This document discusses the Theory of Constraints (TOC) developed by Eliyahu Goldratt. It introduces key concepts in TOC like bottlenecks, throughput, inventory, and operational expenses. It explains that bottlenecks limit the maximum speed of a process and must be identified and improved. The five focusing steps of TOC are identified as identifying the constraint, deciding how to exploit it, subordinating everything else to dealing with the constraint, elevating the system's constraints, and repeating the process if the constraint changes. Real-world examples are provided to illustrate how TOC can improve productivity and profitability.

2. • “Genius” , “Guru to
industry”
• Management- a Science not
an Art
• Introduced the concept of
ongoing improvement.

5. • Net Profit
• Return On Investment
• Cash Flow

6. •On being called by Alex, Jonah gave
him the 3 money measurements:
Increase
Throughput
Decrease
Inventory
Decrease
Operational Expense

7. •Gathers focus group for
operational solutions
•Several concepts which are
polar opposites from general
business operations.

8. •Jonah reveals that a balanced
plant is where the capacity of
every resource is balanced
exactly with demand from the
market.

9. •A series of events
•Predictive information that
cannot be determined precisely.
•Interlinked.

10. •Alex takes his son, David, on a
hike with his Boy Scout troop.
•Uses this hike to understand the
two phenomena.
•Used to understand theory of
bottlenecks later.

11. •Final throughput-measured by rate
of slowest operation.
•Inventory should be minimized.
•Operational expense must be
conserved.

12. •Bottleneck - Capacity = or <
than the demand placed upon it
•Non-bottleneck - Capacity is >
than the demand placed upon it.

13. •Maximum speed = speed of the
slowest operation
•Bottlenecks must be identified
and improved if the process is to
be improved.

14. •Allows management to take action
to alleviate the constraint in the
future
•Reduce cycle time
•Improve manufacturing cycle
efficiency (MCE)

15. •Make sure bottleneck time is not
wasted
•Take the load off the bottlenecks
•Quality controls

17. Types of elapsed time
Setup
time
Process
time
Queue
time
Wait
time

18. • 15% increase on sales promised
• Cutting the batch sizes to half.
• Gets his plants improvement
marketed

19. • Manages a huge contract
• Accomplishes an increase of
about 17%
• Promoted to the division head.

20. Define
Goal
Cut batch
sizes in half
Define
Measurements
Increase
Sales
Reduce lead
times
Determine
Bottlenecks
Relieve stress
from bottlenecks
and increase
productivity of
bottlenecks

21. • Minimum one constraint at a
time in a system
• Over time constraints may
change
• The 5 focusing steps of theory of
constraints are:

22. If a constraint is
broken in Step
4, go back to Step
1.
Subordinate everything
else to the decisions of
Step 2.
Elevate the
system’s
constraints
Decide how to exploit
the system’s constraints.
Identify the system’s
constraints.

23. • Improves capacity decisions in
the short-run
• Avoids build up of inventory
• Improves communication
between departments

24. •Negative impact on nonconstrained areas
•Ignores long-run considerations
•Not a substitute for other
accounting methods

25. • Global principles of
manufacturing
•Helps to bring order and avoid
chaos
•Not only applicable to
manufacturing world

26. • Each concept and theory
elongated
•Extremely technical
•Lots of thinking required.
Difficult to read at one go