Managing system constraints: a cost/utilization approach

Modern management philosophies, such as just in time (JIT), the theory of constraints (TOC) and total quality management (TQM), place a strong emphasis on operations management. These approaches create techniques and procedures for effective flow of materials, but do not provide sufficient tools to consider the economic outcomes of the various alternatives. This paper applies the cost/utilization model to the analysis of production lines and materials flow. The model combines the Pareto approach with the TOC approach. The Pareto approach concentrates on the important and costly elements of the organization. TOC focuses on the organization's constraints. It is presented in a simple graphic display aimed to allow managers to locate better constraint resources, detect faults in the planning of the production line, examine improper fluctuations in the process and pinpoint their sources. The model is a top-management decision-support tool that may be applied in areas such as buffer policy, assessment of protective capacity, investment in production resources and identification and priorization of areas for improvement.