Throughput Production System Benes

July 1 by

Shop Hour AttainmentAre you losing revenue because customers are unhappy with delivery performance?  Are you not getting the output you thought you should get with your equipment?  The Throughput Production System can show you, in real time, how healthy your shop is based on customer expectations, and balance that with your cash position.

Think about this scenario: Would you like to know which order is the hottest, based on its remaining flow, compared to true customer need? The Throughput Production System will show you.

Would you like a simple program that allows you to easily prioritize the days jobs, and then make sure that you accomplish the required effort to make your and your customers goals? This is exactly what the Throughput Production System does.

Would you like to be able to balance your lines and protect schedule from ‘lumpy’ demand? The forecast aspect of the Throughput Production System enables this.

The Throughput Production System will enhance your current ERP scheduling system (even if it’s just a bunch of spreadsheets!), and allow you to improve your delivery performance and customer satisfaction.

Here’s the Bottom line: If your customers are thrilled with your performance, and have established a high level of trust with you and that performance, additional sales are likely on the way.

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A Constraint is like a Traffic Jam

July 1 by

Delayed throughput - Not having your product sail through the factory is like having a traffic jam on the highway - lots of cash, in the form of inventory, creating its own constrantt, just sitting there gathering dust, and slowing down all production and revenue.

Not having your product sail through the factory is like having a traffic jam on the highway – lots of cash, in the form of inventory, creating its own constraint, just sitting there gathering dust, and slowing down all production and revenue.

As long as your cash is not converted back to revenue, it’s like you’re loaning out your money at no interest – in fact it’s worse than that, because that money laying around is probably stopping you from getting more sales. It makes it appear as if the capacity is full, while it’s probably just misallocated. The additional revenues get blocked at the constraint, limiting what you were probably expecting when you bought that new machine.

The cash you invest in materials, labor, etc., doesn’t come back to you until you convert it back into cash in the form of revenues. So when we manage Throughput, we are indirectly managing revenues – and better cash flow, and a fatter bottom line.

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A Constraint Is a Drain on Cash

July 1 by

A Constraint in your production process drains cash – the Throughput Production System can help you find it, and stop it from going down the drain

When we put on a Throughput Managerial Accounting lens, we see that virtually everything that goes on in your factory is really a conversion of cash. Once you spend that cash to get things placed into the process, you want to convert it back to cash as soon as you can. This is more than just getting back the cost of materials, it’s also the cost of the labor, the electricity, the building and equipment, even the non-recurring effort you previously put into the job. If you saw YOUR cash piled up and laying around your shop gathering dust, wouldn’t you want to be able to reach it, and put it to better use?

The constraint does more than just slow down the conversion of cash invested in time and materials back to cash – it also limits the revenues you can realize from your system. In fact, with Throughput Managerial Accounting, we don’t realize throughput until it converts back to cash, in the form of revenue. This puts a whole different light on Throughput Velocity and its true meaning – we realize we want our cash back as soon as possible.

With Constraint Management and the Throughput Production System, we find where the cash gets stuck, and get it converted back to real money as soon as possible. And more importantly, we make sure it doesn’t get lost forever, in the form of lost revenues.

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