working on an assignment on the theory of constrains by Eli Goldratt


  • apply the fundamental concepts of the Theory of Constraints as presented by Eli Goldratt in The Goal. You should define throughput, inventory and operating expense in the context of an organization (work, social or religious) of which you are a member. In addition, you should identify the most serious bottleneck this organization faces and apply the 5-step process outlined in The Goal to break the bottleneck and increase the organization’s throughput.

    The organization selected does not have to be engaged in manufacturing. It also doesn’t have to be an entire organization. For large organizations, a unit of the organization can be selected. It is important that you select an organization or a unit of a larger organization with which you are very familiar.

    As a reference, here are the definitions discussed in The Goal:

    Throughput: The rate at which the system generates money through sales.
    Inventory: All the money the systems invests in things it intends to sell, including facilities and equipment, which are likely to be sold off as scrap after they obsolesce beyond their useful lives.
    Operating Expense: All the money the system spends to turn Inventory into Throughput.
    Bottleneck: The Theory of Constraints likens each system (i.e., an entire organization or a unit of a larger organization) to a chain, or a network of chains. In any chain there is one weakest link, which limits the performance of the entire chain. This weakest link is the system’s bottleneck.


Please remember to clearly breakdown each of the 5 steps in your conference posting to demonstrate your understanding of TOC.



Examples for TOC




Let’s assume that you are employed as an engineer in a research and development unit of a large company. This unit should be the focus of this question and not the larger organization. To successfully apply TOC, it is important that you know the selected organizational unit very well. First, identify the goal of the unit in such a way that it can be specifically measured. For example, the goal of the organization in the example may be to complete as many research projects as possible in a specific period of time. Throughput could be measured by the number of projects completed. The goal could be stated a little differently. It could be to reduce the time required to complete one project.
The throughput would be defined as the time required to complete one project.
Inventory would be the number of projects in progress, and the resources needed to complete the projects as long as it is incorporated into the project to be delivered.
Operating expenses are the costs associated with turning the raw resources in the completed project and the people needed to complete the project. Finally, one bottleneck that impedes the timely completion of a project should be identified. It should be the constraint that most severely limits the unit’s ability to increase its throughput (decrease project completion time). Perhaps, the bottleneck is the unit supervisor who must sign off on all projects before they are officially completed. The five focusing steps would be applied, seeking a way to remove this constraint. One possible solution could be that for all but the most important projects, the assigned engineer signs off on the project and not the unit supervisor. In the end, your solution will reflect your understanding of the problem.

Here’s another example. Let’s assume that you volunteer some of your time in a church kitchen preparing meals for poor people. The first step is to identify what the goal of the organization is. The organization in this situation is just the church kitchen and not any other activities that take place within the church. The goal could be to feed as many people as possible. Throughput could be measured by the number of people served. The inventory would consist of the people not served. Operating expenses would include the cost of the food (if it was purchased), the equipment needed to prepare it, the electricity to operate the kitchen equipment, and the people who volunteer (if there are any costs). A bottleneck that constrains the number of meals served might be the amount of food available or the number of volunteers available. You would use the 5 step process outlined in The Goal to determine how to eliminate the bottleneck. One solution could be to contact local supermarkets and restaurants to ask for donations. The important step is to define the goal of the organization clearly so that it can be quantified.

A different goal of the church kitchen might be to help less fortunate people improve the quality of their lives by providing them with a spiritual message along with a meal. If this was the goal, throughput could be measured by the number of repeat customers – people who return for a second and third meal. The point here is that it is up to you to define the goal of your organization. It is the critical first step in applying the Theory of Constraints.

A third goal could be to serve the greatest number of people. The throughput would be the number of meals served and the inventory would be the meals not served. The operating expenses would be the same except for the food, which in this case is inventory. The bottleneck could be the lack of servers, lack of cooks, lack of food (either the cost or lack of donations might be a cause), lack of space, or even a bad location (the people to feed are not close enough to either attract or give access). This situation is basically the same as the first one, but uses a different perspective to demonstrate that you can set up the situation in different ways.





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