Theory of Constraints is a specific management methodology for systems (profit-making and non-profit organizations) developed by Dr Eliyahu Goldratt. TOC is based on identifying and managing the key limiting factor in the system, which predetermines the success and effectiveness of the entire system. The key feature of the concept is that the efforts to manage a very small number of aspects of the system bring an effect much higher than the result of simultaneous manipulation of all or most of the system problematic areas.

This is sharp and significant change in demand (over 30% during replenishment)

This is a financial indicator calculated as the sum of throughput for each product multiplied by the average daily sales of this product in units for a set period of time and by the number of days the product(s) was not available at the central warehouse, branch or distributor warehouse or on the shelves.

This is a financial indicator calculated as the difference between income and fully variable costs (identically to the mark-up for distribution companies — selling price minus purchase price; for manufacturing companies generally only raw and other materials are included in variable costs). Throughput may be calculated both for the company as a whole and for each type of product. Throughput in the project means the overall daily, weekly, monthly result of the whole company as the difference between income (daily, weekly, monthly) and direct variable costs (daily, weekly, monthly).

In TOC thinking processes, this is a logical tool used to arrange actions necessary to achieve a goal in a logical sequence. It represents the transition states or stages from the existing situation to the desired result (virtually, the strategic action plan).

It is something (technical, financial, political and other obstacles) that prevents or precludes the implementation of a solution or “injection” thereby blocking the achievement of desirable effects.

This is visible negative effect, a symptom, which shows the presence of problems in the system (organizations, companies). These are the negative factors that the organization actually and chronically has. The elimination of UDE alone is not effective enough. The elimination of the root problem that causes most of UDEs is a faster and more efficient way to reach the goal.

In TOC thinking processes, this is a tool of “sufficient condition logic” that shows how the solution in the future reality tree may lead to UDE (undesirable effect). “Negative Branch Reservation” may be used to conduct the solution risk analysis and develop additional requirements in order to minimise or eliminate a possible negative effect.

This is a set of logical processes (tools) based on the cause-effect relationship rules. These tools are aimed at identifying the key problem and underlying false assumptions. These tools also help to replace the false assumptions and identified incorrect policies with a set of new comprehensive and systemic rules that improve and protect the overall performance of the entire system. This set of tools consists of the current reality tree, evaporating cloud, injection and assumptions, future reality tree, “negative branch reservations”, assumption tree, and transitional tree.

If stocks in the warehouse are in this zone for a long time, this means the lack of stocks. The buffer needs to be increased.

This is an unresolved strategic conflict that explains the existence of several or most UDEs (undesirable effects).

In TOC thinking processes, this is the answer to the question “Why.” The assumption explains the cause-effect relationships or logical link between strategy and tactics. The general definition is something considered true without evidence.

In TOC thinking processes, injection is a new idea or solution that, when “implanted” in the future reality, will bring or help to bring a set of desirable effects.

If stocks in the warehouse are in this zone for a long time, this means the excess of stocks. The buffer needs to be reduced.

This is a financial indicator calculated as the sum of fully variable costs by each product, the stock for which is above the buffer for the number of days that the stock of this product(s) was higher than the stock buffer in the central warehouse, branch or distributor warehouse, or on the shelves.

This is a positive effect (manifestation, result) which the system (organization, company) pursues. They are formulated in the future reality tree (FRT) and arise instead of UDEs that exist in the current reality tree (CRT) as a result of the new solutions applied.

If stocks in the warehouse are in this zone for a long time, this means the adequacy of stocks. The buffer needs no changes.

The system of dynamic buffer management is the methodology of inventory management and replenishment, which allows you to dynamically respond to changes in demand. Each stock buffer is divided into 3 zones — red, yellow, green. Depending on the buffer stock size status of a particular zone, the dynamic buffer management system recommends certain managerial solutions (increase/decrease of the buffer). DBM is also a module in Symphony — a mechanism that determines the most important and timely buffer values based on the current real consumption instead of forecasts.

In TOC thinking processes, the current reality tree (CRT) is a logical tool for analysing a system or a specific problem. CRT helps to combine all the existing undesirable effects of the system by means of the cause-effect relationships, as well as define the root problems (causes) that cause the undesirable effects of a company (system). This analysis provides a reliable picture of the reality situation, as well as clearly identifies the few key factors to be influenced in order to eliminate all UDEs.

In TOC thinking processes, this is a tool based on the “necessary condition logic” designed to identify obstacles that block the implementation of a solution or an idea. Once obstacles are identified, the obstacle elimination tasks must be defined. Sometimes the result of using this tool is called the “interim goal map.”

This is a comprehensive tool that outlines the developed strategy and tactics of a company for a long-term perspective with certain logic: company goal, preconditions thereof, and specific strategic and tactical steps.

