The Theory of Constraints (TOC), developed by Eliyahu Goldratt, is a method for organizational change focused on profit improvement by identifying and managing constraints. The process includes five steps: identifying constraints, exploiting them, subordinating other processes, elevating the constraints if necessary, and repeating the process. A case study on Lucent demonstrated the successful implementation of TOC, leading to increased throughput, faster product development, timely project completion, and higher profits.

1. INTRODUCTION
• What is TOC ??
BY: Muhammad Kashif

2. What is the Theory of Constraints?
 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.
 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.

3. TOCSTEP BYSTEP
• 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

4. 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

5. 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

6. INTRODUCTIO
N
• TOCFocuson 3Activities
– Throughput
– Inventory
– Operating Expense

7. Theory of Constraints
Case Study

8. BACKGROUND

9. BACKGROUND
• Founded in
• Company Type
• Product
:1970
: Manufacturing
: Semiconductor, Fiber
Optic, Fiber Cable.

10. THE PROBLEM
1. How Lucent become more productive ?
2. How Lucent improve their performance ?
3. How Lucent can Increase their profit ?

11. Case Study
Problem Simulation

12. TOC IMPLEMENTATION
Source: Tocca.com

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26. TOC Implementation
Step 1:Identify Constraints

27. TOC Implementation
Step 2:Squeeze or exploit the constraint

28. TOC Implementation
Step 3:Subordinate to the constraint
“Remove all excessive WIP”

29. TOC Implementation
Step 3:Subordinate to the constraint

30. TOC Implementation
Step 4:Elevate the constraint

31. TOC Implementation
Step 5:Repeat the process

32. TOC Implementation
After Implementing TOC
Throughput from : 10/ Day
Become : 14/ Day

33. TOCRESULT“LUCENT”
1. The Product can developed twice Fast
2. The Project can be completed on time
3. Increase in profit