Analyzing “The Goal”
Throughput: the rate at which the system generates money through sales. Inventory: all the money that the system has invested in purchasing things which it intends to sell. Operational Expense: all the money the system spends in order to turn inventory into throughput. Lou makes these definitions simpler by saying, “Throughput is the money coming in. Inventory is the money currently inside the system. And operational expense is the money we have to pay out to make throughput happen” (pg. 72). The primary difference of these measurements compared to their traditional definitions is that they are all worded to be complete measures of how a company is reaching its goal of making money. They are all important because everything managed in Alex’s plant is covered by those measurements. By simultaneously increasing throughput, and reducing both inventories and operational expense, the plant is expressing all of its operations in terms of “the goal.” What happened in Alex’s plant is that new robots and poor process scheduling caused increases in inventory, which increases the operational expense of carrying that inventory, and also decreased the throughput because there was always a part missing to turn inventory into finished goods.
The Goal defines a bottleneck as “any resource whose capacity is equal to or less than the demand placed upon it” (pg.139). The bottleneck determines the effective capacity and output of the entire plant. Fundamentally speaking, a plant manager should match the capacity of the bottleneck resource with demand from the market. When I was at Subway the other day, I was trying to see what the bottleneck was in their assembly line sandwich making process. It took each person about 15 seconds to cut the bread or put on the meat or put on the veggies or put on the sauces and it took about 30 seconds to ring up someone’s order and receive payment. However, in the middle of the production process was the toaster, which took about one minute to toast somebody’s sandwich. The toaster resource had a capacity less than the demand placed on it, especially during high traffic lunch hours, causing a line build up in front of Subway.
In order to turn his plant around, Alex had to address production sampling principles in order to maximize throughput, and minimize inventory and operational expense. A few principles he had to address are as follows: first, the use of non-bottlenecks is determined by bottleneck constraints in the system. This means that the non-bottleneck resources should be processing at a flow consistent with the total output potential of the system, which is the capacity of the bottleneck resource. Secondly, utilization and activation are not synonymous. This means that just