<P> The theory of constraints (TOC) is an overall management philosophy introduced by Eliyahu M. Goldratt in his 1984 book titled The Goal, that is geared to help organizations continually achieve their goals . Goldratt adapted the concept to project management with his book Critical Chain, published in 1997 . </P> <P> An earlier propagator of a similar concept was Wolfgang Mewes in Germany with publications on power - oriented management theory (Machtorientierte Führungstheorie, 1963) and following with his Energo - Kybernetic System (EKS, 1971), later renamed Engpasskonzentrierte Strategie (Bottleneck - focused Strategy) as a more advanced theory of bottlenecks . The publications of Wolfgang Mewes are marketed through the FAZ Verlag, publishing house of the German newspaper Frankfurter Allgemeine Zeitung (Frankfurt General Newspaper). However, the paradigm Theory of constraints was first used by Goldratt . </P> <P> The underlying premise of the theory of constraints is that organizations can be measured and controlled by variations on three measures: throughput, operational expense, and inventory . Inventory is all the money that the system has invested in purchasing things which it intends to sell . Operational expense is all the money the system spends in order to turn inventory into throughput . Throughput is the rate at which the system generates money through sales . </P> <P> Before the goal itself can be reached, necessary conditions must first be met . These typically include safety, quality, legal obligations, etc . For most businesses, the goal itself is to make money . However, for many organizations and non-profit businesses, making money is a necessary condition for pursuing the goal . Whether it is the goal or a necessary condition, understanding how to make sound financial decisions based on throughput, inventory, and operating expense is a critical requirement . </P>

The central idea of theory of constraints (toc) is based on the
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