The Goal Summary of Mgmt Ideas

The Goal can be expressed in several ways.

From the Financial Point of View, making money is The Goal – it can be measured in three ways: net income, ROI, and cash flow. Do not increase one at the expense of another. Try to make all three go up at once. Cash flow is a sink-or-swim situation. If you run out of money to pay bills, your creditors force you into bankruptcy. Net Income can show you are making a profit and how much profit. ROI tells you if the net profit is big enough vs. the investment made to know if you want more of this kind of business.

To facilitate making operational rules, we restate The Goal:

We make more money by 1) Increasing Throughput, 2) Decreasing Inventory, and 3) Decreasing Operational Expenses.

THROUGHTPUT is the rate the system generates SALES.

INVENTORY is all the money the system has invested in purchasing things which it intends to sell.

OPERATIONAL EXPENSE is all the money the system spends in order to turn INVENTORY into THROUGHPUT.

Think company-wide, not just for manufacturing, this plant, or the sales department. Dismiss Local Optimums.

Labor to produce products can be inventory or operational expense.

A balanced plant has each and every available resource at the exact level