The Theory of Constraints
Fundamental Exam Review
TOC Philosophy Segment
James R. Holt, Ph.D., PE
Professor
Engineering Management
© Washington State University-2010
jholt@wsu.edu
http://www.engrmgt.wsu.edu/
1
Process Theory
Input
Input
Input
Process
Output
Output
Larger Process
Process
Input
Process
Output
Output
Input
Process
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Output
2
Systems Concepts
• Organizations / Systems exist for a purpose
• That purpose is better achieved by cooperation of
multiple, independent elements linked together
• Each Inter-linked event depends in some detail
upon the other links.
• The system owner determines purpose
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3
There is a “Weakest Link”
• Different link capabilities, normal
•
•
variation and changing workload make it
impossible to balance everything.
One element of the system is more
limited than another.
When the whole system is dependent
upon the cooperation of all elements, the
weakest link determines the strength of
the chain.
100
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4
Interconnections are
non-Trivial
• Every Systems have relatively few constraints
 The generic problem with physical systems
 The Five Focusing Steps
 The Generic Physical Solution
• Physical and Non-Physical Processes
 Flow systems (I, A, V, T structures / combinations)
 Distribution and Supply Chain
 Management control of these systems
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Interconnections are nonTrivial
•
•
•
A simple chain over simplifies reality
Link 1 has a relationship with Link 5
Link 5 has a different relationship with 1
1 2 3 4 5 6 7 8 9
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Management of the Links Vs.
Linkages
• Maybe the Simple Chain isn’t so simple
Link 8 and 9 can combine to push
on both Link 6 and Link 7
Link 1 and 2 can get together
and lean on Link 3 or Link 8
1 2 3 4 5 6 7 8 9
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There are 40,000
first order effects
and 1,000,000+
second and higher
order effects!
7
Traditional Approach:
Divide and Conquer
• Division of Labor breaks down linkages
complex
systems into manageable chunks.
• Which is harder to manage? Left or Right?
Left
Right
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Complexity  Simplicity
• Controlling many independent parts requires many
independent control mechanisms.
• Controlling many interconnected parts only
requires controlling the one part (for few parts) that
determine the resulting actions of the rest of the
parts (Steering, Accelerator and Brake).
• Find the Constraint to the System and Every
System is Simple.
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The Five Focusing Steps
Step 1. Identify the system’s constraint.
Step 2. Decide how to Exploit the system’s constraint.
Step 3. Subordinate everything else to the above
decision.
Step 4. Elevate the system’s constraint.
Step 5. WARNING, WARNING! If a constraint is broken,
go back to Step 1. But don’t allow Inertia to
become a constraint.
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The Problem: People Measure
Operational Efficiency
• Work flows from left to right
through processes with capacity
shown.
Process
A
B
C
D
E
FG
RM
Capability
Parts
per Day
Market
Request
11
7
9
5
8
6
Too Much Overtime
Chronic Complainer
Excellent Efficiency--Near 100%
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Reward Based on Efficiency
• Work flows from left to right.
Process
A
B
C
D
E
FG
RM
Capability
P/D
7
9
5
8
6
Both found ways to look busy and
appear to have a capacity of 5 parts/day.
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What Happens In Reality...
• Processes A and B won’t produce
more than Process C for long.
Process
A
B
C
D
E
FG
RM
Potential
P/D
7
9
5
8
6
Reality
5
5
5
5
5
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Then, Variability Sets In
• Processing times are just
AVERAGE Estimates
Process
A
B
C
D
E
FG
RM
Reality
5+/-2
5+/-2
5+/-2
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5+/-2
5+/-2
14
What’s an Average? 50%
• Half of the time there are 5 or more per day at
each process--Half the time less
• Probability of being 5 or more on the same day:
Process
A
B
C
D
E
FG
RM
Reality
Probability
5+/-2
0.5
Two at a time:
Over all:
0.25
5+/-2
0.5
5+/-2
0.5
5+/-2
0.5
5+/-2
0.5
0.25
3% Chance of 5 per day
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Traditional Solution: Add Inventory
• Put a day of inventory at each process!
