The Goal

66

I write it down, but I'm wondering about it, because it's very different from the traditional definition of inventory.

"And the last measurement?" I ask.

"Operational expense," he says. "Operational expense is all the money the system spends in order to turn inventory into throughput."

"Okay," I say as I write. "But what about the labor invested in inventory? You make it sound as though labor is operational expense?"

"Judge it according to the definitions," he says.

"But the value added to the product by direct labor has to be a part of inventory, doesn't it?"

"It might be, but it doesn't have to be," he says.

"Why do you say that?"

"Very simply, I decided to define it this way because I believe it's better not to take the value added into account," he says. "It eliminates the confusion over whether a dollar spent is an invest- ment or an expense. That's why I defined inventory and opera- tional expense the way I just gave you."

"Oh," I say. "Okay. But how do I relate these measurements to my plant?"

"Everything you manage in your plant is covered by those measurements," he says.

"Everything?" I say. I don't quite believe him. "But going back to our original conversation, how do I use these measure- ments to evaluate productivity?"

"Well, obviously you have to express the goal in terms of the measurements," he says, adding, "Hold on a second, Alex." Then I hear him tell someone, "I'll be there in a minute."

"So how do I express the goal?" I ask, anxious to keep the conversation going.

"Alex, I really have to run. And I know you are smart enough to figure it out on your own; all you have to do is think about it," he says. "Just remember we are always talking about the organization as a whole-not about the manufacturing de- partment, or about one plant, or about one department within the plant. We are not concerned with local optimums."

"Local optimums?" I repeat.

Jonah sighs. "I'll have to explain it to you some other time."

"But, Jonah, this isn't enough," I say. "Even if I can define