Managing Costs and Revenues--MBA I--Spring Managing Costs & Revenues Professor William F. O’Brien, MBA, CPA Spring 2008

Managing Costs and Revenues--MBA I--Spring Session 6 The Goal Reichard Maschinen Case

Managing Costs and Revenues--MBA I--Spring Theory of Constraints The Concept The Process The Measures

Managing Costs and Revenues--MBA I--Spring The Concept Presented in Eliyahu Goldratt’s The Goal The goal of a business is to make money…consistent with customer satisfaction Continuous flow Avoid the “herbies” Eliminate the bottlenecks first

Managing Costs and Revenues--MBA I--Spring The Process Identify the constraints Exploit the constraints (reduce the bottlenecks) Subordinate everything else Elevate the constraints (remove the bottlenecks) Reiterate the process

Managing Costs and Revenues--MBA I--Spring The Measures Throughput-Net income Inventory-ROI Ops. Expenses-Cash Flow