Throughput Accounting and System Dynamics Simulation: Importance of Low Throughput Products

摘要

Nearly for two decades accounting paradigm of theory of constraints, named as throughput accounting, has argued against full costing approaches (such as activity based costing) as well as conventional accounting solutions, and built mainly its argumentation on simple and static two product example of choosing right product mix in order to maximize profitability of a manufacturing unit. Based on this theory it is critical for manufacturing company to favour products, which produce highest profits (inc. only truly variable costs on product level) with respect of constrained production process phase(s) time unit(s). This isknown in linear programming literature as "bang of a buck" approach.In this paper we simulate original throughput accounting product mix problem of choosing right products, and use stochastic variation in production process phases as well as in the end product demand (average values remain as the same with original static example). Our simulation results show that cycle time variation and demand variation of products create situation, where system profits increase significantly as compared to the original example. This is mostly caused by the reason that we have enough WIP in the process,constraint resource is having occasionally lower cycle-times, and unfavoured product is being produced due to the reason that there does not exists that high demand for more preferred product (or we have already fulfilled its average demand). Based on these findings,we propose that throughput accounting theory should be modified variability in some situations is main factor for higher profitability.However, for strategically important preferred products such kind of arrangement does not yield that impressive results, and it is merely unneeded.