Editing Theory of constraints (section)

==Applications==
The focusing steps, this process of ongoing improvement, have been applied to [[manufacturing]], [[project management]], [[supply chain]]/distribution generated specific solutions. Other tools (mainly the "thinking process") also led to TOC applications in the fields of [[marketing]] and [[sales]], and [[finance]].  The solution as applied to each of these areas are listed below.

===Operations===
Within manufacturing operations and [[operations management]], the solution seeks to pull materials through the system, rather than push them into the system. The primary methodology used is drum-buffer-rope (DBR)<ref name=race>{{cite book |author1=Goldratt, Eliyahu |author2=Fox, Robert |title=The Race |publisher=North River Press |location=[Croton-on-Hudson, New York] |year=1986 |pages=[https://archive.org/details/race00gold/page/179 179] |isbn=978-0-88427-062-1 |url=https://archive.org/details/race00gold/page/179 }}</ref> and a variation called simplified drum-buffer-rope (S-DBR).<ref name=sdbr>{{Cite journal |author1=Eli Schragenheim  |author2=H. William Dettmer  |name-list-style=amp | title = Simplified Drum-Buffer-Rope: A Whole System Approach to High Velocity Manufacturing | year=  2000 | url = http://www.goalsys.com/books/documents/S-DBRPaper.pdf | access-date = 8 December 2007}}</ref>

Drum-buffer-rope is a manufacturing execution methodology based on the fact the output of a system can only be the same as the output at the constraint of the system. Any attempt to produce more than what the constraint can process just leads to excess inventory piling up.<ref>{{Cite book|title=The Race|last=Goldratt|first=Eliyahu M.|publisher=North River Press|year=1986|isbn=9780884270621|location=Croton-on Hudson, New York|pages=[https://archive.org/details/race00gold/page/77 77–97]|url=https://archive.org/details/race00gold/page/77}}</ref> The method is named for its three components. The ''drum'' is the rate at which the physical constraint of the plant can work: the work center or machine or operation that limits the ability of the entire system to produce more. The rest of the plant follows the beat of the drum. Schedule at the drum decides what the system should produce, in what sequence to produce and how much to produce.<ref>{{cite book|last1=Goldratt|first1=Eliyahu|title=The Haystack Syndrome:: Sifting Information out of the Data Ocean|url=https://archive.org/details/haystacksyndrome00gold|url-access=registration|date=1990|publisher=New York: North River Press|location=New York|isbn=9780884270898}}</ref> They make sure the drum has work and that anything the drum has processed does not get wasted.

The ''buffer'' protects the drum, so that it always has work flowing to it. Buffers in DBR provide the additional lead time beyond the required set up and process times, for materials in the product flow. Since these buffers have time as their unit of measure, rather than quantity of material, this makes the priority system operate strictly based on the time an order is expected to be at the drum. Each work order will have a remaining buffer status that can be calculated. Based on this buffer status, work orders can be color coded into Red, Yellow and Green. The red orders have the highest priority and must be worked on first, since they have penetrated most into their buffers followed by yellow and green. As time evolves, this buffer status might change and the color assigned to the particular work order change with it.<ref>{{cite book|last1=Shri Shrikanth|first1=M|title=DBR, Buffer Management, and VATI flow classification|date=2010}}</ref><ref>{{cite book|last1=J. F. Cox III & J. J. Schleier|title=Theory of Constraints Handbook|publisher=McGraw Hill|location=New York|pages=175–210}}</ref>

Traditional DBR usually calls for buffers at several points in the system: the constraint, synchronization points and at shipping. S-DBR has a buffer at shipping and manages the flow of work across the drum through a load planning mechanism.<ref>{{cite book|last1=Schragenheim|first1=e|last2=Dettmer|first2=H. W|last3=Patterson|first3=J. W.|title=Supply Chain Management at Warp Speed|date=2009|publisher=Auerbach publications|location=Boca Raton}}</ref>

