ABSTRACT
The theory of constraints (TOC) originated as a management system that aimed to deliver product on time while holding relatively low levels of inventory. It therefore has some similarities with Just In Time production methods. However, the theory of constraints differs from JIT in two major ways. First, the aim is not to minimize inventory: indeed, an important element of the approach is to hold carefully calculated inventories at key locations. Second, the theory of constraints recognizes the crucial importance of plant bottlenecks and the need to maximize their utilization. The exploitation of bottleneck facilities led to the calculation of ‘throughput per bottleneck minute’, a similar idea to the management accountant’s ‘contribution per unit of limiting factor’. However, despite this similarity, cost accounting has been castigated by TOC enthusiasts because of the overhead included in product costs and the use of local performance measures such as efficiency ratios and variances. It is argued that these practices militate against optimal (or even good) production practices.
