Generic airlines reservation sales office

The paper compares the impact of decisions made using the Theory of Constraints (TOC) and traditional costing methods. By using a specific example we hope to show the dramatic difference in outcomes when one decision-making method focuses on cost reduction and the other focuses on increasing profit (or more accurately, throughput). We use two parts of the Goldratt thinking process to clearly identify the problems and assumptions: the Negative Branch Reservation to demonstrate the impact of a proposed solution, and the Evaporating Cloud to surface assumptions. The Theory of Constraints performance measures of Throughput, Inventory, and Operating Expense are defined, and a case drawn from the airline industry illustrating the use of TOC decision-making tools is presented.