Throughput is the process of moving production through your business. Eventually the production will culminate in cash in your hand from a paid-for sale. Workflow management creates a faster flow (or throughput) of product through your business.
What you have learned:
That a strong focus on wasted effort and resources in your business will substantially reduce your operating cost.
The other side of that same process is that the ‘flow’ of product through your business systems will have improved.
The faster flow/throughput gives you Revenue increasing opportunities as well.
If not, go back to the Project C2.4 Optimise100 – Cost Reduction and do those steps again.
Is your product a service? It still involves a work flow/production cycle.
Focus here:
How can you rapidly improve the throughput of the product through your production cycle.
Some of these issues have been covered in earlier articles. Touching on them again here gives a different perspective to apply.
Identify the Constraints with Workflow Management
The Theory of Constraints (TOC):
There is likely to be only one, and certainly no more than a very few Bottlenecks/Constraints in your system.
Locate the Bottleneck/Constraint. At this point production cannot proceed through your Production Cycle any faster than the speed at which the Bottleneck can handle it.
Therefore, it is important to:
- Identify the bottleneck.
- Work very hard to reduce its impact on production.
Go to the Menu: Level 4: Theory of Constraints (TOC)
Understand the elements of the Theory of Constraints. It is an important step in stabilising your business, no matter what your business is.
Any workflow management improvements that you make to the efficiency of your constraint in your production system may go immediately and totally to the bottom line.
This is because little, or no further, costs will be required to make that Bottleneck work efficiently.
It is not possible to know what impact liberating your Bottleneck/Constraint will have but experts say a 20% Profit increase is often achievable.
Surplus Capacity
As part of your TOC exercise, it will become clear to you that sections of your production cycle will have more capacity than is necessary to service the Constraint.
In a poorly managed business, managers will have these stations producing at their maximum capacity.
The principle outcome – a large build-up of Work in Progress (WIP) in front of the Constraint.
This will cause a stockpile of produced components of your product after the non-critical work stages.
The article – How to Manage Local Optima Problem – explains the Profit hit this causes.
Look for the opportunity and take advantage of your surplus capacity.
Then the additional capacity will go directly and immediately to your Profit bottom line.
Find other use for this surplus capacity.
- The additional output from those work stations can be sold outside the company.
- Generate more Income without reducing the ability of your Bottleneck to continue to process components for your product.
These opportunities are described in greater detail in the article: How to Manage Local Optima Problem
In addition, there is a concept known as Throughput Accounting.
Throughput Accounting demonstrates how surplus capacity can be very Profitable.
Go to the article: Change Your Mindset with Throughput Accounting (TA) for further information.
