The Theory of Constraints Was Developed to Maximize the Performance

question 88

Essay

The Theory of Constraints was developed to maximize the performance of a value chain.According to the theory, five steps are required to maximize and improve the performance of a value chain.
Required:
a.List the five steps.
b.Define the two terms bottleneck process and throughput contribution.Indicate how these terms are related to the theory of constraints.

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Definitions:

Flexible Policy

A strategy or approach that is adaptable and able to change in response to external conditions or new information.

Short-Term Bank Loans

Borrowings from banks that are scheduled to be repaid within a year.

Reserve Inventory Storage Costs

Expenses associated with storing unsold merchandise or materials that a business holds in reserve beyond its immediate operational needs.

Shortage Cost

Costs incurred when demand exceeds supply, including opportunity costs of unmet sales and customer dissatisfaction.