THROUGHPUT ANALYSIS

Also known as: Overall Equipment Effectiveness (OEE)

© Frank Haluch 2011-2025

One-way suppliers can increase their profit is to increase their overall value-added process performance versus increasing their prices.

Throughput analysis measures the throughput effectiveness of the value-added conversion process.  It does this by measuring:

• Down Time: The time that the process is not available to perform the value-added conversion
• Cycle Time: Actual to theoretical performance  
• Quality: the number of good units to total units produced.

World-class factory availability and cycle time performance target is typically 95%.  World class quality exceeds 99.99966% under six sigma.  When the data from these three measurements are multiplied together, they define the overall Throughput Effectiveness. 

.95 x .95 x .9999966 = 0.9025 or 90.025%

If a strategic supplier has an overall throughput effectiveness of less than 90%, they have a hidden factory. 

With no capital investment and a little OEE directed effort, pricing benefits are obtained by turning on the hidden factory!