Theory of Constraints

1
Theory of Constraints

• The Concept
• The Process
• The Measures

2
The Concept

• Presented in Eliyahu Goldratts The Goal
• The goal of a business is to make
  moneyconsistent with customer satisfaction
• Continuous flow
• Avoid the herbies
• Eliminate the bottlenecks first

3
The Process

• Identify the constraints
• Exploit the constraints (reduce the bottlenecks)
• Subordinate everything else
• Elevate the constraints (remove the bottlenecks)
• Reiterate the process

4
The Measures

• Throughput - Net income
• Inventory - ROI
• Ops. Expenses - Cash Flow

5
Lous Moral Dilemma

• What caused it?
• How did he handle it?
• How would you handle it?