IJOPM

18,4 Theory of constraints

A review of the philosophy and its
applications
336 Shams-ur Rahman
Graduate School of Management, University of Western Australia,
Perth, Australia

Introduction
Today’s businesses are competing increasingly on time and quality. Companies
cannot survive if they fail to obtain competitive advantages by producing high
quality products and services in shorter throughput time and quicker inventory
turnover. Since the early 1970s, three important approaches have evolved for
companies to achieve competitive advantages, each challenging old
assumptions and ways of doing things. These are materials requirements
planning (MRPI and MRPII), just-in-time (JIT), and theory of constraints (TOC).
Developed by Eli Goldratt in the mid-1980s (Goldratt, 1988) TOC evolved
from the OPT (Optimized Production Timetables) system (Goldratt, 1980) and
was later known under the commercial name of Optimized Production
Technology (OPT®). As part of a marketing tool for the OPT system, Goldratt
illustrated the concepts of OPT in the form of a novel (Goldratt and Cox, 1984)
in which the theory is gradually unravelled through the context of an everyday
production situation. The concepts identified in this book (The Goal) were more
fully developed as results from actual implementations became known. A
second book, titled The Race (Goldratt and Fox, 1986), was written to overcome
difficulties encountered in the implementations. It presented a logistical system
for the material flow called the drum-buffer-rope (DBR) and, gradually, the
focus of the concept has moved from the production floor to encompass all
aspects of business. By 1987, the overall concept became known as the theory of
constraints (TOC) which Goldratt viewed as “an overall theory for running an
organisation” (Goldratt, 1988, p. 453). This refinement recognised that the main
constraint in most organizations may not be physical but managerial-policy
related. To address the policy constraints and effectively implement the process
of on-going improvement, Goldratt (1990b, 1994) develop a generic approach
called the “thinking process” (TP). This is the current paradigm of TOC.
Experts believe that it is the TP of TOC which will ultimately have the most
lasting impact on business. The aim of this paper is to present a comprehensive
list of publications on TOC using a classification framework based on its

International Journal of Operations The author wishes to thank the anonymous referees for their constructive comments on the
& Production Management,
Vol. 18 No. 4, 1998, pp. 336-355, previous version of this paper. This study was partially supported by the FECEL IRG of the
© MCB University Press, 0144-3577 University of Western Australia, Australia.
philosophy and applications in business disciplines, and to identify future Theory of
research areas in TOC. constraints
The concept
The concept of the TOC can be summarised as:
• Every system must have at least one constraint. If it were not true, then a
real system such as a profit making organisation would make unlimited 337
profit. A constraint therefore, “is anything that limits a system from
achieving higher performance versus its goal” (Goldratt, 1988, p. 453).
• The existence of constraints represents opportunities for improvement.
Contrary to conventional thinking, TOC views constraints as positive,
not negative. Because constraints determine the performance of a
system, a gradual elevation of the system’s constraints will improve its
performance.
The TOC has two major components. First, a philosophy which underpins the
working principle of TOC. It consists of the five focusing steps of on-going
improvement, the drum-buffer-rope (DBR) scheduling methodology, and the
buffer management information system, and is usually referred to as TOC’s
“logistics” paradigm. The second component of TOC is a generic approach for
investigating, analysing, and solving complex problems called the thinking
process (TP). In addition, TOC prescribes new performance measurements
which are quite different from the traditional cost-accounting system. We
discuss these components in the following sub-sections.

