TOC focuses on increasing throughput contribution. Throughput contribution is revenues minus totally variable costs, which is usually only direct materials cost, during a given period of time. It is the rate at which contribution dollars are earned.
Decreasing operating costs is an area that TOC focuses on, because decreasing operating costs will improve Return on Investment, operating profit, and cash flow. Operating costs include salaries and wages, rent, utilities and period expenses.
TOC focuses on identifying the place in the production process where total required hours exceed the available hours, not the reverse. This place is called the bottleneck . After the bottleneck has been identified, the flow through the bottleneck is then maximized and used in the best way to maximize contribution.
Decreasing investments is an area that TOC focuses on, because decreasing investments will increase Return on Investment. Investments includes costs in direct materials, work-in-process and finished goods inventories; R&D, and costs of equipment and buildings.
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