Category Archives: Theory of Constraints

The Goal

The Theory of Constraints is the creation of Eliyahu M. Goldratt first introduced in his book The Goal.  TOC claims that within any system, there is a choke point (constraint) which determines the throughput of the system, whether that throughput is units of production, profits, etc.  What sets TOC apart from other research is it provides a solution!  TOC includes tools to identify constraints and manage those constraints to maximize throughput.  Most of the current published works focus on production just as six-sigma, TQM, and similar methods do.  The application is much broader, and newer books are expanding TOC into the other realms, like human resource management.

The Goal is actually written as a novel.  Unfortunately, it doesn’t present enough of the solution.

Theory of Constraints and Its Implications for Management Accounting (Eric W. Noreen, Debra A. Smith, James T. MacKey)

Not the best book out there on the Theory of Constraints.  Part of TOC is the principle that the accounting which is done for GAAP and the IRS, for example, should not be used to make business decisions.  This isn’t a new concept to accountants.  Many an MBA has glossed over this fine print though.  Several case studies are given where using TOC accounting to make business decisions provides significantly superior profits, capital expenditure plans, offshore trades, etc.