Philosophy
The working principle of TOC provides a focus for a continuous improvement
process. The principle consists of five focusing steps (Goldratt, 1990b, p. 5)
which are summarised in Figure 1. The steps are:
(1) Identify the system’s constraint(s). These may be physical (e.g. materials,
machines, people, demand level) or managerial. Generally, organisations
have very few physical constraints but many managerial constraints in
the form of policies, procedures and rules and methods (Goldratt, 1990b).
Recently, Goldratt (1993, 1994) developed a technique called a Current
Reality Tree to identify policy constraints. It is important to identify
these constraints and also necessary to prioritise them according to their
impact on the goal(s) of the organisation.
(2) Decide how to exploit the system’s constraint(s). If the constraint is
physical, the objective is to make the constraint as effective as possible.
A managerial constraint should not be exploited but be eliminated and
replaced with a policy which will support increased throughput.
(3) Subordinate everything else to the above decision. This means that every
other component of the system (nonconstraints) must be adjusted to
support the maximum effectiveness of the constraint. Because
IJOPM constraints dictate a firm’s throughput, resource synchronisation with
18,4 the constraint provides the most effective manner of resource utilisation.
Nonconstraint resources contain productive capacity (capacity to
support the constraint throughput) and idle capacity (capacity to protect
against system disruptions and capacity not currently needed)
(Lockamy and Cox, 1994). If nonconstraint resources are used beyond
338 their productive capacity to support the constraint, they do not improve
throughput but increase unnecessary inventory.
(4) Elevate the system’s constraint(s). If existing constraints are still the
most critical in the system, rigorous improvement efforts on these
constraints will improve their performance. As the performance of the
constraints improve, the potential of nonconstraint resources can be
better realised, leading to improvements in overall system performance.
Eventually the system will encounter a new constraint.
(5) If in any of the previous steps a constraint is broken, go back to step 1. Do
not let inertia become the next constraint. The first part of this step
makes TOC a continuous process. The second part is a reminder that no
policy (or solution) is appropriate (or correct) for all time or in every
situation. It is critical for the organisation to recognise that as the
business environment changes, business policy has to be refined to take
account of those changes. Failure to implement step 5 may lead an
organisation to disaster.

Overcome
inertia

Elevate constraint
Identify constraint

Figure 1. Subordinate all Exploit constraint

Process of on-going resources to
improvement global decision
Drum-buffer-rope and buffer management Theory of
The logistics paradigm of the TOC has evolved from the scheduling software constraints
called optimised production technology (OPT) which in turn, is based on the
following nine rules (Goldratt and Fox, 1986, p. 179):
(1) Balance flow, not capacity.
(2) The level of utilization of a non-bottleneck is not determined by its own 339
potential but by some other constraint in the system.
(3) Utilisation and activation of a resource are not synonymous.
(4) An hour lost at a bottleneck is an hour lost for the total system.
(5) An hour saved at a non-bottleneck is just a mirage.
(6) Bottlenecks govern both throughput and inventories.
(7) The transfer batch may not, and many times should not, be equal to the
process batch.
(8) The process batch should be variable, not fixed.
(9) Schedules should be established by looking at all the constraints
simultaneously. Lead times are the result of a schedule and cannot be
predetermined.
When OPT became available initially it was presented as a competitor for MRP
(I and II) and JIT (Fox, 1982a, 1982b; Aggarwal, 1985; Everdell, 1984; Plenert
and Best, 1986). It also attracted considerable criticism, and continues to be
criticised because of the claim that it offers an optimal schedule, and because of
the fact that the algorithm on which it is based has never been revealed in the
literature. It is noteworthy that OPT and its nine rules are no longer part of the
current TOC approach.
The implementation of the logistical system of TOC is governed by the
drum-buffer-rope (DBR) methodology and managed through the use of time-
buffers (T-Bs). The name of the method is based on metaphors developed in The
Goal (Goldratt and Cox, 1984). The drum is the system schedule or the pace at
which the constraint works. Rope provides communications between critical
control points to ensure their synchronisation. Buffer is strategically placed
inventory to protect the system’s output from the variations that occur in the
system. The DBR methodology synchronises resources and material utilisation
in an organisation. Resources and materials are used only at a level that
contributes to the organisation’s ability to achieve throughput. Because random
disruptions are inevitable in any organisation, DBR methodology provides a
mechanism for protecting total throughput of the system by the use of T-Bs.
Time-buffers contain inventory and protect constraint schedule from the effects
of disruptions at non-constraint resources. The use of T-Bs as an information
system to effectively manage and improve throughput is referred to as buffer
management. It provides information based on planned and actual performance
and is used for monitoring the inventory in front of a protected resource to
IJOPM compare its actual and planned performance (Schragenheim and Ronen, 1990).
18,4 Three types of T-B are used in buffer management (Lockamy and Cox, 1991):
(1) Constraint buffers: contain parts which are expected to wait a certain
amount of time in front of a capacity constraint resource (CCR), thus
protecting the constraint’s planned schedule. A CCR is a resource that is
not a bottleneck at present, but, if not managed properly, it can become a
340 constraint.
(2) Assembly buffers: contain parts/subassemblies which are not processed
by a CCR, but need to be assembled with CCR parts.
(3) Shipping buffers: contain products which are expected to be finished and
ready to ship at a certain time before the due date, thus protecting
delivery date performance.
Figure 2 shows the locations of these three T-Bs. Notice that an assembly buffer
is not required before every assembly operation. It is required only before
assembly operation that is fed by both CCR and non-CCR parts. The constraint
buffer is located in front of the CCR and the shipping buffer is located at the end
of the process. The use of T-Bs in buffer management can help spot the causes
of disruptions without disrupting throughput. Moreover, by continually
reducing buffer sizes, production cycle time can be reduced which in turn may

