 Any factor that is in scarce supply and that

stops the organization from expanding

activities further, that is limits the
organization’s activities.

 Company has a choice between various types

of products which could manufacture and
must use the limited resources wisely, that is
called product decision mix.
 The rule in establishing the product mix is to
rank the product according to the highest
“contribution per limiting factor” ratio. The
capacity of the scarce resource should be
allocated according to this ranking.
 Also called optimized production technology.
Based on the principles that profits are expended
by increasing the throughput of the plant.

 Bottleneck- machine capacity limits the

throughput of the whole production process. A
bottleneck should be removed or ensure they are
fully utilized at all times.

 Non-bottleneck- resources should be scheduled

and operated based on constraints within the
system, and should not be used to produce more
than the bottlenecks can absorb.
 TOC use three key measures:
◦ Throughput contribution (sales – direct
materials)
◦ Investments (inventory, R&D costs)
◦ Other operational expenses (other than
direct materials)