throughput per constraint unitthroughput per constraint unit - (T/CU)A ratio that quantifies the rate a specific product or service will, if sold, contribute to the throughput of the company, calculated as the unit selling price minus the totally variable cost per unit of product or service, divided by the system constraint's capacity consumed, expressed in the appropriate unit of measure.
Usage: This ratio is most often used to estimate the impact a decision regarding a possible change in product mix will have on the company's throughput. T/CU is also used to quantify the true "cost" of unavailability of a system constraint. T/CU should never be used alone. It is recommended to always calculate the impact that any change in product mix will have on throughput, investment, and operating expense before making a final decision.
Cautions: 1) T/CU should not be used to make decisions about product mix when there is no active capacity-constrained resource.
2) T/CU should not be used to make decisions about product mix when a system has interactive constraints; in such cases, the decision should be based on the cumulative change in system throughput, investment, and operating expenses.
3) When there is insufficient protective capacity on non-bottleneck resources, changing product mix based on the T/CU calculation can cause the constraint to shift, and thus invalidate the T/CU analysis.
Background: T/CU is derived from the economic principle known as the law of optimal allocation of scarce resources. This principle states that "A scarce resource is best used to produce and sell those products with the highest contribution margin per unit of scarce resourceâ.The relevant unit of scarce resource or constraint capacity is usually processing time on the capacity-constrained resource, but may also be a unit of storage space (e.g. if shelf space is the scarce resource as it usually is for a retailer), etc.
Example: If the relevant constraint unit is minutes, and it takes 2 minutes of constraint time to process a product that sells for $55 and has totally variable costs of $30, the T/CU = $12.50/min. ((55-30) Ã· 2).