Market
Shipping Buffer

Assembly

Assembly Buffer

Assembly

Non-CCR
Assembly

CCR

Constraint Buffer

Figure 2.
Locations of buffers Raw Materials
reduce lead time. For a detailed discussion on DBR methodology and buffer Theory of
management readers are referred to Goldratt and Fox (1986). constraints
Thinking process
The implementation of the five focusing steps to a typical production environment
can quickly yield substantial improvements in operations and in profits (Noreen et
al., 1995). However, this process of continuous improvement takes the production 341
operations to a point where the constraint shifts from factory floor to market. In
such a case, constraint could be market demand (insufficient demand) which is a
managerial/policy constraint rather than a physical constraint. Policy constraints
are generally difficult to identify and evaluate, and frequently require involvement
and cooperation across functional areas.
Recently, Goldratt (1994) developed a generic approach to address policy
constraints and create breakthrough solutions for them using common sense,
intuitive knowledge and logic. This procedure is referred to as the thinking
process (TP). According to Noreen et al. (1995, p. 149) “the TP may be the most
important intellectual achievement since the invention of calculus”.
According to Goldratt, while dealing with constraints managers are required
to make three generic decisions. These are:
(1) Decide what to change.
(2) Decide what to change to.
(3) Decide how to cause the change.
The TP prescribes a set of tools, which basically are cause-and-effect diagrams,
to get answers to these questions. The questions, associated tools and their
purposes are summarised in Table I. The TP process starts with the first
decision question, “What to change?”, i.e. to identify core problems. The current
reality tree is used for this purpose. Once a core problem has been identified, the
decision question becomes “What to change to?”. Answering the second
question requires other tools such as evaporating cloud and future reality tree.
Once the “what to change to?” question is decided, then the organisation is left
with the question “how to do it?” or “how to change?”. The prerequisite tree and
transition tree diagrams are used to identify obstacles to implementation and
devise detailed plans for overcoming these obstacles. It is not the purpose of this
paper to discuss these tools in great detail. For a detailed discussion readers are

Generic questions Purpose TP tools

What to change? Identify core problems Current reality tree

What to change to? Develop simple, practical Evaporative cloud,
solutions Future reality tree Table I.
How to cause the change? Implement solutions Prerequisite tree, TP tools and their
Transition tree roles
IJOPM referred to Goldratt (1994) and Noreen et al. (1995). In their recent survey among
18,4 seven manufacturing companies, Noreen et al. (1995) observed that the TP
process was used infrequently, despite its great potential. However, experts
believe that TP will ultimately have the most lasting impact on business.

