Theory of constraints (TOC) is described first by E.M. Goldratt in a novel – The Goal. This book describes the philosophy & its accompanying methodology (TOC) by using the story of a fictitious plant manager as he struggles to make the plant profitable.
TOC is an approach to business which focuses on achieving the goal of that business that is To make more money now & then in future. Goldratt stated that a business like any system operates with constraints. A constraint is defined as anything that limits the performance of a business relative to its goal.
Another important aspect of TOC is its unique approach to improvement that does not focus on cost reduction but instead on increasing throughput. Under TOC throughput is defined as the money generated by the system through sales. It is throughput value which represents ( Seling price – raw material cost) the value added to the product by system.
TOC strives to continuously increase the money generated by the system.
The FIVE step process for improving a system by focusing on the constraints of that system.
Step1: Identify the primary constraint of the system.
Step2: Decide how to exploit the constraint?
Step3: Subordinate all other actions to exploit the constraints.
Step4: Determine if it is necessary to elevate the constraints.
Step5: If constraint is broken in the process step return to the first step & repeat the process.
TOC can play important role in successful implementation of TPM to reduce downtime cost of maintenance & increase throughput.
This results in appropriate increase in productive capacity i.e. increase in the overall rate of throughput & reduction in starvation & blockage at the bottleneck of equipment.