Throughput Accounting Profit Maximization requires knowledge of a system’s limitations. Knowing what limits a system, enables decisions that improves the system, instead of decisions that only affect a small part of the system.
TPACC’s approach to Profit Maximization leverages the entire system’s improvement and prioritizes decisions in the following order:
1. Maximizing Throughput,
2. Minimizing Investment, and
3. Minimizing Operating Expenses*.
The above Key Performance Indicator (KPI) order of priority was developed by Dr EM Goldratt, developer of the *Theory Of Constraints. The priorities are generally, but not necessarily, applied in for-profit systems, and not for-profit systems such as healthcare providers. There are only nine fundamental concepts applied to maximize profitability, so things are kept very simple. Throughput Accounting Profit Maximization starts with Concept 1, which emphasizes that performance measurement is focused on measuring things that affect the holistic system’s performance, and ends with Concept 9, which determines whether the system is moving closer, or, further from its goal.