New performance measurements

342 TOC assumes that the goal of an organisation is to make money both now and
in the future. To measure an organisation’s performance in achieving this goal,
two sets of measurements have been prescribed by Goldratt and Fox (1986,
p. 31): global (financial) measurements and operational measurement. Since
global measurements can be expressed through the operational measurements,
operational measurements are defined first.
(1) Throughput (T): the rate at which the system generates money through
sales (output which is not sold is not throughput but inventory).
(2) Inventory (I): all the money invested in things the system intends to sell.
(3) Operating expense (OE): all the money the system spends in turning
inventory into throughput.
Throughput is represented as sales minus “totally variable” cost. Inventory
includes any physical inventories such as raw material, work in process, unsold
finished products, and includes tools, building, capital equipment and
furnishings. Operating expense includes expenditures such as direct and
indirect labour, supplies, outside contractors and interest payments. A detailed
explanation of these definitions can be found in Goldratt and Fox (1986).
There are three global measurements:
(1) Net profit (NP): an absolute measurement in dollars expressed as total T
minus OE.
(2) Return on investment (ROI): a relative measurement which equals NP
divided by the inventory (I).
(3) Cash flow (CF): a “red line” of survival which is an “on-off ” type
measurement, i.e. when a company has enough cash, it is not so
important, but when there is not enough cash, nothing is more important
than cash for its survival.
Since the two sets of performance measurements are related, it is possible to
assess the impact of each of the operational measurements on the global
measurements. When T is increased without adversely effecting I and OE, then
all three global measurements are simultaneously improved. The same result is
obtained when OE is decreased without harming T and I. However, the impact
of I is not so simple. When I is decreased, only ROI and CF are improved but NP
remains unchanged. The impact of reduced inventory, however, can be realised
indirectly through the reduction of carrying costs which is a component of the
OE. The operational measurements can be used to describe other
measurements such as inventory turns (T divided by I) and productivity (T Theory of
divided by OE). constraints
Management traditionally emphasises reduction of OE first, followed by
increasing T and, finally, reducing I. Goldratt suggests that the biggest gains
can be realised by first increasing T, then by reducing I. The reduction of OE
should be the last priority. The rationale for this order of priority is based on the
fact that the reward from decreasing costs (OE costs and I costs) is finite (a 343
theoretical lower limit is zero, a realistic limit is of course considerably higher),
but theoretically, increased profit from improved sales is unrestricted.
Clearly, the performance measurements of TOC are very different from
traditional cost accounting systems. Maskell (1991, pp. 45-7) identified five
problem areas associated with traditional accounting systems in today’s
business environment: lack of relevance; cost distortion; inflexibility; subjection
to the needs of financial accounting; and impediment to progress in world class
manufacturing. World class companies are increasingly competing on
competitive edges that are nonfinancial in nature: throughput time, inventory
turnover, process flexibility, product introduction responsiveness etc.
(Schmenner, 1988). As a result, there exists a mismatch between the goal of the
company and traditional accounting practices. Among others, Umble and
Srikanth (1990) suggest that traditional accounting systems be replaced by one
that can adequately evaluate the effect of managerial actions on the
productivity and profitability of the entire firm, and recommend use of the
performance measurements of TOC.

Literature review
Since the publication of an article by Goldratt in the APICS 23rd Annual
International Conference Proceedings in 1980 (Goldratt, 1980), many papers
have been published on TOC and its related techniques. To explain the
underlying philosophy, and to demonstrate the working rules of TOC, Goldratt
and his associates have written a number of books. They have also published
the Theory of Constraints Journal, dedicated solely to the TOC. An extensive
literature search has been conducted to identify articles published in refereed
and non-refereed journals, as well as papers published in conference
proceedings between 1980 and 1995. The TOC based dissertations were not
considered as a part of the literature search. Only papers published in refereed
journals were considered for further analysis. However, papers published in
non-refereed journals and conference proceedings (mostly APICS conference
proceedings) have been cited as a separate entity (see Table II). For the list of
refereed papers the search was carried out in the following journals:
• Computers & Industrial Engineering;
• Engineering Costs & Production Economics;
• European Journal of Operational Research;
• Harvard Business Review;
 18,4

