1. Managing Costs and Revenues--MBA I--Spring 2008 6-1 Managing Costs & Revenues Professor William F. O’Brien, MBA, CPA Spring 2008

2. Managing Costs and Revenues--MBA I--Spring 2008 6-2 Session 6 The Goal Reichard Maschinen Case

3. Managing Costs and Revenues--MBA I--Spring 2008 6-3 Theory of Constraints The Concept The Process The Measures

4. Managing Costs and Revenues--MBA I--Spring 2008 6-4 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

5. Managing Costs and Revenues--MBA I--Spring 2008 6-5 The Process Identify the constraints Exploit the constraints (reduce the bottlenecks) Subordinate everything else Elevate the constraints (remove the bottlenecks) Reiterate the process

6. Managing Costs and Revenues--MBA I--Spring 2008 6-6 The Measures Throughput-Net income Inventory-ROI Ops. Expenses-Cash Flow