Theory Of Constraints (TOC)
Author : Madhav P. Joshi
Theory Of Constraints (TOC) way of managing operations is relatively a recent development in industrial scenario. Though this has been practiced very widely in North American and many parts of Europe, it is still not very common in Indian industry.

TOC is used not only by manufacturing organizations, but it is equally applicable to service industries, project management and even healthcare, banking and nonprofit making NGOs as well.

Application of TOC concepts in these organizations has shown dramatic improvements in their performance.

As working by TOC way, is common sense and down to earth practical way of managing business, it gives following major breakthroughs to organizations adapting to TOC way.
  1. Improvement in Available to Promise (ATP) performance.(More than 90% ATP)
  2. More than double digit improvement in productivity.
  3. Reduction in lead times.
  4. Improvement in cash flow.
  5. 20% to 50% reduction in inventory.
  6. Double digit improvement in profitability.
  7. Establishes a Process Of On Going Improvement. (POOGI)

Quantitative results survey done by Mabin and Bladstone for 82 organizations where TOC was introduced is as follows:
  • Lead Time mean reduction - 70%
  • Inventory level mean reduction – 49%
  • Revenue/Profit mean increase – 76%
  • Organizations can achieve improvement in performance within a short period of 3 to 6 months. Also practically no additional investment is required to achieve such quantum improvement in performance.

However the most critical factor for the success of TOC is firm conviction from the top management/decision makers and total willingness to change as per requirements of TOC. It is not a project, per say, but an entirely different way of working and managing operations.

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