The Goal

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inventory. And this time you end up, not with excess work-in- process, but with excess finished goods. The constraint here is not in production. The constraint is marketing's ability to sell."

As he says this, I'm thinking to myself about the finished goods we've got crammed into warehouses. At least two-thirds of those inventories are products made entirely with non-bottleneck parts. By running non-bottlenecks for "efficiency," we've built inventories far in excess of demand. And what about the remain- ing third of our finished goods? They have bottleneck parts, but most of those products have been sitting on the shelf now for a couple of years. They're obsolete. Out of 1,500 or so units in stock, we're lucky if we can sell ten a month. Just about all of the competitive products with bottleneck parts are sold virtually as soon as they come out of final assembly. A few of them sit in the warehouse a day or two before they go to the customer, but due to the backlog, not many.

I look at Jonah. To the four diagrams on the floor, he has now added numbers so that together they look like this...

Jonah says, "We've examined four linear combinations in- volving X and Y. Now, of course, we can create endless combina- tions of X and Y. But the four in front of us are fundamental enough that we don't have to go any further. Because if we use these like building blocks, we can represent any manufacturing situation. We don't have to look at trillions of combinations of X and Y to find what is universally true in all of them; we can generalize the truth simply by identifying what happens in each of these four cases. Can you tell me what you have noticed to be similar in all of them?"

Stacey points out immediately that in no case does Y ever determine throughput for the system. Whenever it's possible to

activate Y above the level of X, doing so results only in excess inventory, not in greater throughput.

"Yes, and if we follow that thought to a logical conclusion," says Jonah, "we can form a simple rule which will be true in every case: the level of utilization of a non-bottleneck is not determined by its own potential, but by some other constraint in the system."

He points to the NCX-10.

"A major constraint here in your system is this machine," says Jonah. "When you make a non-bottleneck do more work than this machine, you are not increasing productivity. On the contrary, you are doing exactly the opposite. You are creating excess inventory, which is against the goal."

"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.

Donovan is taken aback. "Beg pardon, but how the hell can you say that?"

"Just take a look behind you," says 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 work- ers produce one hundred percent of the time, or else get rid of them to 'save' money."

Lou says, "Well, granted that maybe one hundred percent is unrealistic. We just ask for some acceptable percentage, say, ninety percent."

"Why is ninety percent acceptable?" asks Jonah. "Why not sixty percent, or twenty-five? The numbers are meaningless un- less they are based upon the constraints of the system. With enough raw materials, you can keep one worker busy from now until retirement. But should you do it? Not if you want to make money."

Then Ralph suggests, "What you're saying is that making an employee work and profiting from that work are two different things."

"Yes, and that's a very close approximation of the second rule we can logically derive from the four combinations of X and Y we talked about," says Jonah. "Putting it precisely, activating a resource and utilizing a resource are not synonymous."

He explains that in both rules, "utilizing" a resource means