Theory of Constraints in Five Steps

The Theory of Constraints (TOC), developed by Eliyahu Goldratt, holds that every system has at least one constraint limiting its throughput. The five focusing steps provide a method to continuously improve by exploiting that constraint.

The five focusing steps

Identify the system constraint — the resource that limits throughput most
Exploit it — get maximum output from the constraint without major investment (eliminate stoppages, reduce changeover, ensure it never starves)
Subordinate everything else to the constraint — run other resources at the constraint's pace, not their own maximum
Elevate the constraint — invest to increase its capacity (new equipment, overtime, outsourcing)
Repeat — the constraint may shift to a different resource; go back to step 1

Key TOC measures

Measure	Definition
Throughput (T)	Rate at which the system generates money through sales
Inventory (I)	All money invested in things the system intends to sell
Operating expense (OE)	All money spent to turn inventory into throughput

The goal: increase T while reducing I and OE. Net profit = T − OE.

CQE exam tips

Subordinating to the constraint means intentionally under-utilizing non-constraint resources — a counterintuitive idea tested on the exam.
A drum-buffer-rope (DBR) system sets the constraint as the "drum," uses a buffer to protect it, and a rope to synchronize upstream release.
TOC is related to but distinct from lean; lean eliminates all waste, TOC focuses on the one limiting constraint.

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