The Goal by Eliyahu Goldratt

I recently finished reading The Goal by Eliyahu Goldratt. It's an excellent book for anyone looking to change the way they think about work.

In a nutshell, it states that the goal of a business is to make money and that, in order to achieve this goal, you need to increase throughput of sales, reduce operational expense and reduce inventory.

• Throughput of sales is the rate at which money is generated through sales (i.e. the money coming in).


• Inventory is the money that has been invested in purchasing things which are intended to be sold (i.e. the money invested).


• Operational expense is the money that is spent in order to turn inventory into sales (i.e. the money going out).

The key to reducing inventory and increasing throughput of sales is not to look at each local area and optimize but instead to look at the entire system.

Start by identifying the Bottlenecks (resources whose capacity is equal to or less than the demand placed on them) and non-bottlenecks (resources whose capacity is greater than the demand placed on it). Once identified, the flow through a bottleneck should be controlled and made equal to the demand from the market. A slower flow will result in a slower throughput of sales, a faster flow will result in more inventory.

If the market demand is greater than the capacity of your bottleneck, you need to try and find ways to increase the capacity of the bottleneck (e.g. make it more efficient or get more resource).

If the capacity of your bottleneck is greater than market demand, then market demand becomes your bottleneck and you should find ways to increase it (e.g. advertising).

If you want to find out more, you'll have to read the book yourself.  I highly recommend it!