Finance and accounting both deal with money and quantifying its positions and flows. But they serve distant purposes and, but while the former is directed to measure and guide decision making the latter is a reporting tool to show where the amounts are distributed in the organization. Using one in the place of the other not only leads to distorted results but also pollutes the tools with adaptations and deformations that compromise even the original objectives of each.
In this workshop we’ll abandon the term “Throughput Accounting” and embrace the Financial Compass as the proper way to describe TOC tools dedicate to support good managerial decisions.
We’ll cover the basics and expand on them in the following flow:
1. Why measure anything?
a. And money?
2. The definitions of T, I and OE as they were and are viewed now
a. Including the interchangeability of I and OE
b. And the criteria for proper classification between TVC and OE
3. The relationships with Profit, ROI and Cash Flow and why The Race is incomplete
4. Revisiting the TVC concept
a. And its two components and their main difference
b. Why I is usually calculated wrong
5. The role of Time in financial decision making
a. The Dilemma of estimation I in investment opportunities and how to solve it
b. Classifying Investment opportunities: the Good, the Bad and the OMG
c. Engineering Investment Opportunities
6. The use of T, I and OE in decision making
a. The need to use the 3?
b. Simplifications and their limitations
c. The most popular one: Throughput Per Constraint Unit
i. Its applicability
ii. Its limitations
iii. Its consequences
iv. What about multiple CCRs?
v. How to solve both? (not with LP, by the way)
d. Evaluating stock and mix
7. The impact of using the Financial Compass
a. For the organization
b. For activities like budgeting, etc.
The workshop will be interspersed with exercises and simulations so that the concept may be more explored.