Comparison of Toc vs Lean
Assignment #5:
Comparison of Theory of Constraints (TOC) versus Lean Manufacturing
MBA 571
November 22, 2011
In today’s business world, competition is fierce and manufacturers are struggling to squeeze out operational costs reductions. To stay in competition, more and more organizations are trying to determine what improvement method will work best and fit best with their culture. Each improvement methodology appears to be driving toward common tools and concepts. However, different methodologies begin the journey from different perspectives. Even though each improvement methodology contributes valuable concepts, ideas and techniques to every organization not all of them serve to the needs of organization if leadership doesn’t actively involve to the efforts of the improvement teams.
Theory of Constraints (TOC)
At his book Goldratt (2004) defines the primary goal as to make money. This can be achieved by simply identifying and eliminating the constraints that limits the output of the entire system. As a result of the organizational change, he aims to see an increase on throughput and decrease on operational expense and inventory. Theory of constraints (TOC) is based on the premise that the rate of goal achievement is limited by at least one constraining process. Only by increasing flow through the constraint can overall throughput be increased where throughput is the rate at which the system generates money through sales. Inventory is all the money that the system has invested in purchasing things which it intends to sell. Operational expense is all the money the system spends in order to turn inventory into throughput. He recommends a five step process:
1. Identify the constraint.
2. Exploit the constraint.
3. Subordinate other processes to the constraint.
4. Elevate the constraint.
5. Repeat the cycle.
Line Manufacturing (Thinking)
Lean is a total operating system for manufacturing plants and has broad application in product or service
Comparison of Theory of Constraints (TOC) versus Lean Manufacturing
MBA 571
November 22, 2011
In today’s business world, competition is fierce and manufacturers are struggling to squeeze out operational costs reductions. To stay in competition, more and more organizations are trying to determine what improvement method will work best and fit best with their culture. Each improvement methodology appears to be driving toward common tools and concepts. However, different methodologies begin the journey from different perspectives. Even though each improvement methodology contributes valuable concepts, ideas and techniques to every organization not all of them serve to the needs of organization if leadership doesn’t actively involve to the efforts of the improvement teams.
Theory of Constraints (TOC)
At his book Goldratt (2004) defines the primary goal as to make money. This can be achieved by simply identifying and eliminating the constraints that limits the output of the entire system. As a result of the organizational change, he aims to see an increase on throughput and decrease on operational expense and inventory. Theory of constraints (TOC) is based on the premise that the rate of goal achievement is limited by at least one constraining process. Only by increasing flow through the constraint can overall throughput be increased where throughput is the rate at which the system generates money through sales. Inventory is all the money that the system has invested in purchasing things which it intends to sell. Operational expense is all the money the system spends in order to turn inventory into throughput. He recommends a five step process:
1. Identify the constraint.
2. Exploit the constraint.
3. Subordinate other processes to the constraint.
4. Elevate the constraint.
5. Repeat the cycle.
Line Manufacturing (Thinking)
Lean is a total operating system for manufacturing plants and has broad application in product or service
References: Goldratt, E. M. (2004). The Goal: A process of ongoing improvement. Great Barrington, MA: The North River Press Publishing Corporation. Husby, P. (2007). Becoming Lean. Material Handling Management, 62(8), 42-45. Husby, P. (2007). Competition or complement: Six Sigma and TOC. Material Handling Management, 62(10), 51-56. Jackson Constraints Group Inc. (2004). TOC and Lean Manufacturing. Retrieved from: http://www.executivebriefing-toc.com/lean.htm Nave, D. (2002). How To Compare Six Sigma, Lean and the Theory of Constraints. Quality Press, (3)73-78. Reid, R. (2007). Applying the TOC five-step focusing process in the service sector. Managing Service Quality, 17(2)209 - 234. Tullis, W. (2009). What is the Theory of Constraints, and How Does it Compare to Lean Thinking? Lean Enterprise Institute. Retrieved from: http://www.lean.org/common/display/?o=223