WIP
5
Process A
5
B
5
C
5
D
5
Total 25
E
FG
RM
Variable
Process
5+/-2
5+/-2
5+/-2
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5+/-2
5+/-2
16
System Variability Takes
Over--Chaos
An Average of 5 means sometimes 3 and some times 7
Process
WIP
A
3
B
0
C
10
D
8
E
4
Total 25
FG
RM
Variable
5+/-2
5+/-2
5+/-2
5+/-2
5+/-2
Process
Inventory (WIP) quickly shifts position.
Inventory manager/expediter tries to smooth it out.
Shifting work-in-process creates large queues at some
locations. This makes work wait longer to be processed.
Distribution problems result.
Costs go up.
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System Variability Leads to Starvation
Process
WIP
A
3
B
0
C
10
D
8
E
4
Total 25
FG
RM
Variable
5+/-2
5+/-2
5+/-2
5+/-2
Process
Some workstations can be starved for work.
Management hates to pay for idle resources.
So...
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5+/-2
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Starvation Leads to
More Inventory
Process
WIP
A
3
B
5
C
10
D
8
E
4
Total 25
X
30
FG
RM
Variable
5+/-2
5+/-2
5+/-2
5+/-2
5+/-2
Process
So… Management Helps! Management puts in more work
(Inventory) to give everyone something to do!
Result: It takes longer and longer from time of release
until final shipping. More and more delay!
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19
Attempts to Control WIP
• Put a Lid on It-Use Kanban Cards-JIT
WIP
5
Process A
5
B
5
C
5
D
5
Total 25
E
FG
RM
Variable
5+/-2
5+/-2
5+/-2
5+/-2
5+/-2
Process
Just-In-Time uses Kanban Cards to limit the queues
building in the system.
No more than 5 parts are allowed at any station.
Looks good, but is it?
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Effects of Inventory Limits on
Production
• What does a Kanban card of 5 Mean?
WIP
5
Process A
5
B
5
5
C
D
5
Total 25
E
FG
RM
Variable
Process
5+/-2
5+/-2
5+/-2
After
Kanban
Before
Kanban
5+/-2
Average = 5
5+/-2
5+/-2
Can’t
exceed
5
5+/-2
Average = 3.5
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Operation’s Dilemma
Produce a
lot
Increase
work-inprocess
Manage
production
effectively
Costs &
delivery in
control
Decrease
work-inprocess
Assumption:
We can’t both
increase WIP and
decrease WIP at
the same time.
Injection: Put a large inventory where its needed
and low inventory everywhere else!
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The Five Focusing Steps
Step 1. Identify the system’s constraint.
Step 2. Decide how to Exploit the system’s constraint.
Step 3. Subordinate everything else to the above
decision.
Step 4. Elevate the system’s constraint.
Step 5. WARNING, WARNING! If a constraint is broken,
go back to Step 1. But don’t allow Inertia to
become a constraint.
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The Five Focusing Steps
Applied to Flow Operations
12
WIP
A
B
Total
C
D
12
E
RM
FG
7
9
5
XXXX
5.5
7
8
6
Five Focusing Steps
Step 1. Identify the Constraint (The Drum)
Step 2. Exploit the Constraint (Buffer the Drum)
Step 3. Subordinate Everything Else (Rope)
Step 4. Elevate the Constraint ($?)
Step 5. If the Constraint Moves, Start Over
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Understanding Buffers
WIP
Total 12/5=2.5 Days
A
B
C
D
E
FG
RM
7
9
5
8
6
• The “Buffer” is Time!
• In general, the buffer is the total time from work release until
the work begins work at the constraint.
• Contents (positions of the WIP) in the buffer ebb and flow
over time.
• If different items spend different time at the constraint, then
number of items in the buffer changes depending upon
product mix.
• But, the “Time in the buffer remains constant”.
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We need more than one Buffer
Raw Material
Buffer
A
B
C
D
E
Finished Goods
Buffer
FG
RM
7
9
5
8
6
There is variability in the Constraint.
To protect our delivery to our customer we
need a finished goods buffer.
There is variability in our suppliers.
We need to protect ourselves from unreliable
delivery.
