The Goal Report
P 26 Meeting in the airport lounge
On the way to Houston while transferring flights at O’Hare airport, Alex met Jonah who is on his way to New York. Alex mentioned that he is going to give a presentation about robotics in his plant and the two started talking about Alex’s plant and its robotics. Alex said because of the robotics, the plant had a 36 percent improvement. Jonah questioned how Alex can know robots are really making improvements in the plant. If the inventory level did not go down, if employees expense did not go down , or if sales did not go up, Jonah said robotics are not making any real improvements. During the conversation, Jonah suggested that Alex should be questioning what the real goal of a plant is. In other words, Jonah pointed out that having better equipment does not mean a plant is improving and it was actually more important to have a better system.
P 57 Alex finds his old address book
When Alex called Jonah and told him that the goal of a factory is to make money and everything he does should be to achieve that goal, Jonah agreed with Alex. Alex said in order to know whether he is getting closer to the goal, he needs specific measurements. Jonah said Alex was absolutely correct and the measurements that capture the goal of making money were
Throughput= the rate that system generates money through sales not production
Inventory = all the money invested in purchasing items that will be sold.
Operational expense = all the money used to turn inventory into throughput.
Jonah’s definitions of throughput, inventory, and operational expense were very different their traditional definitions. However, they truly were the essence of the measurements that capture the goal of making money in a plant. From this conversation, Alex learned about what the right measurements were and the importance of having them.
P.77 Alex visits Jonah in NY
Alex explained about the...