system is determined by the step that has the smallest capacity--in this case surgery. The total number of patients processed through the entire system cannot exceed 15 per day-the maximum number of patients that can be treated in surgery.

Case study 3: A leading scooter factory of northern India had an assembly line, in which there was a special purpose machine (SPM). It had four workstations. Station I was for loading/unloading of the parts (which is a crank shaft). The second, third and fourth workstations were for various operations in a sequential order. These operations were drilling, spot-facing, chamfering, boring and counter boring. The company hired a consultant-team. The consultants observed the entire assembly line. SPM was found to be heavily loaded. The cost of duplicating SPM was too high. The company wished to increase the production capacityof the plant (which was around 30,000 two-wheelers). The cycle-time on SPM was about 71 seconds per part. It was lesser elsewhere in the assembly line. Thus, SPM was identified as the bottleneck. The consultants deliberated on the working on SPM and designed a combination tool, which was sufficient for all the operations, earlier performed on the three stations (Stations 2, 3 and 4).

Present SPM is the Bottleneck

(b) Proposed change in SPM: Handling of Bottleneck Machine by introducting two combination tools at stations 2 and 4. Figure: An Industrial example of TOC-application

This improvement in SPM, by introducing two combinations tools (of same type) at stations 2 and 4 and two loading/unloading stations at stations 1 and 3, virtually increased the throughput by nearly seventy lessons of this case-example is: reduced setup time increases the throughput. By combining three operations, which were easier performed on three stations, there is a substantial saving in non-value-added time of production. The bottleneck capacity increases dramatically due to more time available for value-added operations. Incidentally, once this SPM ceased to be the bottleneck, another process in the assembly line would become the constraint. The company may now wish to attack the emerging bottleneck machine/operation for increasing the throughput to a still higher level. The manufacturing system may be considered to be analogous to the chain having different links. The chain is as strong as its weakest link. It is important to improve the strength of the weakest link for improving the strength of chain. Same is true for any system. In the context of a manufacturing system, the concept of constraint, and the analogy of chain provides following insights:

Throughput of system is limited by the critical (or, weakest) link in the system, which is the constraint of the system. It is of no great significance where the weakest link or constraint is located. As soon as this link fails, the entire system will fail. Manufacturing system, like the chain, should be considered as a whole. Due to bottleneck (or, constraint): Production upstream will produced excess inventory and generate queues. Any queue is a sign of inefficiency, which must be removed. Production (or operation) downstream will remain starved. This will cause the under-utilization of manufacturing/human resources. The under-utilization is again a sign of inefficiency, which must be removed. Due to above reasons, the thrust should be on continuous identification and removal of constraints. This gives rise to the Theory of Constraints.

Case study 4. The Lessons plant of Baxter International makes medical products such as sterile bags. Management of the plant is actually aware of the necessity to actively manage its constraints. For example, when materials are a constraint, management may go to a secondary vendor and purchase material at a higher cost than normal. When a machine is the constraint, a weekend shift is often added on the machine. If a particular machine is chronically the constraint and management has exhausted the possibilities of using it more effectively, then additional capacity is purchased. For example when the constraint was the plastic extruding machines, a new extruding machine was ordered. However even before the machine arrived, management had determined that the constraint would shift to the blenders once the new extruding capacity was added. Therefore a new blender was already planned. By thinking ahead and focusing on the constraints, management is able to increase the plant's real capacity at the lowest possible cost.

Case study 5.. Daufel Enterprises is a small business that produces hand-tied fishing flies. A fishing fly consists of feathers, furs, and synthetics placed on a hook and seamed with

thread. The fly tier constructs these flies to represent aquatic organisms upon which fish feed. Quality and speed are two issues that conflict in the fly-tying industry. The faster a tier can construct a fly, the more profitable. However, if speed is the only focus, quality will suffer. In the book, Patterns, Hatches, Tactics, and Trout (Vivid Publishing, 1995), popular fly fishing writer Charles Meck wrote the following about Daufel Enterprises: Doug and Dan Daufel have tied flies commercially for the past five years. The young age of these identical twins from Dayton, Ohio, belies their tremendous fly-tying ability. They tie some of the best patterns I have seen in my forty-plus years of fly fishing and tying flies. They have tied flies for more than ten years and now tie commercially some of the finest flies I've ever seen. In essence, the Daufel brothers must personally tie the flies or quality will suffer. In their business, therefore, the brothers' time is the constraint factor.

