What is a Throughput Accounting Profit Model?

    A Throughput Accounting Profit Model acknowledges the existence of at least one constraint in quantifying a goal. Whether the constraint is a physical bottleneck, management’s attention, or a marketing constraint, it distinguishes Throughput Accounting Profit Models from traditional Cost Accounting models.

    The following points suggest what an innovative Throughput Accounting Profit Model could provide:What is a Throughput Accounting Profit Model?

    • Analyses of changes and their profit impact, e.g. capital investment, product design, or, marketing strategies,
    • The identification of the System Constraint,
    • Impact of constraint exploitation that maximizes Throughput mixes,
    • Real-time creation of reports and charts of total system Throughput values for ranges of products or services,
    • Track total system Throughput and the rate of Throughput in multiple areas,
    • Forecast the impact of tactics and strategies on returns and profits,
    • Assist with improving or developing long-term business strategies,
    • Test business plans for realism and study the profit impact of shifting product & service mixes,
    • Identify internal and external factors that limit system profitability,
    • Identify the effect of process improvements on profits before implementing changes, or
    • Prioritizing asset acquisitions and analyze the profit impact of changes in Return On Investment (ROI).

    As each situation is unique to its environment, ThroughputAccounting Profit Models are also unique in their design, however, focus should always remain on the system’s goal. TPACC’s Throughput Accounting Profit Models are structured with the holistic Theory Of Constraints approach and developed with a simplified Agile process.

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