Investment (I) – all the money the system invests in purchasing things it intends to sell.

Investment includes Inventories that are recorded at the purchasing prices (at RM prices, price of components or goods for resale), without added value due to internal processes and without overhead absorption.

Return on Investment ( ROI) the TOC Way

Periodic T, I and OE are used in order to assess the ROI of the company through the use of the formula:

ROI=NP/I = (T-OE)/I

When judging the incremental impact of a decision that contains additional investment the marginal ROI is calculated through the formula:

Marginal ROI = ∆NP/∆I = (∆T-∆OE)/∆I

 

Source: Oded Cohen and Jelena Fedurko, Theory of Constraints Fundamentals, 2012