The Goal

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ent ways, ways which mean the same thing as those two words, 'making money.' '

"Okay," I answer, "so I can say the goal is to increase net profit, while simultaneously increasing both ROI and cash flow, and that's the equivalent of saying the goal is to make money."

"Exactly," he says. "One expression is the equivalent of the other. But as you have discovered, those conventional measure- ments you use to express the goal do not lend themselves very well to the daily operations of the manufacturing organization. In fact, that's why I developed a different set of measurements."

"What kind of measurements are those?" I ask.

"They're measurements which express the goal of making money perfectly well, but which also permit you to develop oper- ational rules for running your plant," he says. "There are three of them. Their names are throughput, inventory and operational expense."

"Those all sound familiar," I say.

"Yes, but their definitions are not," says Jonah. "In fact, you will probably want to write them down,"

Pen in hand, I flip ahead to a clean sheet of paper on my tablet and tell him to go ahead.

"Throughput," he says, "is the rate at which the system gen- erates money through sal e s ."

I write it down word for word.

Then I ask, "But what about production? Wouldn't it be more correct to say-"

"No," he says. "Through sal e s -not production. If you pro- duce something, but don't sell it, it's not throughput. Got it?"

"Right. I thought maybe because I'm plant manager I could substitute-"

Jonah cuts me off.

"Alex, let me tell you something," he says. "These defini- tions, even though they may sound simple, are worded very pre- cisely. And they should be; a measurement not clearly defined is worse than useless. So I suggest you consider them carefully as a group. And remember that if you want to change one of them, you will have to change at least one of the others as well."

"Okay," I say warily.

"The next measurement is inventory," he says. "Inventory is all the money that the system has invested in purchasing things which it intends to sell."