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Theory of Constraints Principles
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Throughput
In the context of the Theory of Constraints, Throughput is the rate at which the system generates money through sales, which is the ultimate goal of any commercial organization.
Operating Expense
Operating Expense is the money spent by the system to turn inventory into throughput. The Theory of Constraints suggests focusing on increasing throughput without a correspondingly significant increase in operating expense.
Buffer Management
Buffer Management in the Theory of Constraints is the practice of placing a cushion of time or inventory before a bottleneck to ensure it operates continuously without interruption caused by variability in processing times or supply delays.
Constraint (Bottleneck)
A constraint, or bottleneck, is any resource whose capacity is less than the demand placed upon it. This principle identifies the bottleneck as the critical limiting factor to the system's throughput and the focus of improvement efforts.
V-A-T (Variance, Assembly, Throughput) Analysis
V-A-T Analysis is used to determine the flow strategy of a production system (V: Variance, A: Assembly, and T: Throughput). It helps categorize production systems to apply the appropriate TOC solution.
Batch Size Reduction
In Theory of Constraints, reducing batch sizes helps in minimizing cycle times and inventory, thus speeding up the flow of products through the constraint. Smaller batches allow for quicker feedback and adjustment.
Throughput Accounting
Throughput Accounting is a form of management accounting that focuses on the throughput of an organization, emphasizing the role of constraints in decision-making and measuring the financial impact of dealing with them.
Inventory
Inventory is all the money that the system has invested in purchasing things which it intends to sell. Keeping inventory levels in balance is crucial in the Theory of Constraints to prevent excessive buildup, which can consume capital and resources.
Five Focusing Steps
The process used in Theory of Constraints to identify and eliminate constraints, ensuring continuous improvement. It involves identifying the system's constraint, exploiting it, subordinating everything else, elevating the system's constraint, and repeating the process if needed.
Drum-Buffer-Rope (DBR)
Drum-Buffer-Rope is a manufacturing execution methodology derived from the Theory of Constraints. The 'Drum' sets the production pace, the 'Buffer' protects the system from disruptions, and the 'Rope' ensures that the rate of production matches the drum's pace.
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