Throughput Accounting: Financial Analysis (#46)

In this podcast episode, we cover a variety of scenarios that can impact the amount of throughput generated by a bottleneck operation. Key points made are:

  • Analysis scenarios focus on maximizing the dollars of throughput per minute of processing time.

  • Not always good to accept large orders for which the associated throughput per minute of processing time is low, since they tend to crowd out other orders with higher throughput per minute.

  • Can make sense to shift work away from the bottleneck if the cost of doing so is lower than the associated amount of throughput per minute.

  • Can make sense to install a quality assurance station in front of the bottleneck operation, to ensure that low-quality parts are not processed by the bottleneck.

  • Generally want to overstaff the bottleneck to avoid downtime.

  • Generally want to process low-throughput items, as long as there is sufficient excess capacity in the bottleneck to accommodate it.

  • If there is enough capacity for all orders, then the bottleneck is probably somewhere else. When there is excess capacity, it could be useful to lower prices to increase order volume.

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