The Goal

77

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."

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