The Goal
Jonah’s Wisdom:
• Teaches Rogo to learn to run the plant by its constraints
• Teaches Rogo the importance of setting a clear, well-defined goals
• Makes Rogo rethink, reconsider, and relearn the true meaning of common business words/sayings such as ‘efficiency’ and ‘increasing productivity’
• Teaches Rogo how to identify the core problem, think about the process, and bring about solutions without explicitly telling him what to do
• Teaches Rogo that with intelligence and resolve, goals can be met
• Teaches Rogo to strive for continuous improvement and to always be on the lookout for what to change and how to change it
• Demonstrates how cash flow is affected by the throughput rate, inventory and customer response time
o Jonah defines throughput rate as ‘the rate at which the system generates money through sales. At first, Rogo had numerous backlogged orders that were missing specific parts and, therefore, could not be shipped. Jonah points out that these backlogs represent unrealized throughput and, thus, unrealized sales and lower cash flows. o Jonah defines inventory as ‘all the money the system has invested in purchasing things which it intends to sell.’ The factory was producing spare parts and stocking them instead of producing the specific parts needed to ship the overdue orders. Excess inventory hurts the factory’s cash flow because it reduced throughput. o Initially, Rogo’s factory had a lot of backlogged orders (some by almost two months) and its customers were not impressed by the tardiness of the deliveries. If the factory did not improve its customer response time, it risked losing business to its competitors, thereby decreasing its cash flow.
Rogo improved the factory’s throughput rate and decreased excess inventory by rearranging the order in which the products were assembled (i.e. moved Q.C. inspection points first) and by improving the efficiency of the bottlenecks and non-bottlenecks. Moreover, he cut the batch size dramatically,
• Teaches Rogo to learn to run the plant by its constraints
• Teaches Rogo the importance of setting a clear, well-defined goals
• Makes Rogo rethink, reconsider, and relearn the true meaning of common business words/sayings such as ‘efficiency’ and ‘increasing productivity’
• Teaches Rogo how to identify the core problem, think about the process, and bring about solutions without explicitly telling him what to do
• Teaches Rogo that with intelligence and resolve, goals can be met
• Teaches Rogo to strive for continuous improvement and to always be on the lookout for what to change and how to change it
• Demonstrates how cash flow is affected by the throughput rate, inventory and customer response time
o Jonah defines throughput rate as ‘the rate at which the system generates money through sales. At first, Rogo had numerous backlogged orders that were missing specific parts and, therefore, could not be shipped. Jonah points out that these backlogs represent unrealized throughput and, thus, unrealized sales and lower cash flows. o Jonah defines inventory as ‘all the money the system has invested in purchasing things which it intends to sell.’ The factory was producing spare parts and stocking them instead of producing the specific parts needed to ship the overdue orders. Excess inventory hurts the factory’s cash flow because it reduced throughput. o Initially, Rogo’s factory had a lot of backlogged orders (some by almost two months) and its customers were not impressed by the tardiness of the deliveries. If the factory did not improve its customer response time, it risked losing business to its competitors, thereby decreasing its cash flow.
Rogo improved the factory’s throughput rate and decreased excess inventory by rearranging the order in which the products were assembled (i.e. moved Q.C. inspection points first) and by improving the efficiency of the bottlenecks and non-bottlenecks. Moreover, he cut the batch size dramatically,