Throughput Economics

Making Good Management Decisions

Eli Schragenheim, Henry Camp, Rocco Surace

• Publisher: Productivity Press
• Year: 2019
• ISBN:
  9780429670695
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

"Schragenheim, Camp and Surace, three leaders of TOC community, are tackling one of value destroyers of corporations—the misuse and abuse of traditional cost accounting. This book develops a practical methodology for better decision making by looking at the impact of certain types of decisions on a company's bottom line. This well-defined methodology allows mid-managers, higher level managers and financial staff to create real value by concentrating on what truly matters."
Boaz Ronen, Professor Emeritus, Coller School of Management, Tel Aviv University, Tel Aviv, Israel

"Throughput Economics is a must read for entrepreneurs and managers who want to make their organizations more and more antifragile."
Andrea Zattoni, CEO of Antifragility, Italy

"Management accounting is a dry topic. Throughput Economics is not—managers can learn a lot they can apply to their company from it."
Rudolf Burkhart, Business Development Director, Vistem Gmbh, Germany

Throughput Economics challenges the current thinking of how to evaluate cost, risks and rewards of any deal or any other new market opportunity being considered, especially the practice of calculating cost-per-unit. Instead, this book offers a process that directly answers the critical question: If we accept the proposed decision, will the performance of the organization improve?

The process involves the intuition of the key people in the organization, together with the relevant data, to come up with the best available information from which to form a reasonable range of net profit, when the considered decision is added on top of all the other activities undertaken by the organization. The process is explained and demonstrated using a variety of cases where the organization faces a new non-trivial idea, along with a detailed explanation of how it should work, including software support that provides very quick response to many what-if suggestions.

This book offers a new and well-defined process, applicable to every organization, that considers both financial impacts and capacity limitations and, also, includes the impact of uncertainty by providing the range of reasonable results rather than one number, which is always proven wrong in the end. Overall, the book provides a holistic method for simplified decision making in seemingly complex or shifting environments using a constraints mindset to facilitate companies' realization, for the first time, their true potential.

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Contents
• Dedication
• Foreword
• Introduction
• 1 Overcoming Distortions Resulting from “Cost per Unit” Accounting—Daily Bread, Part 1
• 2 A Conceptual, Yet Natural, Way to Make Decisions
• 3 Information Is Derived from Hard Data, Intuition and Assessment of Uncertainty
• 4 Throughput—a Key Concept Pointing in a Sensible Direction—Daily Bread, Part 2
• 5 More on the Problematic Nature of Capacity
• 6 Analyzing a Simple Case—P&Q, Part 1
• 7 Some Thoughts about Accounting Principles and Standards
• 8 A More Realistic Case—Daily Bread, Part 3
• 9 Using What-if Analysis to Support Mutual Decisions
• 10 T-generators and Critical Resources—Two New Required Terms
• 11 Finding More to Sell—Choco-for-You, Part 1
• 12 Evaluating the Next Leap in Performance and Its Required Investment—Choco-for-You, Part 2
• 13 Analyzing the Significant Decisions as Explored in the Choco-for-You Case
• 14 The Role of Time and Timing in Decision Making
• 15 Cash as a Special Critical Resource
• 16 The Quality of Earnings—From the Perspective of a TOC Minded CPA
• 17 Now, it’s Time for a Big Move—Daily Bread, Part 4
• 18 An Analysis of Acquisitions
• 19 Management Attention as a Special Critical Resource
• 20 The Critical Nature of Metrics
• Epilogue: What We Have Covered Together
• Appendix A: Modeling and Data Requirements for Performing the What-If Scenarios
• Appendix B: Specifics on What Metrics to Use and When they are Applicable
• Appendix C: List of Figures
• Appendix D: List of Tables
• Index