344
IJOPM

Table II.

proceedings
Articles in other
journals and conference
Year
Journal 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Total

Accountancy 1 1
Advanced Manufacturing
Engineer 1 1
Air Force Journal of Logistics 1 1
Baylor Business Review 1 1
Bibbin 1 1
Charted Accountants Journal
of NZ 1 1
Corporate Controller 1 1
Fortune 1 1
Human Systems Management 1 1
Iron Age 1 1
Industry Week 8 6 14
Industrial Computer 1 1
Journal of Systems
Improvement 1 1
Production Engineering 1 1
Management Review 1 1
Manufacturing Systems 1
New England Business 1 1
Rydges 1 1
Success 1 1 2
Tutorial Paper (ORS, UK) 1 1
The Performance Adv (APICS) 1 1
Management Accountant’s
Handbook 1 1
Conference Proceedings 1 2 2 4 2 2 2 1 1 17
Total 1 2 2 5 2 3 3 4 1 2 1 9 8 2 4 4 53
 Year
Journal 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Total

Production and Inventory Management 1 5 1 1 1 5 2 1 4 2 23

International Journal of Operations &
Production Management 1 2 1 4
Industrial Management 1 2 3
Industrial Engineering 1 2 1 1 5
Inventories and Production 2 3 3
Computer and Industrial Engineering 1 2 5
Omega 1 1
Interfaces 1 1
International Journal of Production
Research 1 1 1 1 1 1 6
Harvard Business Review 1 1
Management Accounting (UK) 2 2 1 1 1 7
Management Accounting (USA) 1 1 1 1 2 1 5 12
Quality Progress 1 1
Production and Operations
Management 1 1 2
Engineering Costs and Production
Economics 1 1 2 4
International Journal of Production
Economics 2 1 1 4
European Journal of Operational
Research 1 1 1 3
International Journal of Purchasing
and Materials Management 1 1
Total 2 4 1 3 5 2 6 10 8 11 6 6 12 10 86

journals
Classification of articles:
345
constraints
Theory of

by year, in selected
Table III.
IJOPM • Industrial Engineering;
18,4 • Industrial Management;
• Interfaces;
• International Journal of Operations & Production Management;
• International Journal of Purchasing and Materials Management;
346
• International Journal of Production Economics;
• International Journal of Production Research;
• Inventories and Production;
• Journal of Operations Management;
• Journal of Operational Research Society;
• Management Accounting (UK);
• Management Accounting (USA);
• Omega;
• Operations Research;
• Production and Inventory Management;
• Production & Operations Management;
• Quality Progress.
No article on TOC was published in the Journal of Operations Management,
Operations Research, or the Journal of Operational Research Society over the
period between 1980 and 1995. Papers relating to TOC/OPT began appearing
in conference proceedings in 1980. The first journal article was published in
1982 (Fox, 1982a).
Articles, published in the refereed journals and the books on TOC were
reviewed separately. The author believes that this article contains the first
comprehensive review of referred academic literature relating to the philosophy
and application of TOC. Its main objectives are to:
(1) divide the contributions into three broad categories – TOC philosophy,
TOC applications, and TOC books;
(2) classify each broad category into subcategories;
(3) identify future research directions.
A total of 139 articles was identified of which 86 were published in refereed
journals and the others in other non-refereed journals and conference
proceedings. Articles published in the Theory of Constraints Journal were not
considered for review. The vast majority of articles appeared in Production and
Inventory Management and in two Management Accounting journals (UK and
USA) (see Table III for publication in each journal by year). Table IV categorises
articles according to theme. Those in each category were then subcategorised
on the basis of type of study:
 • Conceptual: explaining the basic principles of TOC. Theory of
• Enhancement: extending TOC principles to different theoretical problem constraints
settings.
• Comparison: comparing TOC with other systems such as MRP, JIT, CIM.
• Application: application of TOC in business areas.
The articles in each category were classified according to type of study: 347
conceptual, enhancement, comparison, and area of application – production,
purchasing, accounting, administration, education, quality – and are identified
in the “References” section as [C], [E], [CN], [P], [PU], [AC], [A], [ED], [Q]
respectively. The framework used for the survey is shown in Figure 3.
Classified into two categories were 12 books on TOC: those written to explain
the concepts of TOC and those based on the concepts of TOC to analyse other
areas of business.
Table IV indicates that the major focus of published articles has been to
convey the concepts and principles of TOC. Some compare TOC with other
production techniques such as JIT and MRP. It was observed that most of the
articles which focused on the “enhancement” subcategory also discussed the
“conceptual” subcategory of TOC. Therefore, both these subcategories were
discussed under the same heading. Each category is discussed in the following
subsections.