Exhibit 1 illustrates the contribution margin (throughput per dozen) for the five most popular flies constructed by the Daufel brothers. In addition, the brothers have quantified the labor constraint for each fly to determine the throughput per labor hour. As indicated by Exhibit 1, all flies have the same sales price and shipping cost, but differ in the material cost per unit and the time required to tie the flies. Exhibit 2 compares the

apparent profitability of the various flies based on traditional contribution margin analysis with the profitability of the various flies based on constraint analysis.

To perform the constraint analysis, the brothers had to monitor their own time spent working on each type of fly. They intuitively knew the Thorax Dun required more time than the others to tie. They also knew it had the lower contribution margin, so they were not surprised when the results indicated it had the lowest throughput per labor hour. However, they were surprised by other results of the throughput analysis. The Compara Dun, which has the highest contribution margin, ranked next to last based on throughput per labor hour because it required the second highest amount of the brothers' time. The Woolly Bugger, which had the next to lowest contribution margin, had the second highest throughput per hour. Because of the high quality of their work, the Daufel brothers are able to sell essentially all of their production of any model of fishing fly. Prior to performing the constraint analysis, the brothers had concentrated on Compara Duns and Pheasant Tails. The constraint analysis indicated that the brothers should switch their productive efforts from the Compara Dun to the Woolly Bugger. To meet the needs of their best customers and continue with their own creativity, the brothers desired to continue producing all of the current models, while increasing their profitability. With this objective in mind, it was suggested that the brothers explore the possibility of increasing the price of the less profitable flies.

Constraint analysis can be used to determine the sales price required so that each model of fly would have the same $29.39 throughput per labor hour. This analysis reveals that the required prices for the Thorax Dun ($20.72 per dozen) and Compara Dun ($16.64 per dozen) were higher than customers would probably be willing to pay. The required prices for the Hare's Ear ($14.11 per dozen) and Woolly Bugger ($12.53 per dozen) would probably not substantially decrease demand. This additional analysis suggests that the Daufel brothers should consider raising the price of the Thorax Dun, Compara Dun, and Hare's Ear to $14.00 per dozen and the price of the Woolly Bugger to $12.50 per dozen. Exhibit 3 shows the throughput per dozen based on the new sales prices.

Sales and production records for Daufel Enterprises prior to performing the constraint analysis were not detailed enough to allow them to accurately determine the expected profit increase as a result of the proposed changes. However, simply switching 500 productive hours per year from the Compara Dun to the Pheasant Tail would result in increased profitability of over $4,600 per year. The other proposed changes in production and price would also likely have positive effects on Daufel Enterprises' profitability. Use of Constraint Analysis Daufel Enterprises' constraining factor is, like many small businesses, the time of one or a few key individuals. This is certainly true in most service businesses. Like the Daufel brothers, owners or managers of small businesses normally have an intuitive feel

for which products are more profitable. Often a simple constraint analysis will allow them to quantify their intuitive feel and make precise adjustments. CPAs that service small businesses can help their clients become more profitable by assisting them with the analysis. CPAs can also use constraint analysis to improve their own firm's profitability. The constraining factor for CPA firms is often partner-level time required to review work before it is submitted to the client. Some services that are priced higher often require more partner time to complete the review and ultimately may not be as profitable as lower-priced services. Since accounting firms normally keep track of time spent on individual jobs, the data is readily available for the analysis. [4]

Case Study 6. It seems Texas Die Casting had spent numerous hours sorting one customers appliance valves for nicks on the seal beads. It was our #1 cause for sorting. Furthermore, our customers frequently found seal bead nicks as well. A team of interested employees met to determine the cause and cure. The initial thoughts were that they came from the Die Cast Department (its' not our fault), or possibly from trim or shot blast. An experiment was conducted which proved the majority of the seal bead damage occurred at the shot blast area. Again, the causes had to be explored. The potential causes were listed as not enough ballast, too many parts, too few parts or just the handling of the parts. The cure turned out to be adding more parts to the shot blaster to avoid the parts falling so far while tumbling. This resulted in the nicks on the seal beads going away, as well as a productivity gain of 32%. Another great TOC success story!

