Empirical evidence on the usefulness of throughput time

In recent years, it is necessary to develop an alternative measure, the time efficiency of management activities, as a more measurable and operational tool instead of traditional accounting measures such as inventories turnover. Therefore the concept of throughput time has got much attention as useful tool for controlling time based management. The purpose of this paper is to investigate the usefulness and adaptability of throughput time. The sample consists of 212 non-banking firms listed on the Korean Stock Exchange. The test period were 10 years (1989–1998). The regression analysis for this study was performed using the cross-sectional data for the sample, and it was also performed for each industry. The results show that net income to total assets and labor productivity (value added per employee) variables in the model was significantly associated with throughput time. On the other hand, the relationship between throughput time and logistics cost to sales do largely not have statistical significance. Especially, it is found that the relationship does not have significance or negative response in food & beverage industry and wholesale & retail industry. In summary, the results show that the measure of throughput time can be an effective managerial indicator for time based competition and management.