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Throughput
Inventory is the money that exists within a business system in the form of equipment, assets, raw material, and so on. Anything that exists as inventory can be sold for money. However, inventory represents a financial burden, since it traps money within a system rather than leaving it available as cash on hand. A manager should keep inventory as low as possible without disrupting their throughput.
Inventory Quotes in The Goal: A Process of Ongoing Improvement
The The Goal: A Process of Ongoing Improvement quotes below are all either spoken by Inventory or refer to Inventory. For each quote, you can also see the other terms and themes related to it (each theme is indicated by its own dot and icon, like this one:
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Chapter 18
Quotes
“This much is clear to me. We have to change the way we think about production capacity. We cannot measure the capacity of a resource in isolation. Its true productive capacity depends upon where it is in the plant. And trying to level capacity with demand to minimize expenses has really screwed us up. We shouldn’t be trying to do that at all.”
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Chapter 25
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“But what are we supposed to do?” asks Bob. “If we don’t keep our people working, we’ll have idle time, and idle time will lower our efficiencies.”
“So what?” asks Jonah. […] “Take a look at the monster you’ve made. It did not create itself. You have created this mountain of inventory with your own decisions. And why? Because of the wrong assumption that you must make the workers produce 100 percent of the time, or else get rid of them to ‘save’ money.”
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Chapter 26
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“If we don’t go ahead with a system to withhold inventory and release it according to the bottlenecks, we’ll be missing a major opportunity to improve performance and save the plant. And I’m not about to stand by and let that happen just to maintain a standard that obviously has more impact on middle management politics than it does on the bottom line. I say we go ahead with this. And if efficiencies drop, let them.”
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Inventory Term Timeline in The Goal: A Process of Ongoing Improvement
The timeline below shows where the term Inventory appears in The Goal: A Process of Ongoing Improvement. The colored dots and icons indicate which themes are associated with that appearance.
Chapter 4
...greater net profit. However, Jonah asks if his number of employees or amount of excess inventory has decreased, and Alex admits it hasn’t. Jonah suggests, then, that the plant is not...
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Chapter 8
...congratulates Alex for finding the answer. He offers three new measurements to operate by: throughput, inventory, and operational expense. “Throughput” describes the money generated explicitly through sales. “Inventory” describes the money...
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Chapter 9
...money. Alex decides the plant needs to increase its throughput while keeping operational expense and inventory as low as possible. He wonders if the robots further that goal, since they didn’t...
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Alex decides they need to talk to Stacey Potazenik, their inventory control manager. When Alex asks her if the robots increased the inventory of unfinished products,...
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...about the robots. Bob insists the robots are doing a good job but admits that inventory keeps increasing because the plant struggles to predict what parts it will need, so they...
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Chapter 10
...The four of them continue to debate how various functions and costs fit into throughput, inventory, and operating expense.
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...within three months or the whole plant closes. They all agree that they should lower inventory because it wastes money, but they worry about giving the robots less to do, since...
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Chapter 11
...all the time is very inefficient.” The fact that Alex’s plant has so much excess inventory proves this. Jonah states that like most managers, Alex focuses too much on trying to...
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Chapter 13
...in the front of the line, and Alex, in the back, represents the plant’s increasing inventory. Alex’s slowed walking speed represents the plant’s decreasing throughput. Soon enough, Ron stops the whole...
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Chapter 15
...and the whole troop moves along at a good pace, all staying together. Alex thinks, “Inventory is down. Throughput is up.” They reach their destination and Alex calculates that after reorganizing,...
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Chapter 18
...they could cross-correlate the two lists. Alex estimates that whatever machines have the most unfinished inventory in front of them might provide clues as well.
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Chapter 24
...They celebrate their last month of progress, since their throughput has improved and their work-in-process inventory has decreased. Bill Peach calls Alex, and Alex braces himself for criticism. However, Peach congratulates...
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...has increased, they are running into shortages of non-bottleneck parts. And since they’ve decreased their inventory of spare and unused parts, the new shortages are causing delays. Alex sighs and tells...
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Chapter 25
...plant inevitably runs into excesses of some parts and shortages of others. This creates excess inventory and thus reduces the plant’s throughput.
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Although Bob argues for keeping their efficiencies high, Alex thinks about their warehouses of excess inventory and realizes Jonah is right. Letting some non-bottleneck machines or workers stand idle is less...
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Chapter 27
...success, and Peach seems only mildly impressed. Alex gives his own report of their efforts: inventory is down, throughput is up now that they can ship products much faster, and even...
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Chapter 28
...to cut their batch sizes in half. Stacey realizes that that would cut their in-process inventory in half, though it would require twice as many machine setups and a lot of...
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...in half as well. This means that cutting the batch size in half also cuts inventory roughly in half, and the increased speed means that their plant can deliver products faster...
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Chapter 29
...make everything move quicker, providing all workers and machines with more consistent work to do. Inventory is lower than ever. But there is also bad news, and Alex climbs out of...
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Chapter 33
...However, Lou has discovered another serious flaw in UniCo’s traditional accounting system. Currently, although excess inventory is a liability, their methods count inventory as positive assets. Thus, when the plant reduced...
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Chapter 36
...successful. Rather than thinking of expenses as the most important function, they prioritized throughput, then inventory, and considered operating expense as the least important measurement. Alex considers Lou’s observation critically important...
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Chapter 37
...to be assembled and stocked on shelves. She estimates they have roughly six weeks’ more inventory than they require. She adds a warning to Step 5 of their process: “do not...
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Chapter 40
...been making products but never selling them yet still counting them as income rather than inventory. No one is considering their actual throughput, and people are reticent to accept new metrics,...
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