Case Study 7.

Pat Burke - An Accounting Constraint

Identify - It was taking too long to close books at the end of the month (5 days) . Labor allocations were inaccurate. Overtime was being worked on this effort monthly. Exploit - Resources were studied and were found to be misused as follows: a) running two accounting systems (B&L, IBM) b) lots of manual worksheets c) bookkeeper overloaded (closing and invoicing) d) B&L was improperly allocating labor Subordinate - Team work accomplished the following: a) improved B&L financial statement and stopped running IBM b) manual worksheets were made electronic c) some closing activities absorbed by controller, and B&L system improved invoicing (Nan) d) changed labor allocation method Elevate - The new methods resulted in: a) 12 hours saved b) 17 hours saved c) bookkeeper could focus on closing, no overtime d) receiving proper labor figures for improvement and closing now takes three days versus five (40% saved)

Conclusion: Many have already suggested that if you had to summarize TOC in a single word, the best word is "focus." The essence of the core principles of TOC (5 steps, thinking processes, etc.) is that they provide a way to separate the important few from the trivial many. I agree this is at the essence of TOC, and in and of itself is extremely powerful.

Following the principles one is able to look at a large, highly complex organization, no matter what it does, and define where the key points are to improve it. Without a similar insight, one is almost forced into the historical solution for dealing with complex systems--breaking them down into some smaller subsystems that we feel we can get our hands around. We know that this creates distortion, usually large distortions, because the individual components of an organization are not usually smaller versions of the whole, they are "pieces" of the whole. And as soon as we try to optimize the little parts we have divided the organization into, we lose touch with how they are supposed to work together.

The fact that TOC provides a process and a logic to effectively see where to focus without distorting the picture is enormously powerful. If we know where are the weakest links, the constraints, in our system we know which actions will lead to improving the organization, and which will not. It gives us a methodology for brushing aside those things which will not improve the whole, those many things that occupy most of people's time.

References

1. http://www.accountingformanagement.com/theory_of_constraints.htm 2. httpwww.scdigest.comassetson_target07-10-28-1.phpcid=1319

3. www.pinnaclestrategies.com,articles,CPI%20Intel%20TOC%20Lean%20Six %20Sigma%20May%202008 4. http://www.nysscpa.org/cpajournal/1999/0499/departments/d530499.htm 5. Eric Noreen, Debra Smith, and Jams Mackey, The Theory of Constraints and its Implications for Management Accounting 6. http://wiki.answers.com/Q/EXAMPLES_Three_companies_has_successfully_ used_THEORY_OF_CONSTRAINTS 7. http://www.tocforme.com/5step/old/sorttime.html 8. http://www.tocforme.com/5step/old/dcm14.html 9. http://www.tocforme.com/5step/old/hydraulicfluid.html 10. http://www.tocforme.com/5step/old/5stepofficesupplies.html 11. http://www.tocforme.com/5step/old/5stepsuccesses.html 12. www.synchronix.com,results-testimonials,theory-of-constraints-case-studies 13. www.scienceofbusiness.com 14. http://www.tocforme.com/5step/old/shotsperhour.html 15. www.synchronix.com 16. www.orsnz.org.nz,conf33,papers,p79 17. http://en.wikipedia.org/wiki/Theory_of_Constraints 18. http://www.grafix9000.com/documents/CCI_Scheinkopf.pdf 19. http://www.realization.com/pdf/Applying_TOC_Principles_and_Lean_Thinki ng_at_Marine_Corps_Maintenance_Center.pdf 20. http://ptgmedia.pearsoncmg.com/images/9780132333122/samplechapter/0132 333120_CH03.pdf 21. http://www.insyte-consulting.com/files/PDF/TOC_Article_Nov-Dec_20052.pdf 22. http://www.srv.net/~lleach/TOC/defined.htm 23. http://www.tocc.com/Articles/FadFuture.PDF 24. http://www.me-ebook.co.cc/2010/06/theory-of-constraints-handbook.html 25. http://www.dbrmfg.co.nz/Overview%20Preface.htm