What Is Throughput?
Throughput is the rate at which your business produces output. Learn how to measure it and why it drives profitability.
Key Takeaways
- Throughput is the number of units a process completes in a given time period.
- It is determined by the bottleneck, not by the fastest step in the process.
- Increasing throughput without adding proportional cost is the primary lever for improving operational profitability.
What throughput measures
Throughput is the quantity of finished goods or completed services your operation produces per unit of time. A factory producing 500 widgets per hour has a throughput of 500 units per hour. A support team resolving 80 tickets per day has a throughput of 80 per day. It is the most fundamental measure of operational output.
Throughput and the bottleneck
Your system's throughput is always limited by its bottleneck, the step with the lowest capacity. If machining can process 100 units per hour but assembly handles only 60, your throughput is 60. Speeding up machining to 120 does nothing for total output. This principle, central to the Theory of Constraints, means improvement efforts should always target the bottleneck first.
Throughput accounting
Traditional cost accounting allocates overhead across products, sometimes obscuring which products actually generate profit. Throughput accounting, developed by Goldratt, focuses on three metrics: throughput (revenue minus variable costs), investment (money tied up in the system), and operating expense. It prioritises decisions that increase throughput over those that merely reduce costs.
Improving throughput
Identify and exploit your bottleneck. Reduce downtime and changeover times. Eliminate rework by improving first-pass quality. Streamline handoffs between steps. For a South African e-commerce fulfilment centre, this might mean reorganising picking routes to reduce motion waste, enabling packers to process more orders per shift without working harder.