# Bottleneck Throughput Gain and Investment Payback Calculator

> Source: https://netray.co/tools/bottleneck-throughput-gain-investment-payback-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Shows how much more you can sell and how fast an investment pays back when a constraint is relieved, capped by the next constraint and by demand.

## Category

manufacturing

## Industry

Discrete Manufacturing

## Audience

- Plant manager
- Industrial engineer
- COO

## Tool

**Kind:** calculator

**Currency:** $

**Inputs:**

#### Current bottleneck rate

**Key:** current_rate

**Type:** number

**Default:** 42

**Min:** 0

**Step:** 0.5

**Unit:** units/hr

**Help:** Demonstrated rate, including routine stops.

#### Productive hours per year

**Key:** hours

**Type:** number

**Default:** 5500

**Min:** 1

**Step:** 50

**Unit:** hours

#### Rate improvement from the project

**Key:** gain_pct

**Type:** slider

**Default:** 15

**Min:** 0

**Max:** 60

**Step:** 1

**Unit:** %

#### Rate of the next constraint

**Key:** next_cap

**Type:** number

**Default:** 52

**Min:** 0

**Step:** 0.5

**Unit:** units/hr

**Help:** The next slowest step. It limits how far this fix can lift the whole line.

#### Annual demand you can sell

**Key:** demand

**Type:** number

**Default:** 260000

**Min:** 0

**Step:** 1000

**Unit:** units

#### Selling price per unit

**Key:** price

**Type:** number

**Default:** 64

**Min:** 0

**Step:** 0.5

**Unit:** $

#### Truly variable cost per unit

**Key:** var_cost

**Type:** number

**Default:** 38

**Min:** 0

**Step:** 0.5

**Unit:** $

**Help:** Materials, freight and other cost that moves with each unit. Leave out fixed labor.

#### Project investment

**Key:** investment

**Type:** number

**Default:** 450000

**Min:** 0

**Step:** 5000

**Unit:** $

#### Added annual running cost

**Key:** added_opex

**Type:** number

**Default:** 25000

**Min:** 0

**Step:** 1000

**Unit:** $

**Help:** Maintenance, licences, tooling or utilities introduced by the project.

**Outputs:**

#### New line rate

**Key:** new_rate

**Expr:** min(current_rate * (1 + gain_pct / 100), next_cap)

**Format:** decimal

**Description:** Capped by the next constraint.

#### Current annual output

**Key:** current_output

**Expr:** current_rate * hours

**Format:** integer

#### Added capacity

**Key:** added_potential

**Expr:** (new_rate - current_rate) * hours

**Format:** integer

#### Unserved demand

**Key:** headroom

**Expr:** max(demand - current_output, 0)

**Format:** integer

#### Added units you can sell

**Key:** added_units

**Expr:** min(added_potential, headroom)

**Format:** integer

**Primary:** true

#### Added throughput margin

**Key:** margin

**Expr:** added_units * (price - var_cost)

**Format:** currency

#### Net annual gain

**Key:** net

**Expr:** margin - added_opex

**Format:** currency

**Primary:** true

#### Payback

**Key:** payback

**Expr:** if(gt(net, 0), investment / net * 12, 0)

**Format:** months

**Description:** Shows 0 if the project does not earn a positive net gain.

**Chart:**

#### Net annual gain vs rate improvement

**Type:** line

**X:** gain_pct

**From:** 0

**To:** 60

**Steps:** 31

**Series:**

- net

**Disclaimer:** Throughput view for planning. It assumes demand is available and that labor and overhead are fixed in the short run.

## Content

**Intro:** Fixing a bottleneck only pays if the extra output can flow through the rest of the line and be sold. This calculator caps the gain at the next constraint and at unserved demand, then values the units at throughput margin.

**Sections:**

#### How to use it

**Body:** Enter the demonstrated rate of the constraint and the productive hours it really runs. Enter the rate of the next slowest step so you do not credit output the line cannot carry. Use only truly variable cost per unit: in the throughput view, direct labor and overhead are usually fixed in the short run. Sweep the improvement percentage with the chart to see where the next constraint or demand flattens the curve, and size the project at that knee rather than at the maximum.

#### The method

**Body:** The new rate is the lesser of the improved rate and the next constraint. Added capacity is the rate gain times hours. Sellable gain is the lesser of added capacity and unserved demand. Throughput margin is price minus variable cost, so the net gain is added units times that margin minus new running cost. Payback is investment divided by net gain, in months.

**Bullets:**

- Do not use full absorption cost per unit: it overstates the cost avoided.
- A gain beyond demand earns nothing.
- Raising the constraint moves the constraint, so check the next step.

#### Reading the result

**Body:** With the defaults the line moves from 42 to about 48 units per hour, adds roughly 34,650 units of capacity, but only 29,000 units are sellable. Net gain is about $0.73 million and payback is about 7 months. The flat part of the chart is the signal: past a certain improvement, extra spend buys no extra profit.

#### Common mistakes

**Body:** Plants often use nameplate speed, ignore the second constraint, or value added units at full price with no material cost. Another error is applying a gain to a machine that is not the true constraint. Confirm the constraint from work center load and queue time history in your ERP before investing.

**Cta:** Netray can help surface work center load, queue time and routing data from your ERP so you can confirm the real constraint before committing capital.

**Faq:**

#### Why use variable cost instead of standard cost?

**Answer:** Standard cost includes labor and overhead that do not change when you build a few thousand more units. Using it understates the gain from added throughput. Use materials and other costs that genuinely move with each unit.

#### What is the next constraint rate?

**Answer:** It is the demonstrated rate of the second slowest step in the flow. Once you relieve the first bottleneck, the line speeds up only until it hits that rate. Find it from routing times and actual run history.

#### Does this include the cost of money?

**Answer:** No. Payback ignores the time value of money. For a larger project, take the net annual gain and investment into an NPV calculation as well.

#### What if demand is below current capacity?

**Answer:** Then unserved demand is zero and the project adds no sellable units. The case would have to rest on cost reduction or quality instead, which this calculator does not value.

## Search terms

bottleneck investment payback, throughput accounting calculator, theory of constraints calculator, capacity constraint roi, constraint relief payback, throughput margin calculator, bottleneck improvement value, next constraint capacity

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