The ''rope'' is the work release mechanism for the plant. Orders are released to the shop floor at one "buffer time" before they are due to be processed by the constraint. In other words, if the buffer is 5 days, the order is released 5 days before it is due at the constraint. Putting work into the system earlier than this buffer time is likely to generate too-high work-in-process and slow down the entire system.<ref name="International Journal of Production Research">{{cite book|last1=Russell|first1=G. R.|last2=Fry|first2=T. D|title=Order review/release and lot splitting in drum-buffer-rope|date=1997|pages=35:827–845}}</ref>

===High-speed automated production lines===
Automated production lines achieve high throughput rates and output quantities by deploying automation solutions that are highly task-specific. Depending on their design and construction, these machines operate at different speeds and capacities and therefore have varying efficiency levels.

A prominent example is the use of automated production lines in the beverage industry. Filling systems usually have several machines executing parts of the complete bottling process, from filling primary containers to secondary packaging and palletisation.<ref>'The planning flexibility bottleneck in food processing industries' (2006) Journal of Operations Management 24(3):287-300, DOI:10.1016/j.jom.2004.11.001</ref>

To be able to maximize the throughput, the production line usually has a designed constraint. This constraint is typically the slowest and often the most expensive machine on the line. The overall throughput of the line is determined by this machine. All other machines can operate faster and are connected by conveyors.

The conveyors usually have the ability to buffer product. In the event of a stoppage at a machine other than the constraint, the conveyor can buffer the product enabling the constraint machine to keep on running.

A typical line setup is such that in normal operation the upstream conveyors from the constraint machine are always run full to prevent starvation at the constraint and the downstream conveyors are run empty to prevent a back up at the constraint. The overall aim is to prevent minor stoppages at the machines from impacting the constraint.

For this reason as the machines get further from the constraint, they have the ability to run faster than the previous machine and this creates a V curve.{{citation needed|date=April 2015}}

===Supply chain and logistics===
In general, the solution for [[supply chain]]s is to create flow of inventory so as to ensure greater availability and to eliminate [[wikt:surplus|surplus]]es.

The TOC distribution solution is effective when used to address a single link in the supply chain and more so across the entire system, even if that system comprises many different companies. The purpose of the TOC distribution solution is to establish a competitive advantage based on extraordinary availability by reducing the damages caused when the flow of goods is interrupted by shortages and surpluses.

This approach uses several new rules to protect availability with less inventory than is conventionally required.

# Inventory is held at an aggregation point(s) as close as possible to the source. This approach ensures smoothed demand at the aggregation point, requiring proportionally less inventory. The distribution centers holding the aggregated stock are able to ship goods downstream to the next link in the supply chain much more quickly than a make-to-order manufacturer can.
# Following this rule may result in a make-to-order manufacturer converting to make-to-stock.  The inventory added at the aggregation point is significantly less than the inventory reduction downstream.
# In all stocking locations, initial inventory buffers are set which effectively create an upper limit of the inventory at that location. The buffer size is equal to the maximum expected consumption within the average Replenishment Time ("RT"), plus additional stock to protect in case a delivery is late. In other words, there is no advantage in holding more inventory in a location than the amount that might be consumed before more could be ordered and received. Typically, the sum of the on hand value of such buffers are 25–75% less than currently observed average inventory levels
##Replenishment Time (RT) is the sum of the delay, after the first consumption following a delivery, before an order is placed plus the delay after the order is placed until the ordered goods arrive at the ordering location.
# Once buffers have been established, no replenishment orders are placed as long as the quantity inbound (already ordered but not yet received) plus the quantity on hand are equal to or greater than the buffer size. Following this rule causes surplus inventory to be bled off as it is consumed.
# For any reason, when on hand plus inbound inventory is less than the buffer, orders are placed as soon as practical to increase the inbound inventory so that the relationship on Hand + Inbound = Buffer is maintained.
# To ensure buffers remain correctly sized even with changes in the rates of demand and replenishment, a simple recursive algorithm called Buffer Management is used.  When the on hand inventory level is in the upper third of the buffer for a full RT, the buffer is reduced by one third (and don't forget rule 3).  Alternatively, when the on hand inventory is in the bottom one third of the buffer for too long, the buffer is increased by one third (and don't forget rule 4).  The definition of "too long" may be changed depending on required service levels, however, a rule of thumb is 20% of the RT. Moving buffers up more readily than down is supported by the usually greater damage caused by shortages as compared to the damage caused by surpluses.

