390. Theory of Constraints
Theory of Constraints (TOC, Goldratt 1984): a management philosophy that says system performance is determined by the bottleneck (the constraint). Identify the bottleneck, exploit it, subordinate everything else.
390.1. The five focusing steps
- Identify the constraint — the bottleneck resource limiting system throughput
- Exploit — maximize utilization of the bottleneck (no idle time, perfect quality, no setups)
- Subordinate — every other resource serves the bottleneck (don’t push more than the bottleneck can absorb)
- Elevate — invest to increase bottleneck capacity (add equipment, overtime, etc.)
- Return to step 1 — when the bottleneck moves elsewhere, repeat
390.2. Throughput accounting
TOC replaces traditional cost accounting (which over-emphasizes unit costs) with three measures:
- Throughput (T): sales revenue minus truly variable costs
- Investment / Inventory (I): money tied up in the system
- Operating Expense (OE): money to convert inventory into throughput
Net profit:
Return on investment:
Goal: increase first, decrease second, decrease third. Traditional accounting often prioritizes OE reduction, which can hurt if you cut the bottleneck.
390.3. Product mix problem (with constraint)
Given multiple products competing for a single bottleneck, maximize total throughput:
where is bottleneck-minutes per unit of product . Optimal: produce in decreasing order of (throughput per bottleneck minute).
This is a single-constraint LP — explicit solution by ratio ranking.
390.4. Drum-Buffer-Rope (DBR) scheduling
A scheduling discipline derived from TOC:
- Drum: the bottleneck sets the pace
- Buffer: small protective inventory in front of the bottleneck — never let it starve
- Rope: communicates bottleneck demand backward to release new work into the system (a “rope” tying the entry point to the bottleneck)
DBR is essentially CONWIP but with the WIP cap chosen to keep just the right amount of buffer in front of the bottleneck.
390.5. Compared to Lean
| TOC | Lean / Toyota | |
|---|---|---|
| Focus | Bottleneck — what limits throughput | Waste — what doesn’t add value |
| Inventory at bottleneck | Buffer (protective) | Reduce (Just-in-Time) |
| Improvement target | Throughput per bottleneck-minute | Cycle time, waste elimination |
| Best for | Complex job shops, bottleneck-driven systems | Repetitive manufacturing, low variability |
Many production systems benefit from both — Lean to reduce variability and waste, TOC to manage the residual bottleneck. The two are complementary, not competing.
390.6. See also
- Factory Physics — quantitative bottleneck analysis
- CONWIP — DBR’s modern equivalent
- Line Balancing
- Best/Worst/PWC