Theory of Constraint & throughput

Theory of Constraint & throughput

1.    Maximum Profit with Maximum throughput

Throughput accounting reveals that profit can be maximized by increasing throughput i.e. sales- variable cost (material).

2.    Maximization is not possible for constraint

Unlimited maximization is not possible due to different constraint. Constraint is a factor which limit to a something. Constraint of sales orders, constraint of production capacity.

3.     Removing Constraint

Profit can be improved by identifying & removing a key constraint. Key constraints should be identified, and then effort should be made to remove that constraint.

4.    One constraint is replaced by another

Theory of constraints says that one constrains is replaced by another constraint. It means once you remove one constraint, it will improve your profit, but soon a new constraint will appear.

5.    Always a Constraint

There is always a constraint that limits the throughput; otherwise the throughput would be unlimited.