The Theory of Constraints: A Management Philosophy

The Theory of Constraints: A Management Philosophy

Shams Rahman (RMIT University, Australia)
DOI: 10.4018/978-1-60960-768-5.ch009
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Abstract

In the late 1970s, a new approach to the management of operations was developed by Goldratt. Now known as the theory of constraints (TOC), it provides a coherent management theory for running an organisation. It has two major components: a philosophy which underpins the working principle of on-going improvement and a generic approach for investigating, analyzing, and creating solutions to problems, called the “thinking process” (TP). Several books, numerous articles, and a few journal special issues have been published on TOC. This chapter provides a comprehensive review of TOC concepts, philosophy, and working principles.
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Background

The theory of constraints (TOC) is a system-based management philosophy which seeks to understand and identify the core causes that limit a system from achieving higher performance versus its goal (Goldratt, 1988). Although a relatively new approach, applications of TOC concepts and tools have been published widely in academic literature and the popular press. This body of literature has been written to:

  • demonstrate the basic concepts of TOC;

  • review TOC literature;

  • review the historical development of OPT as well as TOC and TP applications;

  • define and categorise concepts and terms;

  • demonstrate the impact of OPT software on organisational performance;

  • compare aspects of TOC with other operations management tools such as material requirement planning (MRP) and Kanban, linear programming, and total quality management;

  • compare the TOC performance measures with traditional cost accounting and activity-based cost accounting management;

  • develop a TOC-based framework for operations management.

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