The Goal

79

throughput happen. One measurement for the incoming money, one for the money still stuck inside, and one for the money going out."

"Well, if you think about all the investment represented by what we've got sitting out there on the floor, you know for sure that inventory is money," says Stacey. "But what bothers me is that I don't see how he's treating value added to materials by direct labor."

"I wondered the same thing, and I can only tell you what he told me," I say.

"Which is?"

"He said he thinks that it's just better if value added isn't taken into account. He said that it gets rid of the 'confusion' about what's an investment and what's an expense, I say.

Stacey and the rest of us think about this for a minute. The room gets quiet again.

Then Stacey says, "Maybe Jonah feels direct labor shouldn't be a part of inventory because the time of the employees isn't what we're really selling. We 'buy' time from our employees, in a sense, but we don't sell that time to a customer-unless we're talking about service."

"Hey, hold it," says Bob. "Now look here: if we're selling the product, aren't we also selling the time invested in that product?" "Okay, but what about idle time?" I ask. Lou butts in to settle it, saying, "All this is, if I understand it correctly, is a different way of doing the accounting. All employee time-whether it's direct or indirect, idle time or operating time, or whatever-is operational expense, according to Jonah. You're still accounting for it. It's just that his way is simpler, and you don't have to play as many games."

Bob puffs out his chest. "Games? We, in operations, are hon- est, hard-working folk who do not have time for games."

"Yeah, you're too busy turning idle time into process time with the stroke of a pen," says Lou.

"Or turning process time into more piles of inventory," says Stacey.

They go on bantering about this for a minute. Meanwhile, I'm thinking there might be something more to this besides sim- plification. Jonah mentioned confusion between investment and expense; are we confused enough now to be doing something we shouldn't? Then I hear Stacey talking.