In TOC thinking processes, this is a logical tool for developing and testing a potential new solution prior to its implementation. It aims at: 1) Verifying that the injection found eliminates most of the UDEs and brings DEs to a company; 2) Developing, supplementing and completing a solution (find auxiliary to the main injection); and 3) Identifying and anticipating the possible risks from the implementation of a new solution (see “Negative Branch Reservation”).

This is a chart that helps to formalise any conflict or dilemma. The evaporating cloud comprises 5 elements: a goal, 2 needs to achieve the goal, and 2 actions to satisfy both needs. Generally, the conflict exists at the action level. The evaporating cloud formalises the conflict, identifies false underlying assumptions and, accordingly, finds a solution and eliminates the conflict.

http://toc-strategicsolutions.com/tierminy-i-poniatiia-tos

This is the time from the entry of goods in the books (the first SKU of the last delivery batch) to the time of placing an order for the next batch of the same goods.

This includes order time, production time, processing time and delivery time. For a factory warehouse, delivery time shall be zero (if it is nearby production facilities). For instance, production time of branches replenished from the Central Warehouse shall be zero, and their replenishment time also includes batching and transportation time.

This is the target stock level for each SKU for each storage location, whose strategic purpose is sales protection. It is calculated for each storage location (central warehouse, branches, distributors, retail, etc.) of the warehouse and is equal to the maximum consumption during the replenishment. The buffers of the central factory warehouse include stocks in the warehouse, on the way and in production. Buffer = Stocks in the warehouse + Stocks on the way + Stocks in production.
For example, the distributor’s stock buffers will include only stocks available and stocks on the way.

This is the TOC production management system based on the search and management of the Production Constraint (“Drum”). The constraint is usually “protected” with a temporary or physical reserve (“Buffer”). To make the system work in exact sync with the Constraint (“Drum”) for all other equipment that is not a Constraint, as well as to timely launch raw and other materials into production, a special schedule is developed (“Rope”).

This is an irresistible offer. It is irresistible, because the offer is prepared under a win-win concept and addresses the key conflict of a person for whom it has been developed. This is the type of offer used in the b2b (business-to-business) segment, primarily for partners, suppliers and clients of a company.

This is a unique storage unit.

This is the process of on-going improvement. TOC aims to not only ensure prompt increase in the company profits, but also to establish the process of company’s on-going improvement. This process involves receiving clear signals that say which of the company’s functions or areas is approaching a capacity constrained resource, or that the flow of goods, information or funds may slow down in the near future. Such information helps to plan improvements in advance and focus the management and financial resources only on those areas that prevent the company form achieving its goal.

Theory of Constraints is a specific management methodology for systems (profit-making and non-profit organizations) developed by Dr Eliyahu Goldratt. TOC is based on identifying and managing the key limiting factor in the system, which predetermines the success and effectiveness of the entire system. The key feature of the concept is that the efforts to manage a very small number of aspects of the system bring an effect much higher than the result of simultaneous manipulation of all or most of the system problematic areas.

This is sharp and significant change in demand (over 30% during replenishment)

This is a financial indicator calculated as the sum of throughput for each product multiplied by the average daily sales of this product in units for a set period of time and by the number of days the product(s) was not available at the central warehouse, branch or distributor warehouse or on the shelves.

This is a financial indicator calculated as the difference between income and fully variable costs (identically to the mark-up for distribution companies — selling price minus purchase price; for manufacturing companies generally only raw and other materials are included in variable costs). Throughput may be calculated both for the company as a whole and for each type of product. Throughput in the project means the overall daily, weekly, monthly result of the whole company as the difference between income (daily, weekly, monthly) and direct variable costs (daily, weekly, monthly).

In TOC thinking processes, this is a logical tool used to arrange actions necessary to achieve a goal in a logical sequence. It represents the transition states or stages from the existing situation to the desired result (virtually, the strategic action plan).

It is something (technical, financial, political and other obstacles) that prevents or precludes the implementation of a solution or “injection” thereby blocking the achievement of desirable effects.

This is visible negative effect, a symptom, which shows the presence of problems in the system (organizations, companies). These are the negative factors that the organization actually and chronically has. The elimination of UDE alone is not effective enough. The elimination of the root problem that causes most of UDEs is a faster and more efficient way to reach the goal.

In TOC thinking processes, this is a tool of “sufficient condition logic” that shows how the solution in the future reality tree may lead to UDE (undesirable effect). “Negative Branch Reservation” may be used to conduct the solution risk analysis and develop additional requirements in order to minimise or eliminate a possible negative effect.

This is a set of logical processes (tools) based on the cause-effect relationship rules. These tools are aimed at identifying the key problem and underlying false assumptions. These tools also help to replace the false assumptions and identified incorrect policies with a set of new comprehensive and systemic rules that improve and protect the overall performance of the entire system. This set of tools consists of the current reality tree, evaporating cloud, injection and assumptions, future reality tree, “negative branch reservations”, assumption tree, and transitional tree.

If stocks in the warehouse are in this zone for a long time, this means the lack of stocks. The buffer needs to be increased.

