ABSTRACT
Another practical application of operational efficiency is the theory of constraints (TOC) or constraints management. Developed in the 1980s by Eli Goldratt, it has been applied to many aspects of Lean manufacturing, including production and supply chain management. Based on the notion that a chain is only as strong as its weakest link, TOC questions the basic notion that an increase in efficiency in any department or process decreases a firm’s costs. Suppose, for example, that an increase in work-in-process efficiency leads to a buildup of finished inventory without a corresponding increase in shipments. Quite conceivably, the improvement in efficiency actually increases rather than decreases the firm’s costs by causing bottlenecks in the system.