Once inventory is managed as described above, continuous efforts should be undertaken to reduce RT, late deliveries, supplier minimum order quantities (both per [[Stock Keeping Unit|SKU]] and per order) and customer order batching. Any improvements in these areas will automatically improve both availability and inventory turns, thanks to the adaptive nature of Buffer Management.

A stocking location that manages inventory according to the TOC should help a non-TOC customer (downstream link in a supply chain, whether internal or external) manage their inventory according to the TOC process. This type of help can take the form of a vendor managed inventory (VMI). The TOC distribution link simply extends its buffer sizing and management techniques to its customers' inventories. Doing so has the effect of smoothing the demand from the customer and reducing order sizes per SKU. VMI results in better availability and inventory turns for both supplier and customer. The benefits to the non-TOC customers are sufficient to meet the purpose of capitalizing on the competitive edge by giving the customer a reason to be more loyal and give more business to the upstream link. When the end consumers buy more, the whole supply chain sells more.

One caveat should be considered. Initially and only temporarily, the supply chain or a specific link may sell less as the surplus inventory in the system is sold.  However, the sales lift due to improved availability is a countervailing factor. The current levels of surpluses and shortages make each case different.

===Finance and accounting===
Holistic thinking applied to the finance application has been termed [[throughput accounting]].<ref name=tpa>{{cite book |author=Corbett, Thomas |title=Throughput Accounting |publisher=North River Press |year=1998 |pages=160 |isbn=978-0-88427-158-1 }}</ref> Throughput accounting suggests that one examine the impact of investments and operational changes in terms of the impact on the throughput of the business.  It is an alternative to [[cost accounting]].

The primary measures for a TOC view of finance and accounting are: throughput, operating expense and investment. Throughput is calculated from sales minus "totally variable cost", where totally variable cost is usually calculated as the cost of raw materials that go into creating the item sold.<ref name=tocma>
{{cite book |author=Eric Noreen |author2=Debra Smith |author3=James T. Mackey |title=The ''Theory of Constraints'' and its implications for Management Accounting |publisher=North River Press |year=1995 |isbn=0-88427-116-1 |url-access=registration |url=https://archive.org/details/theoryofconstrai0000nore }}
</ref>{{rp|pages=13–14}}

===Project management===
[[Critical Chain Project Management]] (CCPM) are utilized in this area.<ref name=criticalchain>{{cite book |author=Goldratt, Eliyahu M. |title=Critical Chain |publisher=North River Press |location=Great Barrington, Massachusetts |year=1997 |isbn=0-88427-153-6 }}</ref> CCPM is based on the idea that all projects look like A-plants: all activities converge to a final deliverable. As such, to protect the project, there must be internal buffers to protect synchronization points and a final project buffer to protect the overall project.

===Marketing and sales===
While originally focused on manufacturing and logistics, TOC has expanded into [[sales management]] and [[marketing]]. Its role is explicitly acknowledged in the field of [[sales process engineering]].<ref name="Selden">{{cite book|title=Sales Process Engineering: A Personal Workshop |author = Paul H. Selden|publisher=ASQ Quality Press|location = Milwaukee, Wisconsin|year=1997|pages =33–35, 264–268|isbn=0-87389-418-9}}</ref> For effective sales management one can apply Drum Buffer Rope to the sales process similar to the way it is applied to operations (see Reengineering the Sales Process book reference below). This technique is appropriate when your constraint is in the sales process itself, or if you just want an effective sales management technique which includes the topics of funnel management and conversion rates.{{Citation needed|date=December 2007}}