Discuss the Theory of Constraints and How It Impacts Capacity

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The Answer is The Theory of Constraints (TOC)is based on the recognition that many products and services proceed through a series of linked processes.These process steps can be contained within a single organization or stretched across multiple organizations (i.e. ,a supply chain).Each process step has its own capacity level,and in every case,there is at least one process step that limits throughput for the entire chain.This process step is referred to as the constraint and in most cases,it alone dictates the throughput attainable for the entire system.
TOC experts have suggested a five-step approach to managing the constraint,and hence throughput,for a process chain:
1.Identify the constraint.The constraint can be anywhere in the chain - including upstream or downstream supply chain partners.When the constraint occurs outside the company,it is often referred to as an external constraint.In contrast,if the constraint is within a company's set of activities,it is referred to as an internal constraint.
2.Exploit the constraint.An hour of throughput lost at the constraint is an hour of throughput lost for the entire chain.It is therefore imperative that organizations carefully manage the constraint to ensure an uninterrupted flow of customers or products through the constraint.
3.Subordinate everything to the constraint.If conflicts arise between exploiting the constraint and efforts to "improve" performance elsewhere (e.g. ,letting an upstream process decrease inventory in a way that starves the constraint for work),management needs to remember that it is the constraint that determines throughput and act accordingly.
4.Elevate the constraint.If the organization needs to increase throughput,find ways to increase the capacity of the constraint.
5.Find the new constraint and repeat the steps.As the effective capacity of the constraint is increased,it may cease to be a constraint.In that case,the emphasis should shift to finding and exploiting the new constraint.

Discuss the Theory of Constraints and How It Impacts Capacity

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