Throughput, Inventory, and Operating Expense

In a warehouse setting, throughput, inventory, and operating expenses are proxy metrics that represent net profit, return on investment, and cash flow, the three levers of a business.

  • Throughput: the rate at which the system generates money through sales.
  • Inventory: Inventory is all the money that the system has invested in purchasing things that it intends to sell.
  • Operating expense: Operational expense is all the money the system spends in order to turn inventory into throughput.

The goal is thus to increase throughput while simultaneously reducing both inventory and operating expense

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