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productivity is the act of bringing a company closer to its goal. Every action that brings a company closer to its goal is productive. Every action that does not bring a company closer to its goal is not productive.

Now then, I ask myself, how do I build a direct connection between the three measurements and what goes on in my plant? If I can find some logical relationship between our daily operations and the overall performance of the company then I'll have a basis for knowing if something is productive or non-productive. . . moving toward the goal or away from it.

"A bottleneck," Jonah continues, "is any resource whose capacity is equal to or less than the demand placed upon it. And a non-bottleneck is any resource whose capacity is greater than the demand placed on it.

"I do think that meeting the people is important," Stacey interrupts the laughter. "Financial numbers only reveal a small fraction of the picture. You have to find out what the people think is going on. What do they see as problems? Where do we stand vis-a-vis the clients?" "Who has a grudge against whom?" Bob contributes, and then in a more serious tone. "You also have to get a sense of the local politics." "And then?" "And then," Bob continues. "I'd probably take a tour of the various production facilities, visit some of the big clients, and probably even some suppliers. You've got to get the full picture."

we must not seek to optimize every resource in the system," says Jonah. "A system of local optimums is not an optimum system at all; it is a very inefficient system."

productivity is meaningless unless you know what your goal is,"

I view science as nothing more than an understanding of the way the world is and why it is that way. At any given time our scientific knowledge is simply the current state of the art of our understanding. I do not believe in absolute truths. I fear such beliefs because they block the search for better understanding. Whenever we think we have final answers progress, science, and better understanding ceases.

"it is possible for a company to show net profit and a good ROI and still go bankrupt." "You mean if it runs out of cash," I say. "Exactly," he says. "Bad cash flow is what kills most of the businesses that go under." "So you have to count cash flow as a third measurement?" He nods.

You forced us to view production as a means to satisfy sales. I want to change the role production is playing in getting sales."

"They're measurements which express the goal of making money perfectly well, but which also permit you to develop operational rules for running your plant," he says. "There are three of them. Their names are throughput, inventory and operational expense."

That's why I was so happy with our new method, timing the release of material according to the bottlenecks' consumption.

STEP 1. Identify the system's bottlenecks. (After all it wasn't too difficult to identify the oven and the NCX10 as the bottlenecks of the plant.) STEP 2. Decide how to exploit the bottlenecks. (That was fun. Realizing that those machines should not take a lunch break, etc.) STEP 3. Subordinate everything else to the above decision. (Making sure that everything marches to the tune of the constraints. The red and green tags.) STEP 4. Elevate the system's bottlenecks. (Bringing back the old Zmegma, switching back to old, less "effective" routings. . . .) STEP 5. If, in a previous step, a bottleneck has been broken go back to step 1.

how do we optimize the use of the bottlenecks? There are two principal themes on which you need to concentrate . . . "First, make sure the bottlenecks' time is not wasted," he says. "How is the time of a bottleneck wasted? One way is for it to be sitting idle during a lunch break. Another is for it to be processing parts which are already defective--or which will become defective through a careless worker or poor process control. A third way to waste a bottleneck's time is to make it work on parts you don't need."

"I mean anything that isn't within the current demand," he says. "Because what happens when you build inventory now that you won't sell for months in the future? You are sacrificing present money for future money; the question is, can your cash flow sustain it? In your case, absolutely not." "He's right," admits Lou. "Then make the bottlenecks work only on what will contribute to throughput today . . . not nine months from now," says Jonah. "That's one way to increase the capacity of the bottlenecks. The other way you increase bottleneck capacity is to take some of the load off the bottlenecks and give it to non-bottlenecks.

the level of utilization of a non-bottleneck is not determined by its own potential, but by some other constraint in the system."

He points to the NCX-10 and says, "You have on this machine only so many hours available for production--what is it. . . 600, 700 hours?" "It's around 585 hours a month," says Ralph. "Whatever is available, the demand is even greater," says Jonah. "If you lose one of those hours, or even half of it, you have lost it forever. You cannot recover it someplace else in the system. Your throughput for the entire plant will be lower by whatever amount the bottleneck produces in that time. And that makes an enormously expensive lunch break."

"What you have learned is that the capacity of the plant is equal to the capacity of its bottlenecks," says Jonah. "Whatever the bottlenecks produce in an hour is the equivalent of what the plant produces in an hour. So . . . an hour lost at a bottleneck is an hour lost for the entire system."

"We were busy reducing costs that didn't have any impact on reducing operating expenses." "Correct," Lou continues. "But the important thing is that we, in our plant, have switched to regard throughput as the most important measurement. Improvement for us is not so much to reduce costs but to increase throughput."

If you've got a machine, the depreciation on that machine is operational expense. Whatever portion of the investment still remains in the machine, which could be sold, is inventory." "Inventory? I thought inventory was products, and parts and so on," says Bob. "You know, the stuff we're going to sell." Lou smiles. "Bob, the whole plant is an investment which can be sold--for the right price and under the right circumstances." And maybe sooner than we'd like, I think. Stacey says, "So investment is the same thing as inventory."

"According to the cost-accounting rules that everybody has used in the past, we're supposed to balance capacity with demand first, then try to maintain the flow," I say. "But instead we shouldn't be trying to balance capacity at all; we need excess capacity. The rule we should be following is to balance the flow with demand, not the capacity.

The daring nature of Ford's method is revealed when one realizes that a direct consequence of limiting the space is that when the allotted space is full, the workers feeding it must stop producing. Therefore, in order to achieve flow, Ford had to abolish local efficiencies. In other words, flow lines are flying in the face of conventional wisdom; the convention that, to be effective, every worker and every work center have to be busy 100% of the time.

If the goal is to make money, then (putting it in terms Jonah might have used), an action that moves us toward making money is productive. And an action that takes away from making money is non-productive.

"Let's say you figure it out and you come up with $10 million net profit . . . an absolute measurement. Offhand, that sounds like a lot of money, like you really raked it in. But how much did you start with?" He pauses for effect. "You see? How much did it take to make that $10 million? Was it just a million dollars? Then you made ten times more money than you invested. Ten to one. That's pretty goddamned good. But let's say you invested a billion dollars. And you only made a lousy ten million bucks? That's pretty bad." "Okay, okay," I say. "I was just asking to be sure." "So you need a relative measurement, too," Lou continues. "You need something like return on investment . . . ROI, some comparison of the money made relative to the money invested."