This website covers knowledge management, personal effectiveness, theory of constraints, amongst other topics. Opinions expressed here are strictly those of the owner, Jack Vinson, and those of the commenters.

Success example with Throughput Accounting

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Steve Holcomb has an article on LinkedIn that describes a nice success story in using the TOC measures of Throughput, Investment, and Operating Expense to guide decision making and bring a company back to profitability. Theory of Constraints: “Throughput Accounting” Gives Company Their First Profitable Year Since 2008! He covers the basics of the concept and then decribes at a high level what they did to bring the company back from the brink.

I've used this in similar ways. A small furniture repair shop was struggling with similar questions - they were making money, but not enough for the business to be their sole occupation, which put them into a conflict of spending time on the business or spending time elsewhere.  A throughput accounting analysis of the various types of work they chose to do gave them direction as to the places where they should focus - in particular, it highlighted something the owners had suspected: the most complicated business was the lowest throughput (longer time on the constraint AND lower price).

Coupled with some new operating rules (exploit the constraint), the furniture shop is still in operation five years later.

Describing the problem - human terms

What is your problem?