Throughput (flow rate)A measure of the business process flow rate Show What is Throughput?Throughput (also known as the flow rate) is a measure of a business process flow rate. Essentially, it measures the movements of inputs and outputs within the production process. It is an important metric in the operations management of a company. This variable primarily indicates the efficiency of operations that are vital to the overall success of a business. The maximization of throughput levels can be the key driver in maximizing a company’s revenue.  The concept of throughput is essential to companies in various industries, even if they are not involved in the production of goods. For example, it can be applied to assess how fast the company provides services to its customers. Throughput FormulaThe formula can be derived from the following equation of calculating inventory: Where: I – the inventory. This is the number of units that are currently contained in a business process. Inventory is measured in number of units. Note that the concept of inventory in operations management is different from the accounting definition of inventory. In accounting, inventory includes products that are waiting to be sold. In operations management, inventory comes with a broader meaning and it includes all the units of the products within the operations system. R – the flow rate (throughput). It is the rate at which the number of units goes through the process per unit time. The rate is measured in units/per time (e.g., units/minute). T – the flow time. This is the time that the units spend in the business process from the beginning to the end. If we rearrange the formula above, we can find throughput using the following equation: R = I / TExample of ThroughputConsider a company called ABC Corp. that manufactures chairs. The company’s management wants to increase its profits by improving the operations process. Therefore, the management decides to find out the company’s current throughput. Currently, the company holds 100 chairs in inventory. The average time that a chair is contained in the business process from its production to selling is ten days. Using the above information, we can find the throughput: R = 100 chairs / 10 daysR = 10 chairs/dayThe company’s throughput is 10 chairs per day. Alternatively, you could state that the daily throughput is 10 chairs. Related ReadingsThank you for reading CFI’s guide to Throughput. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources below:
Skills You'll LearnProcess Management, Operations Management, Six Sigma, Inventory Reviews
AJ Oct 28, 2018 This is an awesome comprehensive operations management course. Although, the course in an introductory course, it covers pretty much everything you need to know about operations management. EA May 3, 2019 I liked how the Professor explained different terms of Operations and Quality. This course will help me apply this knowledge of looking inside an operation and finding out the bottlenecks. From the lesson Process Analysis Taught By
What is the flow time of the process?Flow time (also known as throughput time or lead time) - the average time that a unit requires to flow through the process from the entry point to the exit point. The flow time is the length of the longest path through the process. Flow time includes both processing time and any time the unit spends between steps.
What does flow unit mean?A flow unit is defined as a mappable portion of the total reservoir within which geological and petrophysical properties that affect the flow of fluids are consistent and predictably different from the properties of other reservoir rock volumes (modified from Ebanks).
What is a flow unit example?Flow units are things that go through a system to be processed. Examples include customers, athletes, patients, and kittens. Typically, a company wants flow units to be high. Flow units will be low if a company's good or service isn't in demand or if the process is inefficient.
Is activity time the same as flow time?Flow-Time Analysis
Theoretical Flow Time: The minimum amount of time required for processing a typical flow unit without any waiting. Activity Time: The time required by a typical flow unit to complete the activity.
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