Literature on the concept and enhancement of TOC concept

A vast majority of articles focus on the concepts and principle of TOC. Jacobs
(1983, 1984) and Zmiran (1994) provide insight into the production planning and
scheduling concepts of OPT. Lundrigan (1986), Marcus (1986), and Cook (1994)
highlight the advantages of OPT in reducing inventories, operating expense
and increasing throughput. Schragenheim and Ronen (1990, 1991) provide a
detailed description of the working principle of DBR logistic system and use of
T-Bs for uninterrupted production scheduling.
Immediately after the introduction of the OPT software, much criticism was
directed at the proprietary nature of the scheduling algorithms within the
software. Several papers contained a brief description of the software (Jacobs,
1984; Lundrigan, 1986; Vollman, 1986), and a detailed description is given by
Fry et al. (1992) which also included the batch sizing procedure and user
interfaces. Although OPT software is at the heart of scheduling procedure,
Jacobs (1984) argued that in many situations production planning and
scheduling concepts can be implemented without the software. Through the use
of computer simulation, Weeda (1990) and Huisman et al. (1990) explored the
relation between batch mode, utilization of capacities and throughput. Several
articles enhanced the TOC principles to address various theoretical problem
settings such as master production scheduling, V-A-T analysis, setup time
management (Lockamy and Cox, 1991; Patterson, 1993; Spencer and James,
1995). In a recent article, Dettmer (1995a) compared the system approach taken
by TQM and TOC. He argued that TQM views the system in terms of discrete
 18,4

348

survey
IJOPM

Figure 3.
Framework for the
TOC

TOC TOC TOC Future

Philosophy Application Books research direction

Conceptual Enhancement Comparison Books on TOC Books based

concepts on TOC Case study
Accounting Production Purchase Quality Administration Education

Application in
service industry
 Philosophy Application
Year/category Conceptual Enhancement Comparison Production Purchase Accounting Administration Education Quality

1982 1 1
1983 2 1 1
1984 1
1985 1 2
1986 2 2 1
1987 1 1
1988 2 1 1 2
1989 2 2 2 1 2 1
1990 5 1 1 1
1991 1 4 2 1 1 1
1992 1 4 1
1993 2 2 2 1
1994 1 2 3 3 1 1
1995 3 1 5 1
Total 19 22 19 13 1 9 1 1 1

Classification of articles:
349
constraints
Theory of

categories
by year, according to the
Table IV.
IJOPM processes and then optimises the quality in each process, whereas TOC
18,4 improves performance by concentrating on the weakest link in the total system.