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Buffer Time is Constant-Predictable
Raw Material
Buffer
A
B
C
D
E
Finished Goods
Buffer
FG
RM
Raw Material
Buffer
2 Days
7
9
Constraint
Buffer
2.5 Days
5
8
6
Finished Goods
Buffer
1 Day
Processing Lead Time is Constant!
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Capacity Constrained Resource
Buffer Management
Constraint Buffer WIP
A
Total 12/5=2.5 Days
B
C
D
E
RM
FG
7
WO21
WO20
WO19
WO18
9
WO17
WO16
WO15
WO14
5
8
WO13
WO12
WO11
WO10
2.5 Days
0
6
• The Constraint is scheduled
very carefully
• Buffer Managed by location
• Individual activities in the
buffer are not scheduled
Time until Scheduled at Constraint
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Problem Identification
A
B
C
D
E
RM
FG
7
WO19
Delayed
Parts
WO21
WO20
WO19
WO18
2.5 Days
9
WO17
WO16
WO15
WO14
5
8
6
Constraint schedule
is in jeopardy!
(Red Zone Hole)
WO13
WO12
WO11
WO10
Watch WO14 (Yellow)
0
WO19 OK (Green)
Time until Scheduled at Constraint
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The TOC Approach to Solving Problems
• The Five Focusing Steps are a Subset of the Three
Main Questions
 What to Change?
• This question deals with finding the Constraint of the
System.
 What to Change to?
• This question deals with what is needed to solve the
problems.
 How to Cause the Change?
• The emphasis on the last question is ‘cause’. What few
actions will we do to cause the system to change itself.
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Conflict Management
• Conflicts Exist.
They are evidence improvement is
needed (conflicts are problems).
 What to change?
 What to change to?
 How to cause the Change?
• A well worded Conflict is half the Battle.
• Conflict is based upon a mutually desirable Goal
• Conflict is based upon different Needs requiring
different Actions
• The different Actions are opposites (The Conflict)
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The Evaporating Cloud
B. My
Need
D. What I
Want
C. Other’s
Need
D’. What
the
Others
Want
A. The
Goal
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Creating the Evaporating Cloud
1. What is it that I Want (that
I’m having trouble getting)?
D. What I
Want
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Creating the Evaporating Cloud
1. What is it that I Want (that
I’m having trouble getting)?
D. What I
Want
D’. What
the
Others
Want
2. What is it that the Others Want
(that I don’t want them to have)?
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Creating the Evaporating Cloud
3. Why do I want what I want?
What Need am I trying to fulfill?
1. What is it that I Want (that
I’m having trouble getting)?
B. My
Need
D. What I
Want
D’. What
the
Others
Want
2. What is it that the Others Want
(that I don’t want them to have)?
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Creating the Evaporating Cloud
3. Why do I want what I want?
What Need am I trying to fulfill?
1. What is it that I Want (that
I’m having trouble getting)?
B. My
Need
D. What I
Want
C. Other’s
Need
D’. What
the
Others
Want
4. Why do the Others want what
they want? What Need do they
have?
2. What is it that the Others Want
(that I don’t want them to have)?
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36
Creating the Evaporating Cloud
3. Why do I want what I want?
What Need am I trying to fulfill?
5. What Goal do we
mutually share? Why
are we still arguing?
1. What is it that I Want (that
I’m having trouble getting)?
B. My
Need
D. What I
Want
C. Other’s
Need
D’. What
the
Others
Want
A. The
Goal
Reading the Cloud:
In order to <point> I must
have <tail>.
4. Why do the Others want what
they want? What Need do they
have?
2. What is it that the Others Want
(that I don’t want them to have)?
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Let’s Do Some Examples
B. Learn a
lot about
what I wnat
D. I want to
ask a lot of
questions
C. Get
through all
the topics
D’. Depack
doesn’t take
over.
A. We all are
ready for the
Fundamental
Exam
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The Approach to Solving Problems
• There are Three Main Questions
 What to Change?
• This question deals with finding the Constraint of the
System.
 What to Change to?
• This question deals with what is needed to solve the
problems.
 How to Cause the Change?
• The emphasis on the last question is ‘cause’. What few
actions will we do to cause the system to change itself.
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39
Communicating the
Evaporating Cloud
4. Point out that you also have a
significant Need.
1. Start the Mutual Goal.
It is common ground.
