Term
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Definition
| Any factor that limits system performance and restricts its output. |
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Term
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Definition
| is the maximum rate of output of a process or system. |
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Term
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Definition
An output constraint that limits a company’s ability to meet market demand.
Also called Capacity Constraint Resource or CCR |
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Term
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Definition
Output Measures
Input Measures
Utilization
Performance Measures in TOC
Inventory (I)
Throughput (T)
Operating Expense (OE)
Utilization (U) |
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Term
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Definition
The focus is on balancing flow, not on balancing capacity.
Maximizing output and efficiency of every resource will not maximize the throughput of the entire system.
An hour lost at a bottleneck or constrained resource is an hour lost for the whole system.
An hour saved at a non-constrained resource does not necessarily make the whole system more productive.
Inventory is needed only in front of the bottlenecks to prevent them from sitting idle, and in front of assembly and shipping points to protect customer schedules. Building inventories elsewhere should be avoided.
Work should be released into the system only as frequently as the bottlenecks need it. Bottleneck flows should be equal to the market demand. Pacing everything to the slowest resource minimizes inventory and operating expenses.
Activation of non-bottleneck resources cannot increase throughput, nor promote better performance on financial measures.
Every capital investment must be viewed from the perspective of its global impact on overall throughput (T), inventory (I), and operating expense (OE). |
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Term
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Definition
Identify The System Bottleneck(s).
Exploit The Bottleneck(s).
Subordinate All Other Decisions to Step 2
Elevate The Bottleneck(s).
Do Not Let Inertia Set In. |
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Term
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Definition
| is the total time from the start to the finish of a process |
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Term
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Definition
| is the time required to change a process or an operation from making one service or product to making another. |
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Term
| Long-Term Capacity Planning |
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Definition
Deals with investment in new facilities and equipment.
Plans cover a minimum of two years into the future.
Economies of scale are sought in order to reduce costs through
Lower fixed costs per unit
Quantity discounts in purchasing materials
Reduced construction costs
Process advantages |
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Term
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Definition
| occur when the average unit cost of a service or good can be reduced by increasing its output rate. |
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Term
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Definition
| occur when the average cost per unit increases as the facility’s size increases |
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Term
| Capacity Timing and Sizing Strategies |
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Definition
Sizing Capacity Cushions
Timing and Sizing Expansions
Linking Process Capacity and other operating decisions. |
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Term
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Definition
| is the amount reserve capacity a firm has available. |
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Term
| A Systematic Approach To Long-Term Capacity Decisions |
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Definition
Estimate future capacity requirements.
Identify gaps by comparing requirements with available capacity.
Develop alternative plans for filling the gaps.
Evaluate each alternative and make a final choice. |
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Term
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Definition
| is determined over some future period based on demand and desired capacity cushion. |
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Term
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Definition
| is a set of consecutive future time periods for planning purposes. |
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Term
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Definition
are the simplest way to express capacity.
Products produced or customers served per unit of time |
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Term
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Definition
are typically based on resource availability.
Availability of workers, machines, workstations, seats, etc |
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Term
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Definition
| is any difference, positive or negative, between forecast demand and current capacity. |
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Term
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Definition
Qualitative Concerns
The fit between alternatives and strategy
Demand uncertainty
Reactions of the competition
Changes in technology
Quantitative Concerns
Cash flows
The difference between the flows of funds into and out of an organization over time, including revenues, costs, and changes in assets and liabilities. |
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