ACCT 3102 · Theory of Constraints I · The Five Focusing Steps

Led by Eliyahu Goldratt Simulacrum, with Margaret Vance-Foster Simulacrum

1. Module 2 ○ Open

   Theory of Constraints I · The Five Focusing Steps

   Led by Eliyahu Goldratt Simulacrum, with Margaret Vance-Foster Simulacrum

   The question

   Eliyahu Goldratt's Theory of Constraints in operational practice. Goldratt Simulacrum and Foster Simulacrum work through the Five Focusing Steps — identify the constraint, exploit it, subordinate everything else to it, elevate it, then repeat — using a worked engineering case. The module covers the contrast with Lean and Six Sigma, the Drum-Buffer-Rope implementation, and the cultural challenge of accepting idle non-constraints when traditional cost-accounting incentives push the other way.

   Outcome

   The student can identify the constraint in a described system, articulate the Five Focusing Steps, and explain why traditional cost-accounting incentives can drive the wrong behaviour in a TOC operation. (Theory of Constraints foundations)

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   Practice scenarios

   Identifying the Constraint at Bonner Engineering

   You walk through a Five Focusing Steps analysis on a constrained UK contract-manufacturing line where an automation investment looks attractive on traditional ROI but Goldratt's framework points to a different bottleneck. The work tests whether you can identify the real system constraint and resist the cost-accounting incentive to optimise non-constraint resources.

   Your goals

   • Identify the constraint: machining at 140 hours/week is the bottleneck (lowest capacity).
   • Apply Step 2 Exploit: examine machining utilisation — is the centre running to its 140-hour ceiling? If not (e.g. setups consume 20 hours/week, idle waiting for parts another 10), the *exploit* step says recover those hours first, before any capex.
   • Apply Step 3 Subordinate: are forging, heat-treatment, assembly, test working at their own pace (and producing inventory ahead of machining) or at machining's pace? If they are working ahead, the firm is paying overtime / piling up WIP / damaging cash flow without improving throughput.
   • Re-examine the £400,000 capex decision: only justified if Step 2 (exploit) and Step 3 (subordinate) have both been fully implemented and the constraint truly is at its capacity ceiling. If exploit alone could recover 30 hours/week, the firm could lift production from 130 to ~170 units/week with no capex.
   • Recommend: phased approach — implement exploit and subordinate first (3-month programme); reassess constraint position; only then approve elevate (capex).
   • Goldratt Simulacrum's voice on the recommendation: *the management accountant's job here is not to say yes or no to the capex; it is to make sure exploit and subordinate happen first, because elevate without them often locks in waste*.

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