Both interested.
5. And you WANT to meet
your Need as well.
B. My
Need
D. What I
Want
C. Other’s
Need
D’. What
the
Others
Want
A. The
Goal
Reading the Cloud:
In order to <point> I must
have <tail>.
2. Recognize you understand the
Other’s Need must be meet to
reach the Goal.
3. Acknowledge the Other side
Wants to act on meeting their
Need.
40
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Evaporating the
Evaporating Cloud
Assumption: All machines must
be keep busy all the time.
Assumption: We are
measured upon our
Production Level
A. Manage
Production
Effectively
Assumption: Our profits
are not high. Customers
demand on-time delivery.
B.
Produce a
Lot
D. Increase
the Work-InProcess
Assumption:
C. Keep
Costs and
Delivery
in Control
D’.
Decrease
the Work-InProcess
We can’t
increase WIP
and Decrease
WIP at the
same time.
Assumption: WIP is expensive.
High WIP delays flow time.
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Projects Are Handled the Same Way
A
B
C
D
Jobs Process Flow
Type I A->B->C->D
Type II C->A->B->D
Type III A->B->B->D
Type IV C->B->A->B
Each Job type has four
Resources A, B, C, D
days of processing for
each receive work as it the four resources.
flows in different
Hum?
patterns
Release one job per day
and every body is busy.
Right?
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Projects Are Handled the Same
A
B
C
D
Jobs Process Flow
Type I A->B->C->D
Type II C->A->B->D
Type III A->B->B->D
Type IV C->B->A->B
Internally, B is the
There are 16 processes
constraint. We can treat
on the 4 job times
but 6 of them go through it just like the product
line
B. C and D only have 3
TDD=Effectiveness in Delivery
processes.
IDD =Effective use of resources
(and tracking improvements)
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Projects are Balancing Acts
Quality and
Scope
Timing and
Schedule
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Budgeted
Costs
44
Then things Combine
Quality and
Scope
Precedence
Structure
Timing and
Schedule
Statistical
Variation
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Budgeted
Costs
Human
Behavior
45
And Reality Sets In
Quality and
Scope
Bumpy Road of Reality
Timing and
Schedule
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Budgeted
Costs
46
The Project Dilemma
• There is Always a Trade-Off
Meet
Commitment
in Danger
Compensate
for Early MisEstimates
Not
Jeopardize
Other Original
Commitments
Not
Compensate
for Early Misestimates
Meet Original
Commitments
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47
Resolving Project Problem Options
Add more time&money and decrease scope
Meet
Commitment in
Danger
Compensate for
Early MisEstimates
Not Jeopardize
Other Original
Commitments
Not Compensate
for Early Misestimates
Meet Original
Commitments
Use our Safety Buffer Correctly
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Consider the Aspects of Projects
Good Statistics
Central Limit Theorem
(add enough things
together and everything
looks normal)
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Typical Activity Duration
Normal Duration Time
Standard Deviation
Project Task Duration Time
Mean
Mean
50% Probable
85%
Probable
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50
So, what is the Behavior?
•Engineering Pessimism:
Estimate a safe value (85%)
Level of
Effort
•Engineering Optimism:
I’m good, I can beat 50%.
•Student Syndrome: “Why
start now? It isn’t due
until Friday?” (There is
more urgent work/parties.)
•Parkinson's Law: Work
Expands to full the time
available (Just keep
tweaking! More is better!)
