Assignment on The Theory of Constraints

The theory of constraints can be described as a system management philosophy introduced by Eliyahu M. Goldratt in the early 1980s. It is a management concept that is specifically designed to provide continual improvement. The underlying principle of the theory of constraints is that constraints set limits of performance for any system. The main focus of this theory is on the identification of constraints in a process or business and exploiting and eliminating these constraints.

The majority of the organization only entails a few constraints. The supporters of this theory suggest that managers ought to concentrate on effectively managing the capability and capacity of these constraints if they intend to enhance the organization’s profitability.

The Theory of Constraints

The theory of constraints can also be characterized as a concept that focuses on the role of constraints in limiting the organization’s performance. This theory encourages managers to attack the constraints to accomplish their fundamental goal, i.e., to generate revenue.

Well-designed TOCs drive management’s attention to the factors that impede the system’s performance. The theory further emphasized performance within the defined constraints of the product offerings and existing processes. By applying TOC, tremendous change can be observed in direction, focus and management.

The theory of constraints is grounded on the premise that the organization’s performance against the defined goals can be determined and managed by variations in the three measures: throughput (money from sales), operating expense (money spent converting investment to throughput) and investment (money to be invested in the business).

Focusing on the need to maximize the throughput, TOC emphasizes comprehending and managing the constraints between the firm and accomplishing its goals. After the goals are identified, the TOC assigns all the non-constraining resources to the requirements of its main constraints.