Throughput Accounting Consulting (Theory of Constraints)
Raise cash flow and margin—without adding cost
Throughput Accounting (TA) focuses every decision on your constraint. We prioritize Throughput (T) per unit of constraint time, reduce Operating Expense (OE) at the system level, and minimize Investment (I) tied up in WIP and inventory—so you generate more cash, faster.
Executive Explainer
What is Throughput Accounting (TOC)?
Throughput Accounting focuses every decision on your system’s constraint using three global measures: Throughput (T) = sales revenue minus truly variable costs (typically raw materials); Investment (I) = money tied up in inventory, WIP, equipment; Operating Expense (OE) = all other costs to turn inventory into throughput. Instead of allocating overhead, you maximize T per unit of constrained time so the bottleneck is always fed with the most profitable work. Profit is managed as T − OE; capital efficiency as (T − OE) / I.
Micro-example:
- Product A yields $50 T and uses 10 minutes of the constraint ⇒ $300/hour.
- Product B yields $40 T and uses 5 minutes ⇒ $480/hour.
- Choose B to raise cash flow faster—without adding cost.
Who this is for
Manufacturers, service firms, and project organizations dealing with:
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Chronic bottlenecks, expediting, and late orders.
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Confusing margins from overhead allocation.
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Too many SKUs, long lead times, unstable schedules.
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“Busy everywhere, profitable nowhere”.
Outcomes you can expect (typical ranges)
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+10–30% increase in throughput on the same assets.
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30–60% shorter lead times & WIP reduction.
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>95% due-date performance with less expediting.
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Clear mix & pricing driven by constraint economics.
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Management visibility: T, OE, I and T/hour at the constraint.
Primary success metric: (T − OE) / I and Throughput per Constraint Hour.
Throughput Account versus Traditional Accounting.
What we deliver
1) TA Diagnostic (2–3 weeks)
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Map the flow and identify the true constraint.
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Build a Throughput per Constraint Hour model by product/service.
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Quick-win exploitation plan (shifts, lot sizes, setups, buffers).
2) Product Mix & Pricing with TA
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Rank SKUs/orders by T per constraint minute.
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Quote & accept rules that protect the constraint.
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Discontinue or redesign low-T items; rationalize catalogs.
3) Scheduling & Buffer Management (DBR/Buffer)
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Drum-Buffer-Rope plan aligned to your constraint.
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Time- and stock-buffer sizing; green/yellow/red control.
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Daily control room cadence and exception management.
4) Analytics & Integration (SAP-ready)
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KPIs: T, OE, I; T per constraint hour; buffer status; DDP.
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Integration with SAP S/4HANA/ECC, CO-PA, PP, MM, PM, BW/4HANA, and SAP Analytics Cloud.
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Executive dashboards for real-time decisioning.
How we work
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Sprint-based execution with weekly show-and-tell.
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Joint task force (operations + finance + planning).
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Hands-on change at the constraint, not slideware.
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Transfer of methods: your team runs TA after we exit.
Engagement options
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Rapid TA Diagnostic (fixed fee).
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Implementation Program (3–12 weeks, milestone-based).
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Executive Workshop (1 day): TA for leaders & finance.
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Ongoing Coaching (monthly retainer).
Example improvements (anonymized)
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Industrial components: +22% T on the same line by re-sequencing and right-sizing buffers; lead time −41%.
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Custom fabrication: Stopped quoting low-T jobs; overall margin +6 pts in 60 days.
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Service ops: Shifted senior time to the bottleneck work type; utilization flat, profit +18%.
What’s different from standard cost accounting?
TA avoids overhead allocation and evaluates decisions at the constraint using T, OE, I and T per constraint hour, eliminating cost-absorption artifacts.
Do we need new software?
No. We start with your current SAP data and simple worksheets; later, we can add BW/4HANA or SAC dashboards for live visibility.
How fast do results appear?
Most teams see measurable throughput and lead-time gains within weeks once the existing constraint is properly exploited.
Will this disrupt day-to-day operations?
No. We stabilize flow with buffers and clear dispatching rules, which reduces firefighting instead of creating it.
Can TA work in services and projects?
Yes. Your “constraint” might be a scarce role, a specialist step, or a stage. We compute T per constrained hour for any context.
How does pricing change under TA?
We prioritize orders with the highest Throughput per constraint minute and set quoting/acceptance rules that protect the bottleneck.
What data do you need to begin? (new)
SKU/order routings with times at the likely constraint, material costs (for T), basic demand/mix, current WIP/queues, and recent due-date performance.
What if we have multiple constraints or seasonality? (new)
We identify the system constraint in time (it can shift), then size time/stock buffers and adapt Drum-Buffer-Rope to maintain flow across demand swings.
How do finance and TA reconcile? (new)
Keep statutory reporting as is; use TA for operational decisions. We map TA measures to SAP CO-PA and management reporting so finance and ops stay aligned.
Will we have to turn down business? (new)
Sometimes. Declining low-T/constraint-hungry work can raise total profit and DDP by freeing your constraint for higher-T items—netting more cash, faster.
What to do next
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Request a Throughput Accounting Diagnostic (recommended start)
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Or Book a 30-minute call to discuss scope, data, and timeline