This is a report on the goal:
The goal of a firm is to make money. Everything done in the firm must be in pursuit of this goal. The firm can be thought of as a system.
Throughput is the rate at which said system makes money through sales (not production – if something is produced but not sold, it should not count as throughput).
Inventory is all the money that the system invested in purchasing the products it intends to sell.
Operational expense is all the money that the system spends to turn inventory into throughput.
Alternatively expressed, the goal is to increase throughput while simultaneously reducing both inventory and operational expense.
A series of dependent events is one in which every event depends on the one before it. Series of dependent events, when combined with statistical fluctuations, result in proesses that cannot be predicted precisely.
A local optimum is created when a single process in the operation is optimised. Often, pursuing local optima makes it harder to attain the global optimum for the system. ‘‘A system of local optimums is not an optimum system.’’
For example, imagine a two-person process in which A places stuffing on pitas and B rolls and wraps shawarmas for the customer. If A can process pitas at the rate of 9 per minute and B can only wrap 5 per minute, then keeping A working at full capacity (local optimum) results in the work-in-progress of unwrapped shawarmas increasing (at the rate of 4 per minute) without increasing throughput (since only rolled and wrapped shawarmas translate into sales).
There are two types of resources: bottlenecks and non-bottlenecks. Bottlenecks dictate the effective capacity of a plant.
The idea is to make the output of the bottleneck equal to market demand. (An even more sophisticated approach is to make its output slightly lower than market demand, to protect against market downturns.) The