In the Theory of Constraints, what is the most appropriate productivity measure?

In the Theory of Constraints (TOC), throughput is defined as the rate at which the system generates money through sales. The primary goal in TOC is to maximize this throughput while minimizing operating expenses and inventory.

The measure of throughput divided by operating expense effectively reflects how much profit is generated for every dollar spent on operating costs. This is crucial for understanding the overall effectiveness of a system in terms of its ability to generate income relative to its expenses. By focusing on this ratio, organizations can identify their constraints and optimize their processes to enhance profitability.

This productivity measure emphasizes the importance of maximizing throughput while controlling costs, which aligns with the TOC's objective of improving overall system performance. So, the selection of this measure provides a clear indication of how well the organization is utilizing its resources to create profit. It guides decision-makers in their continuous improvement efforts, illustrating the balance between production efficiency and cost management.