Throughput Economics

A proposal for a theory of constraints-based framework in sales and operations planning

“…He is an international TOC expert, having been primarily responsible for the development of the Simplified Drum-Buffer-Rope system. The following proposals are based on Eli Schragenheim's recently published book Throughput Economics: Making good management decisions (Schragenheim et al, 2019), texts published on his blog (Schragenheim, n.d.-a, n.d.-b) and a presentation by him at the TOCICO Congress in 2012 (Schragenheim, 2012).…”

“…The following proposal aims to help managers take good decisions, despite inherent environmental uncertainty, thus making them feel more confident about the context and possible results of a decision. One of its applications is in manufacturing environments, with the objective of supporting product mix decisions and long-term capacity management (Schragenheim et al, 2019).…”

“…During the decision-making process, the questions to be answered are (Schragenheim et al, 2019): will accepting certain business opportunities increase a company's net profit? Analyzing the impact of the long-term horizon, what positive and negative consequences may arise?…”

“…Another point is that capacity is purchased in minimum amounts. This means that it may be possible to purchase extra capacity quickly, paying a certain price, or it may just be impossible to add some amount of capacity because its cost would be unfeasible (Schragenheim et al, 2019).…”

“…Recent studies leaded by Eli Schragenheim started to propose and illustrate how TOC can contribute to long-term planning (Schragenheim, n.d.-a, n.d.-b., 2012, Schragenheim et al, 2019, but studies that particularly attempt to identify the possible limitations and contributions of TOC within S&OP processes, is an area that remains to be explored further and no articles published approaching the relationship about these methods was found.…”