Knowledge brought forward from previous studies Limiting factor analysis The throughput approach is very similar to the approach of maximising contribution per unit of scarce resource, which you will have covered in your earlier studies. Strategic-level issues such as market developments, product developments and the stage reached in the product life cycle must also be taken into account. However, the huge majority of organisations cannot produce and market products based on short-term profit considerations alone. Limitations of the throughput accounting ratioĪs we have seen, the TA ratio can be used to decide which products should be produced. Quality may fall and bulk discounts may be lost Reduce material costs per unit, eg change materials and/or suppliers
How can a business improve a throughput accounting ratio? The TA ratio can be used to assess the relative earning capabilities of different products and hence can help with decision making.
In a throughput environment, production priority must be given to the products best able to generate throughput, that is those products that maximise throughput per unit of bottleneck.
