In part 1 of this series, I introduced management attention as a constraint. This second post goes on with more reasons why management fail to pay the necessary attention to the factor limiting the whole system’s performance. Unaware or wrong about the constraint Management attention might be on the wrong things because manager are unaware … Continue reading Management attention as a constraint – Part 2
Inventories and Work In Progress (WIP) can be helpful clues to visually identify the bottleneck or constraint in a process, but they can also be insufficient or even misleading as I explained in part 2 of this series. It is often also necessary to study material and parts routes to really understand where they get … Continue reading How to identify the constraint of a system? Part 3
In a for-profit organization making money is the goal and the limitation to making more money is called a constraint. Conversely, a constraint is a limiting factor to get more out of the system. There is only one constraint which is the most limiting factor restricting the Throughput. Throughput is the rate at which the … Continue reading If making money is your goal, throughput is your obsession
Throughput Accounting (TA) can be understood as a simplified accounting system based on Theory of Constraints (ToC) principles. TA makes growth-driven management and decision making simpler and understandable even for people not familiar with traditional accounting. Beyond simplifying, TA has a different approach compared to traditional accounting. The latter will focus on cost control (cost … Continue reading What is Throughput Accounting?
Theory of Constraints (TOC) provides a framework to identify, exploit, set pace and elevate* the constraint, or put in simpler words: identify the bottleneck in the process and make the best with it. *Identify, exploit, subordinate, elevate and prevent inertia are known as the “five focusing steps” of Theory of Constraints. In this constraint or … Continue reading TOC-based decision for best product mix
Little's law is a simple equation explaining how Waiting Time, Throughput and Inventory are related. Wait Time = Inventory (or WIP) / Throughput Here is a video about Little's law: Fine, what is Little's law good for? Well, if a process lead time is too long, chances are that work-in-progress (WIP) is too high. For … Continue reading What is Little’s law? What is it good for?
Throughput accounting comes early for all studying Theory of Constraints. The simplest is about the 3 KPIs: Throughput (T), Operating Expenses (OE) and Inventory (I) - later changed to Investment - and their relationship for higher profits. Later, Throughput accounting is used to make sound decisions to maximize profit despite limited means, favoring the products with highest "octane", which is the … Continue reading Introduction to Throughput Accounting