The Goal

System throughput is determined by the bottleneck. Improving anything else is an illusion of progress.

[Wide] → [Wide] → [NARROW] → [Wide] → Output

Widening the wide sections changes nothing. This is obvious when drawn as pipes, yet organizations constantly pour resources into non-constraints and wonder why output doesn’t improve.

1. Identify — Find the bottleneck.
2. Exploit — Squeeze every drop of capacity from it without spending money.
3. Subordinate — Everything else serves the constraint. Deliberately hold back non-bottlenecks.
4. Elevate — Now invest. Only after exploitation is maxed out.
5. Repeat — A new constraint emerges. Back to step 1.

Step 3 is where most organizations fail. Holding resources back feels wasteful. It isn’t.

Look for where inventory piles up. The constraint is always busy while downstream resources are starved. Follow the queues.

The constraint isn’t always a machine or person. It can be a policy, a skill (only one person knows how to do X), or the market itself.

Keeping everyone busy is not the same as being productive. A worker upstream of the bottleneck running at 100% just builds piles of WIP. A worker downstream starves regardless.

Idle time at non-bottlenecks isn’t waste. It’s the point.

The hiking analogy: put the slowest kid (Herbie) at the front and tie a rope to him. The whole group moves at his pace without spreading apart.

• Drum — The bottleneck sets the pace
• Buffer — Inventory in front of the constraint so it never starves
• Rope — Ties input to bottleneck capacity

Only regulate what enters the system. If the bottleneck processes 10 units/hour, release 10 units/hour at the start. Everything in between will sort itself out.

Traditional cost accounting rewards overproduction — inventory is an asset on the balance sheet. Managers game this.

TOC flips it:

• Throughput (T) — Revenue minus truly variable costs
• Inventory (I) — Money stuck in the system
• Operating Expense (OE) — Money spent to turn I into T

Net Profit = T - OE. ROI = (T - OE) / I.

The priority for decisions: increase throughput first (biggest leverage), reduce inventory second (frees cash), reduce operating expense last (often counterproductive if it touches the constraint).