Impact of scheduling free goods on the throughput performance of a manufacturing operation

Abstract

Theory of Constraints philosophy operates under the assumption that the goal of a for-profit business is to ‘Make money now and in the future’. Consequently, it is a manager's job continuously to search for ways to increase their operation's throughput. Increasing the amount of free goods the operation accepts is one way a manager can do this. Free goods are items that do not use the capacity of the operation's primary constraint. Because of this, it is possible to increase their output. However, increasing the number of free goods processed decreases the amount of protective capacity within the operation. Protective capacity plays a key role in the ability of an operation to deliver orders on time. Increasing the amount of free goods the operation processes is an action that could jeopardize the system's future throughput because it will impact on the operation's ability to ship orders on time. In order for managers to fulfil the goal of making money now and in the future, they must maximize total throughput while minimizing late orders. This paper provides some initial insights about how managers can intelligently manage free goods to balance these competing goals.