Improved Throughput

Throughput is defined by ‘volume of ‘things’ delivered to the market per period of time’. It can be important to both those organisations who produce tangible goods (for example manufacturing), and to those within service industries (for example, producing insurance quotations, or acquiring new bank customers, or filling aircraft seats).

Organisations wishing to increase their throughout rates need to consider two questions beforehand. One, will their market buy the additional items they deliver? And two, is there sufficient financial benefit in delivering the extra items in the first place? If both the answers are ‘yes’, then throughput improvements are a meaningful goal.

Only the second question needs explaining. Only those organisations with a high fixed cost component to their business will benefit financially. Why is this? Where the cost of sales is low relative to the overhead, every additional item delivered into the market contributes a high proportion of income to overhead (and through to the bottom line). If not, very large volume increases are required to ‘retain’ enough of the contribution to make the throughput initiative worthwhile. You’ be better off saving costs instead.

High fixed cost manufacturers include capex-intensive organisations (heavy plant and engineering, mining, cement and metals refining). In the services sector, examples include the equivalent capex- and labour-intensive organisations (airlines and telcos for example, hence the concept of discount seats and call periods, respectively).

Although it can vary, at any one time there is only ever one single bottleneck in any value chain. A key objective in what we deliver is to understand and optimise the throughput ‘bottleneck’ in the value chain, and ignore all else. By avoiding local optimisation (and hence wasted effort), our clients see the additional throughput actually reach their market, and not end up as work in process inside the organisation.