The Goal

'Yes, there is. We've just been talking about our local celebri- ties, the robots,' I say.

Bob glances from side to side, wondering, I suppose, what we've been saying.

'What are you worried about them for?' he asks. 'The ro- bots work pretty good now.'

'We're not so sure about that,' I say. 'Stacey tells me we've got an excess of parts built by the robots. But in some instances we can't get enough of certain other parts to assemble and ship our orders.'

Bob says, 'It isn't that we can't get enough parts-it's more that we can't seem to get them when we need them. That's true even with a lot of the robot parts. We'll have a pile of something like, say, a CD-50 sit around for months waiting for control boxes. Then we'll get the control boxes, but we won't have something else. Finally we get the something else, and we build the order and ship it. Next thing you know, you're looking around for a CD-50 and you can't find any. We'll have tons of CD-45's and 80's, but no 50's. So we wait. And by the time we get the 50's again, all the control boxes are gone.'

'And so on, and so on, and so on,' says Stacey.

'But, Stacey, you said the robots were producing a lot of parts for which we don't have product orders,' I say. 'That means we're producing parts we don't need.'

'Everybody tells me we'll use them eventually,' she says. Then she adds, 'Look, it's the same game everybody plays. Whenever efficiencies take a drop, everybody draws against the future forecast to keep busy. We build inventory. If the forecast doesn't hold up, there's hell to pay. Well, that's what's happening now. We've been building inventory for the better part of a year, and the market hasn't helped us one damn bit.'

'I know, Stacey, I know,' I tell her. 'And I'm not blaming you or anybody. I'm just trying to figure this out.'

Restless, I get up and pace.

I say, 'So the bottom line is this: to give the robots more to do, we released more materials.'

'Which, in turn, increased inventories,' says Stacey.

'Which has increased our costs,' I add.

'But the cost of those parts went down,' says Lou.

'Did it?' I ask. 'What about the added carrying cost of in-

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ventory? That's operational expense. And if that went up, how could the cost of parts go down?'

'Look, it depends on volume,' says Lou.

'Exactly,' I say. 'Sales volume... that's what matters. And when we've got parts that can't be assembled into a product and sold because we don't have the other components, or because we don't have the orders, then we're increasing our costs.'

'Al,' says Bob, 'are you trying to tell us we got screwed by the robots?'

I sit down again.

'We haven't been managing according to the goal,' I mut- ter.

Lou squints. 'The goal? You mean our objectives for the month?'

I look around at them.

'I think I need to explain a few things.'

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10

An hour and a half later, I've gone over it all with them. We're in the conference room, which I've commandeered be- cause it has a whiteboard. On that whiteboard, I've drawn a dia- gram of the goal. Just now I've written out the definitions of the three measurements.

All of them are quiet. Finally, Lou speaks up and says, 'Where the heck did you get these definitions anyway?'

'My old physics teacher gave them to me.'

'Who?' asks Bob.

'Your old physics teacher?' asks Lou.

'Yeah,' I say defensively. 'What about it?'

'So what's his name?' asks Bob.

'Or what's 'her' name,' says Stacey.

'His name is Jonah. He's from Israel.'

Bob says, 'Well, what I want to know is, how come in throughput he says 'sales'? We're manufacturing. We've got noth- ing to do with sales; that's marketing.'

I shrug. After all, I asked the same question over the phone. Jonah said the definitions were precise, but I don't know how to answer Bob. I turn toward the window. Then I see what I should have remembered.

'Come here,' I say to Bob.

He lumbers over. I put a hand on his shoulder and point out the window. 'What are those?' I ask him.

'Warehouses,' he says.

'For what?'

'Finished goods.'

'Would the company stay in business if all it did was manu- facture products to fill those warehouses?'

'Okay, okay,' Bob says sheepishly, seeing the meaning now. 'So we got to sell the stuff to make money.'

Lou is still staring at the board.

'Interesting, isn't it, that each one of those definitions con- tains the word money,' he says. 'Throughput is the money coming in. Inventory is the money currently inside the system. And oper- ational expense is the money we have to pay out to make

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throughput happen. One measurement for the incoming money, one for the money still stuck inside, and one for the money going out.'

'Well, if you think about all the investment represented by what we've got sitting out there on the floor, you know for sure that inventory is money,' says Stacey. 'But what bothers me is that I don't see how he's treating value added to materials by direct labor.'

'I wondered the same thing, and I can only tell you what he told me,' I say.

'Which is?'

'He said he thinks that it's just better if value added isn't taken into account. He said that it gets rid of the 'confusion' about what's an investment and what's an expense, I say.

Stacey and the rest of us think about this for a minute. The room gets quiet again.

Then Stacey says, 'Maybe Jonah feels direct labor shouldn't be a part of inventory because the time of the employees isn't what we're really selling. We 'buy' time from our employees, in a sense, but we don't sell that