Assigned
Date
Time-->
•Empirical evidence
shows most tasks
complete on or after the
due date
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Engineering Perpetual Motion (overtime)
Actual Work
Load
Level of
Effort
Assigned
Date
Normal
Work Load
Time-->
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The result is Bad Multi- Tasking
A1
A3
Project Manager A
A2
Ten Days
Each Task
B1
B3
B2
Project Manager B
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Politically Correct Schedule
30 Days Flow
A1
A2
A3
B1
10
B2
20
30
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B3
40
50
54
More Like Actual Schedule
40 Days Flow
A1
A2
B1
B2
10
20
30
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A3
B3
40
50
55
Elements of the Project Management
Solution
• Prioritize
• Don’t Schedule Conflicts
• Avoid Bad Multi-Tasking
• Don’t Release Too Early/Too Late
• Buffer Critical Chain
 Buffers: Project / Feeding / Resources
• Schedule 50% Estimate Completion
• Communicate “Time Remaining”
• Negotiate Capability Not Dates
• No Milestones
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TOC Flow Time
20 Days Flow
A1
A2
A3
B1
10
20
B2
30
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B3
40
50
57
Don’t Schedule Conflict
Before
After TOC Leveling
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Buffer the Project and NOT Individual
Activities
Before with 85% Estimates
Actual 50% Estimates with Individual Buffers
Task Buffer
TOC Aggregated Buffer of Activities
Task Task Task Task Buffer
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Protect the Critical Chain
Project Buffer
Feeding Buffer
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Buffer Resources on the Critical Chain
Lt. Green be ready
Buffer
Blue be ready
Green be ready
Cyan Resource be ready
Project Buffer
Feeding Buffer
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61
The Simple Line Diagram Was Too
Simplistic
RM
FG
FG
Aircraft assembly
is more of an “A”
Plant
RM
RM
RM
RM
RM
RM
RM
RM
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RM
62
The “A” Plant Has Some Long
Duration Processes
FG
RM
RM
RM
RM
RM
RM
RM
RM
RM
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Pull Tight the Longest Path (and Shake)
Fastest Possible Flow Time (Critical Path)
RM
FG
Critical
Assembly Joins
RM
RM
RM
RM
RM
RM
RM
© Washington State University-2010
RM
64
How Could we Fairly Measure
Feeder Chains?
RM
FG
RM
RM
RM
RM
RM
TDD-On Missed Delivery to main line
RM
RM
IDD-On Effective Use of Resources
RM
(and monitoring improvements)
Hum? Could this also
apply to suppliers?
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There is an Injection for Every Conflict
• Arrow
• AB
• AC
• BD
• CD’
• D/D’
Assumption
Productive
Cost Effective
Busy Machines
Expensive WIP
Can’t do Both
Injection
Deliver Max Capacity
Price on Value
Keep Constraint 100%
Throughput Focus
Buffer Constraint only
Chosen Injection:
Focus on the Capacity Constrained Resource.
Release work to the system at the rate of the
Capacity Constrained Resource a Buffer Time in
Advance (no sooner, no later).
Use Buffer Management to improve the system.
© Washington State University-2010
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The Key Points of TOC Solutions
• TOC only accepts Win-Win Solutions
 Win-Lose, Lose-Win, Lose-Lose are
unacceptable.
 In the Evaporating Cloud, The Goal is achieved!
Usually, both sides needs are met.
 Everyone is happy.
• Stake Holders, Employees, Customers, Economy,
Ecology, Behaviors, Friendships (even competitors
benefit).
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67
Sometimes TOC Solutions Are Counter
Intuitive
• DBR: To get more out, put less in.
• CCPM: To finish project sooner, delay the Start.
• CCPM: To be safer, remove the safety.
• Replenishment: To get your products quicker to
the customer, store them farther away.
• To Solve the Conflict, Ignore the conflict.
• To Make More Money, Sell at below Cost.
If you can’t find an injection, then just do what
is opposite of what everyone else is doing
(and do whatever it takes to make it work).
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68
This is Efrat’s logic diagram of The Choice as shown at
the TOCICO International Conference in Tokyo, Japan,
November 2009. Recorded by James Holt
This is necessary based logic but the arrows are shown
going in the opposite direction (because that is how
most people would interpret them. “If you want (tail of
arrow) you need to have (head of arrow).”
Stamina to overcome
failures
Wish to have a
meaningful life
Enough meaningful
successes
Opportunities
Collaborate with
people
Think clearly
Overcome four
obstacles
Overcome
perception that
reality is complex
Every situation
is simple
Don’t accept
conflicts
Every conflict
can be removed
Avoid blaming
There is always
a win-win
solution
Core TOC Concepts
Don’t think you
know it all
Every situation can
be substantially
improved.
Next Topics
• TOC Thinking Processes
• TOC Applications
 Operations
 Project Management
 Replenishment
• TOC Finances and Measures
• Some TOC Philosophy will be blended into these
additional topics.
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70