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Improving profits by identifying leverage point

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Understanding how constraints behave can have a great effect on reducing the number of measurements and thus conflicts in identifying the leverage points.

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Description

Improving profits is always the aim of any manufacturing operation. However not all efforts lead to good results. In fact, if one is able to identify the leverage point or in other words a place where all the efforts lead to quantum jump in profits results will happen quicker and a company can deploy resources effectively. One big problem in identifying such a leverage point is measurements and the process of identyfying. We measure too many things and use many measurements for decision making that actually do not lead us in the correct direction. Increasing profits is just not a simple equation that says SP-Cost =Profit . Since only cost is what we know  to calculate using formulas, so we base all our improvements on the degree of impact it will have on cost and hoping that will, in the end lead to greater profits. But more often than not it doesn’t lead to much improvement in profits. Understanding how constraints behave can have a great effect on reducing the number of measurements and thus conflicts in identifying the leverage points.

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