Glossary of Theory of Constraints (TOC) Terminology

Please note that a comprehensive Dictionary of TOC terms can be downloaded from the TOCICO website.

Activation
The employment of a nonconstraint resource for the sake of keeping busy unrelated to whether it is useful in supporting system throughput. A measure of how intensively a resource is being used to produce a good or service. Activation compares actual time used to available time.

Batch Processing
A manufacturing technique in which parts are accumulated and processed together in a lot.

Bottleneck
A facility, function, department, or resource whose capacity, if properly scheduled, is less than, or exactly equal to, the demand placed upon it in a comparable period of time.

Buffer
A quantity of materials awaiting further processing. In theory of constraints, buffers can be time or material and support throughput and/or due date performance. Buffers can be maintained at constraints, convergent points (with a constraint part), divergent points, and shipping points.

Buffer Management
A theory of constraints process in which all expediting and remedial action in a shop is driven by what is scheduled to be in the buffers (constraint, assembly, and shipping buffers).

Constraint
Any element or factor that prevents a system from achieving a higher level of performance relative to its goal. Constraints can be physical/logistical, managerial/procedural or behavioral/psychological.

Constraint Management
The practice of managing resources and organisations in accordance with theory of constraints.

Contribution Margin
The net of the variable money flow. An amount equal to the difference between sales revenue and all totally variable expenses associated with that sales revenue.

Control points
Strategic locations in the logical product structure for a product or family that simplify the planning, scheduling and control functions. Control points include gating operations, convergent points, divergent points, constraints, and shipping points.

Convergent point
A control point in the logical product structure where nonconstraint parts are assembled with constraint parts.

Current reality tree
A logic-based tool for using cause-and-effect relationships to determine root problems that cause the observed undesirable effects of the system.

Divergent point
A control point in the logical product structure where a common part or assembly can be directed to two or more end items.

Efficiency
A measure (as a percentage) of the actual output to the standard output expected. Efficiency measures how well something is performing relative to expectations; it does not measure output relative to any input.

Evaporating cloud
A logic-based tool for surfacing assumptions related to a conflict or problem.

Five Focusing Steps
A process to continuously improve organisational profit by evaluating the production system and market mix to determine how to make the most money using the system constraint.
The steps consist of:
1) identifying the system constraint,
2) deciding how to exploit the system constraint,
3) subordinating all nonconstraints to the system constraint,
4) elevating the system constraint,
5) repeating the process if the constraint is broken, while not allowing inertia to set in.

Flow network
A total system of resources required to produce a part or product.

Future reality tree
A logic-based tool for constructing and testing potential solutions before implementation. The objectives are to 1) develop, expand, and complete the solution and 2) identify and solve or prevent new problems created by implementing the solution.

Global Measures
That set of measurements that refers to the overall performance of the company. Net profit, return on investment and cash flow are examples of financial measures; and throughput, inventory, and operating expense are examples of operational measures.

Inventory
1) Those stocks or items used to support production, supporting activities, and customer service.
2) TOC: All the money invested in things purchased for sale, valued at purchase price with no value added for applied labour or allocated overhead.

Just-in-Time (JIT)
A philosophy of manufacturing based on planned elimination of all waste and continuous improvement of productivity.

Kanban
Scheduling system developed and used by Toyota. A method of Just-In-Time production that uses standard containers or lot sizes with a single card (Kanban) attached to each. It is a pull system in which work centres signal with a card that they wish to withdraw parts from feeding operations or suppliers.

Local Measures
That set of measurements that relates to a resource, operation, process, or part and usually has low correlation to global organisation measures.

Missynchronized Resource
A non-bottleneck resource overloaded due to management policy or improper subordination to the requirements of the system constraint.

MRP II system
Manufacturing resource planning. A method for the planning of all resources of a manufacturing company. It is made up of linked functions for business planning, sales and operations planning, production planning, master production scheduling, materials requirements planning, capacity requirements planning, and execution support.

Non-bottleneck
A facility, function, department, or resource whose capacity, if properly scheduled, is greater than the demand placed upon it in a comparable period of time.

Operating Expense
All the money spent by the system to convert inventory into throughput.

Opportunity time
Inherent idle time of a non-bottleneck available for improvement activities when not required for processing as protective capacity.

Point of control
A defining resource or cell process that can be used to synchronize all activities within a product flow network.

Prerequisite tree
A logic-based tool for determining the obstacles that block implementation of a problem solution or idea. Once obstacles have been identified, objectives for overcoming obstacles can be determined.

Process batch
The number of units made between sequential setups at a work centre.

Productivity
An overall measure of the ability to produce a good or service. It is the actual output of production compared to the actual input of resources. Productivity is a relative measure across time or against common entities.

Protective capacity
A given amount of extra capacity at non-constraints, used to protect against statistical fluctuation (breakdowns, late receipts of materials, quality problems, etc.). Protective capacity provides non-constraints with the ability to catch up to "protect" throughput and due date performance.

Queue
The jobs at a given work centre waiting to be processed.

Queue time
The amount of time a job waits at a work centre before setup or work is performed on the job.

Space Buffer
A physical space allocated to prevent a bottleneck from stopping production because no room exists to offload finished material from that operation.

Synchronized manufacturing
A systematic way that moves material quickly and smoothly through the various resources of the plant in concert with market demand. A manufacturing management philosophy that includes a consistent set of principles, procedures, and techniques where every action is evaluated in terms of the global goal of the system.

Synchronous Flow Management
A management philosophy that adapts the Theory of Constraints to the entire organisation of a manufacturing company as a way of doing business. It encompasses the entire process of decision making and execution for the core business issues of product development, business acquisition, business fulfillment, and strategic direction.

Theory of Constraints
A management philosophy developed by Dr. Eliyahu M. Goldratt that can be viewed as three separate but interrelated areas - logistics, performance measurement and logical thinking.

TOC performance measures
Throughput, Inventory, Operating Expense, and the Five Focusing Steps (identify, exploit, subordinate, elevate, repeat).

Throughput
The rate at which the system generates money through sales of its products or services.

Throughput contribution
The incremental element of throughput contributed by each unit of product or service sold.

Transfer batch
The quantity of an item moved between sequential work centres during production.

Transition tree
A logic-based tool for identifying and sequencing actions in accomplishing an objective. The transitions represent the states or stages in moving from the present situation to the desired objective.

UDE - Undesirable Effect
An individual problem or issue that is consistently present in the organisation and which, in combination with other UDEs, becomes a major block to improving overall performance.

Utilization
The ratio of actual time a resource is producing (run time only) to the clock time the resource is scheduled to produce.

V, A & T Analysis
A constraints management procedure for determining the general flow of parts and products from raw materials to finished products (logical product structure). A V logical structure starts with one or a few raw materials, and the product expands into a number of different products as it flows through its routings. The shape of an A logical structure is dominated by converging points. Many raw materials are fabricated into a few finished products. A T logical structure consists of numerous similar finished products assembled from common assembles and subassemblies.