Optimum production schedule and profit maximisation using the concept: theory of constraints

The Theory of Constraints (TOC) is an example of a management philosophy built upon a limited number of assumptions and designed to provide a process of continuous ongoing improvement. The assumption forming one foundation of TOC is that a system's outputs are determined by its constraints. The assumptions forming another foundation are new definitions for throughput, inventory and operating expense. These definitions are designed to support the goal of the organisation, which, according to Goldratt, is to make money. TOC, previously referred to as Optimized Production Technology (OPT), is a production control methodology that maximises profits in a plant with a demonstrated bottleneck. The process used by TOC to determine product mix that will maximise profitability is a very simple series of steps. In this article, a case study from an industry is considered to demonstrate how the application of concepts of TOC will maximise profit for an organisation. This paper further explains how TOC plays a vital role in increasing performance through a limited number of assumptions designed to provide a continuous process of improvement, as emphasised in Total Quality Management (TQM). This paper also shows the steps involved in solving a typical TOC problem along with optimisation of resources for increased demand conditions. This work has been carried out on an IBM/PC compatible system.