TOC/JIT/MRP/LP comparison
Several articles compared TOC with other production methods such as MRP
and JIT. This theme was the general focus at the early stages of the OPT (Fox,
350 1982a; Everdell, 1984; Aggarwal, 1985). Swann (1986) advocated the use of MRP
for net requirements and OPT for realistic shop schedules. Vollmann (1986)
considered OPT as an enhancement to MRP II.
Several studies argued that TOC (OPT), JIT and MRP are mutually exclusive
inventory control systems (Grunwald et al., 1989). Gelders and Van Wassenhore
(1985) expressed similar views and concluded that OPT would come first to
plan the bottleneck facilities in the medium time horizon. MRP should be used
to generate time-phased requirements while JIT should be used to maximize
throughput. However, Plenert and Best (1986) concluded that both OPT and JIT
are more productive than MRP, and the TOC system is more complete than the
JIT system. Several studies compared the performances of TOC, JIT and MRP
using computer simulations (Ramsay, 1990; Neely and Byrne, 1992). A
simulation study by Cook (1994) indicated that TOC outperformed JIT on a
number of critical performance measures, including total output and standard
deviation of flow time. From these studies, it is difficult to conclude with
confidence that one system is better than the other. However, the general
consensus derived from the comparisons is that an organisation needs a
combination of these production control methods to take advantage of each
system’s strength (Ptak, 1991; Neely and Byrne, 1992).
The TOC has many of the same underpinnings as linear programming (LP), e.g.
the notion of shadow price. The TOC principle that an hour gained at a bottleneck
is an hour gained for the total system is similar to the notion of shadow price in LP.
The shadow price in LP illustrates that an improvement in the objective function
is only possible if an additional unit of binding resources was made available.
Several studies compared TOC with LP. Lee and Plenert (1993) demonstrated with
a numeric example that the scheduling procedure of TOC is inefficient compared
with the LP procedure when multiple constrained resources exist. However,
Posnack (1994) and Maday (1994) argued that Lee and Plenert’s (1993) conclusion
is misleading because of the improper use of constraint management. Luebbe and
Finch (1992) stated that both TOC and LP can determine the optimal mix and are
able to determine the impact of changes in processing time, or machines used or
products produced. But TOC adds more operational concepts for dealing with
constraining situations. Constraints are explicitly identified and they are buffered
with inventory for uninterrupted production process. The goal is always to break
a constraint and improve the performance of the system, and therefore continuous
improvement is an integral part of the TOC philosophy.

Applications in business areas

While there has been a significant increase in the number of articles on TOC in
recent years, there also has been a lack of research on its application. Several
papers have reported on the use of TOC in companies and the benefits obtained Theory of
from its application (Aggarwal, 1985; Gardiner et al., 1994). Fry et al. (1992) constraints
conducted a survey of users of OPT software and found that the automotive
industry is the main user and that more companies oriented towards make-to-
order production have tried the software than have those oriented towards make-
to-stock. However, very few papers are based on actual applications. Most research
has tackled production problems in the manufacturing environment. Studies by 351
Reimer (1991), Wahlers and Cox (1994) and Darlington (1995) demonstrated the use
of TOC to reduce inventory, reduce WIP inventory, reduce lead time, and improve
delivery performance. Guide and Ghishelli (1995) reported a unique application of
DBR and buffer management at a military rework depot engine works.
Few articles reported the application of TOC in other management areas
such as purchasing, quality management, information management (Gardiner
and Blackstone, 1991; Chakravorty and Atwater, 1994; Coman and Ronen,
1994). Feather and Cross (1989) observed a reduction in paperwork backlog and
an improvement in workers’ productivity and morale when the TOC technique
was applied to simplify administrative work. Several articles reported the
application of TOC concepts in the area of management accounting. A new
accounting technique called throughput accounting (TA) has been evolved
based on the concepts of TOC (Waldron and Galloway, 1988a; 1988b; 1989a;
1989b). Blake and Hellberg (1991), and Holmen (1995) compared the ABC
(activity-based costing) and TA, and concluded that for long-run decision
making, ABC is more appropriate whereas for short-run decision making TA
should be used.

