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Throughput accounting and stochastic system behaviour: importance of low throughput products


  • Olli-Pekka Hilmola
  • Lauri Lattila


Nearly for two decades, throughput accounting has argued against practices of management accounting. It has built mainly its alternative theory on simple and static example of choosing right product mix to maximize profitability of a manufacturing unit. In this research work, we simulate original throughput accounting product mix problem and use stochastic variation in the production process phases and in the end product demand. Results show that variation creates situation, where system profits increase significantly; this is mostly caused by the reason that we have enough WIP in the process, constraint resource is having occasionally lower cycle-times and un-favoured low throughput product is being produced due to the reason that there does not exists that high demand high yield one. Based on these findings, we propose that throughput accounting theory should be modified – variability in some situations and with low throughput products is the main factor for higher profitability.

Suggested Citation

  • Olli-Pekka Hilmola & Lauri Lattila, 2008. "Throughput accounting and stochastic system behaviour: importance of low throughput products," International Journal of Applied Management Science, Inderscience Enterprises Ltd, vol. 1(2), pages 123-142.
  • Handle: RePEc:ids:injams:v:1:y:2008:i:2:p:123-142

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    Cited by:

    1. Lauri Lättilä & Olli-Pekka Hilmola, 2012. "Forecasting long-term demand of largest Finnish sea ports," International Journal of Applied Management Science, Inderscience Enterprises Ltd, vol. 4(1), pages 52-79.


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