What is Throughput?
Throughput is the rate at which a production system generates good, saleable units per hour. It matters because it defines how much revenue a line can produce from its fixed assets, how tightly it supports customer demand, and whether the constraint limits margins, ROI, or working capital flow. In throughput-driven finance and operations, increasing throughput at the bottleneck is the fastest path to value creation.
Formula
Where:
- TH = effective throughput (good units/hour)
- CT= cycle time (sec/unit)
- PL = performance loss (%)
- FPY = first-pass yield (%)
- L= number of parallel lines
Good units for the production period:
Example
Assume:
- CT = 60 sec/unit
- TA = 450 min
- TS = 0 min
- FPY = 98%
- PL = 10%\
- L = 1
- Demand D = 400 units
- Theoretical rate: 3600/60 = 60 units/hour
- Effective throughput: 60 x 0.9 x 0.98 = 52.9 units/hour
- Net hours: 450/60 = 7.5
- Expected good units: 52.9 x 7.5 = 397
The line produces 397 good units, slightly under the 400-unit demand, indicating a revenue-limiting bottleneck.