Operations Management: An Integrated Approach, 5th Edition

THEORY OF CONSTRAINTS

Theory of constraints (TOC)

A management philosophy that extends the concepts of OPT.

Internal resource constraint

A regular bottleneck.

Market constraint

The condition that results when market demand is less than production capacity.

Policy constraint

The condition that results when a specific policy dictates the rate of production.

The theory of constraints (TOC) is an extension of OPT. According to the TOC, a system's output is determined by three kinds of constraints: internal resource constraint, market constraint, and policy constraint. An internal resource constraint is the classic bottleneck discussed in the previous section. A market constraint results when market demand is less than production capacity. Since companies do not want excess inventory buildup, the market determines the rate of production. Policy constraint means that a specific policy dictates the rate of production (for example, a policy of no overtime).

TOC tries to improve system performance by focusing on constraints. Improvement is measured financially and operationally. Financial measurements ...