This approach uses throughput, which is sales minus your variable expenses. You’ll be able to use these calculations to determine whether investing more cash into production is a wise idea. Unless you have on-call staff, you’ll still pay wages and equipment will remain in place regardless of production demand.įor that reason, a separate throughput calculation formula has been proposed, called the system approach. However, one complication of throughput analysis is that your daily expenses are there whether you produce 10,000 spatulas per day or not. To even get started as a company, you need supplies, employees and building space, as well as the supplies you need for your production process unless you’re a service-based business. The information you gain can be used to evaluate the investment you’re making into your business. But that information will be useless if you don’t analyze it to help improve your processes. The first step in analyzing your throughput rates is using the throughput efficiency formula to determine exactly what your numbers are.

If it’s manufacturing inventory, it would be a measure of units produced and sold per day, week, month or year. This rate presents as units per time, so if it’s your technology process, it would be the number of units moving through your system per minute or second. This is the rate at which your inventory, or units, move through the process.

The third element is your throughput, which is what you’re trying to determine. But a measure of a technology transaction could be seconds or minutes. If you’re trying to determine the throughput of manufacturing units from the time production begins to the time the item is sold, time could be weeks rather than hours. It refers to the total amount of time that you measure from start to finish. If you’re a technologist, the inventory might be the number of transactions, visits or batches. In a service-based business, the customer would serve as your inventory, where you’d be calculating the throughput time using the number of customers served within the timeframe. One of those is inventory, which is assigned a basic number based on the units you have in stock. There are three major elements involved in the formula used to calculate throughput time.

A database, for instance, can be measured based on the transactions per second that flow through it, and webmasters may measure throughput by the number of page views a site gets per minute. Traditionally, this measure has been applied to batch jobs, but today’s throughput time is applied in a variety of ways in technology fields. In information systems, throughput is the measure of the number of units of information that can be processed in a designated amount of time. If a unit is produced but not sold, it isn’t counted. In manufacturing, throughput is usually applied to the number of units that are produced and sold within a designated timeframe. These benchmarks can vary from one organization to the next since each business has its own processes. It is often used in production, where professionals monitor how long it takes to manufacture an item from a specific start point to its designated end. Throughput time is the measure of a specific process’s rate from start to finish.

Throughput with timeslice