This is an unresolved strategic conflict that explains the existence of several or most UDEs (undesirable effects).

In TOC thinking processes, this is the answer to the question “Why.” The assumption explains the cause-effect relationships or logical link between strategy and tactics. The general definition is something considered true without evidence.

In TOC thinking processes, injection is a new idea or solution that, when “implanted” in the future reality, will bring or help to bring a set of desirable effects.

If stocks in the warehouse are in this zone for a long time, this means the excess of stocks. The buffer needs to be reduced.

This is a financial indicator calculated as the sum of fully variable costs by each product, the stock for which is above the buffer for the number of days that the stock of this product(s) was higher than the stock buffer in the central warehouse, branch or distributor warehouse, or on the shelves.

This is a positive effect (manifestation, result) which the system (organization, company) pursues. They are formulated in the future reality tree (FRT) and arise instead of UDEs that exist in the current reality tree (CRT) as a result of the new solutions applied.

If stocks in the warehouse are in this zone for a long time, this means the adequacy of stocks. The buffer needs no changes.

The system of dynamic buffer management is the methodology of inventory management and replenishment, which allows you to dynamically respond to changes in demand. Each stock buffer is divided into 3 zones — red, yellow, green. Depending on the buffer stock size status of a particular zone, the dynamic buffer management system recommends certain managerial solutions (increase/decrease of the buffer). DBM is also a module in Symphony — a mechanism that determines the most important and timely buffer values based on the current real consumption instead of forecasts.

In TOC thinking processes, the current reality tree (CRT) is a logical tool for analysing a system or a specific problem. CRT helps to combine all the existing undesirable effects of the system by means of the cause-effect relationships, as well as define the root problems (causes) that cause the undesirable effects of a company (system). This analysis provides a reliable picture of the reality situation, as well as clearly identifies the few key factors to be influenced in order to eliminate all UDEs.

In TOC thinking processes, this is a tool based on the “necessary condition logic” designed to identify obstacles that block the implementation of a solution or an idea. Once obstacles are identified, the obstacle elimination tasks must be defined. Sometimes the result of using this tool is called the “interim goal map.”

This is a comprehensive tool that outlines the developed strategy and tactics of a company for a long-term perspective with certain logic: company goal, preconditions thereof, and specific strategic and tactical steps.

In TOC thinking processes, this is a logical tool for developing and testing a potential new solution prior to its implementation. It aims at: 1) Verifying that the injection found eliminates most of the UDEs and brings DEs to a company; 2) Developing, supplementing and completing a solution (find auxiliary to the main injection); and 3) Identifying and anticipating the possible risks from the implementation of a new solution (see “Negative Branch Reservation”).

This is a chart that helps to formalise any conflict or dilemma. The evaporating cloud comprises 5 elements: a goal, 2 needs to achieve the goal, and 2 actions to satisfy both needs. Generally, the conflict exists at the action level. The evaporating cloud formalises the conflict, identifies false underlying assumptions and, accordingly, finds a solution and eliminates the conflict.

http://toc-strategicsolutions.com/tierminy-i-poniatiia-tos

This is the time from the entry of goods in the books (the first SKU of the last delivery batch) to the time of placing an order for the next batch of the same goods.

This includes order time, production time, processing time and delivery time. For a factory warehouse, delivery time shall be zero (if it is nearby production facilities). For instance, production time of branches replenished from the Central Warehouse shall be zero, and their replenishment time also includes batching and transportation time.

This is the target stock level for each SKU for each storage location, whose strategic purpose is sales protection. It is calculated for each storage location (central warehouse, branches, distributors, retail, etc.) of the warehouse and is equal to the maximum consumption during the replenishment. The buffers of the central factory warehouse include stocks in the warehouse, on the way and in production. Buffer = Stocks in the warehouse + Stocks on the way + Stocks in production.
For example, the distributor’s stock buffers will include only stocks available and stocks on the way.

This is the TOC production management system based on the search and management of the Production Constraint (“Drum”). The constraint is usually “protected” with a temporary or physical reserve (“Buffer”). To make the system work in exact sync with the Constraint (“Drum”) for all other equipment that is not a Constraint, as well as to timely launch raw and other materials into production, a special schedule is developed (“Rope”).

This is an irresistible offer. It is irresistible, because the offer is prepared under a win-win concept and addresses the key conflict of a person for whom it has been developed. This is the type of offer used in the b2b (business-to-business) segment, primarily for partners, suppliers and clients of a company.

This is a unique storage unit.

This is the process of on-going improvement. TOC aims to not only ensure prompt increase in the company profits, but also to establish the process of company’s on-going improvement. This process involves receiving clear signals that say which of the company’s functions or areas is approaching a capacity constrained resource, or that the flow of goods, information or funds may slow down in the near future. Such information helps to plan improvements in advance and focus the management and financial resources only on those areas that prevent the company form achieving its goal.