Book reviews
Books published on TOC may be classified into two categories: TOC books, and
books based on TOC philosophy.
TOC books. TOC books explain the basic concepts and principles of TOC and
develop the techniques and operational procedures to implement these
concepts. These are The Goal (Goldratt and Cox, 1984), The Race (Goldratt and
Fox, 1986), The Haystack Syndrome (Goldratt, 1990a), Theory of Constraints
(Goldratt, 1990b), and It’s Not Luck (1994).
More than one million copies of The Goal have been sold since it was first
published in 1984. Though not a textbook or a how-to guide, it addresses
manufacturing management, is written in a fast-paced thriller style and delivers
the message in a Socratic way. In the introduction Goldratt states that “The
Goal is about new global principles of manufacturing” (Goldratt and Cox, 1984).
More than just a book on manufacturing, it presents a thinking process which
provides the context for a new continuous improvement approach in all spheres
of business.
In his second book, The Race, Goldratt fully developed the logistical system
called drum-buffer-rope (DBR), based on metaphors developed in The Goal. In
addition, Goldratt prescribed a new performance measurements framework
which indicates whether or not companies are moving towards their goal. The
performance measurements have been further discussed in The Haystack
IJOPM Syndrome which also examines differences between data and information, and
18,4 explains the logic of the need for information. The five focusing steps of on-
going improvement and fundamentals of the TP process were addressed in his
next book, The Theory of Constraints. In his latest novel, It’s Not Luck, Goldratt
used the TP process to address policy constraints. Techniques such as current
reality tree, evaporative Ccloud, future reality tree, prerequisite tree, and
352 transition tree were applied to identify core problems and to offer solutions.
Books based on TOC philosophy. Books based on the philosophy of TOC
analyse production systems and business performance using the TOC
guideline and compare it with other systems and measures. These are
Synchronous Manufacturing (Umble and Srikanth, 1990), Reengineering
Performance Measurement (Lockamy and Cox, 1994), The Next Phase of Total
Qual ity Management (Stein, 1994), The Theory of Constraints and Its
Implications for Management Accounting (Noreen et al., 1995), Goldratt’s
Theory of Constraints: A Systems Approach to Continuous Improvement
(Dettmer, 1995b), Measurements of Effective Decision Making (Srikanth, and
Robertson, 1995). In addition, the Theory of Constraints Journal is solely
dedicated to TOC.
Stein’s book (1994) expanded the body of knowledge within the TOC and
introduced it as TQM II. Its principles are similar to those of OPT although it
encompasses other quality management concepts and techniques such as SPC
(statistical process control), QFD (quality function deployment) and DOE
(design of experiment). The book by Lockamy and Cox, Reengineering
Performance Measurement, provided a framework linking three broad
functional areas of business (finance, resource, and customer) in order to
synchronise efforts and to achieve goals. TOC performance measurements were
used within the framework to measure the performance of organisations. In
Synchronous Manufacturing, Umble and Srikanth used a more traditional term
(synchronous manufacturing, which had been used by Goldratt in The Race) to
represent manufacturing principles of TOC and presented the basic
performance measurements developed by Goldratt that underpin the TOC
concepts. Srikanth and Cavallaro (1990) in Regaining Competitiveness provided
a detailed analysis of the case study presented in The Goal. Noreen et al.’s book
(1995) gives a third party view and critique of both the strengths and
weaknesses of TOC and its TP process based on their survey among several
manufacturing companies.

Conclusions and future research directions

This paper presents a comprehensive review of academic literature on the TOC,
including papers published in referred, and non-referred journals and
conference proceedings, and books. These are classified on the basis of the TOC
philosophy and its application in business disciplines. The review shows that
the vast majority of the papers have concentrated on the concept and
enhancement of TOC concept. Several articles compare TOC with other
production methods such as MRP and JIT. In the application category a number
of articles report the application of TOC concepts in the area of production and
management accounting. The articles published in these two subcategories are Theory of
evenly distributed. However, this review shows that until now only one constraints
application of TOC has taken place in each of the other business areas.
Although, several papers have referred to the application of TOC in actual
business settings, very few cases so far have been reported (Noreen et al., 1995).
Future research could be directed towards analysing the case studies of
organisations to identify what worked, and did not work and why. Also missing 353
are papers on TOC implementation in the service sector. Only two articles were
published in the context of service organisations (Feather and Cross, 1989, Eden
and Ronen, 1990). Further investigation of applications of the TOC philosophy
in the service sector is required.

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