alex sits in the meeting with peach thinking that nobody knows what’s going wrong and how to fix it.
alex decides to leave the meeting and sez he’s going back to the plant. but he goes and sits on a hillside outside the plant having beer and pizza.
alex tries to figure out what the goal is.
the plant needs materials so they have to be purchased in a cost effective manner, but the plant has lots of inventory of all this cost effectively purchased stuff sitting around in warehouses that cost the company money.
the plant employs people but that’s not its purpose and they have also fired people.
is producing products the goal? jonah said no. but the company has to make stuff since it’s a manufacturing company.
quality? the company has tried to increase quality and it’s still in trouble and companies making high quality products sometimes go bust.
what about quality and efficiency? but lots of quality products made with high efficiency are ditched by the companies making them.
what about keeping up with technology? no. r and d isn’t in charge of the company.
what about sales? making stuff doesn’t do any good if it sits in warehouses it has to be sold. but if stuff doesn’t sell for a profit, then the company will fail.
losing less money won’t help. the company has to make money from the plant or they’ll shut it down. so the goal is making money.
any action that moves the company toward making money is productive. any action that doesn’t do this is unproductive.
alex goes to the plant and sees workers sitting around. their supervisor tells him they’re waiting for parts.
alex sez he should find something for them to do and the supervisor gets them to move boxes.
alex wonders if the box moving actually helps the company make money: is it productive?
most people in the plant are working most of the time and the plant is still losing money.
alex looks at measurements of whether people are working, costs of products etc that are supposed to tell him if the plant is productive.
lou, the plant controller, comes to tell alex that peach found out he left the meeting and he was annoyed.
alex explains that making money if the goal and he asks lou how we know if the plant is making money.
lou sez he’d need measurements of how much money the company made.
alex suggests net profit. lou points out that if you don’t know how much money you spent to make that profit you might be spending a billion to make 10 million, which would suck. so return on investment ROI is better.
but a company can have a good roi and still run out of cash. so you need to measure cash flow too.
alex tells lou that the plant has to make money in three months or it’ll be shut down and they might be fired.
lou sez he knows what’s wrong and talks about unions, quality etc but if he already knows the problem then how come they’re still failing?
alex decides he has to improve net profits, roi and cash flow.
so alex decides he has to make a connection between net profits, row and cash flow and what the factory is doing, but he doesn’t know how.
alex calls his wife and realises he missed going out for dinner with her and alex’s daughter missed him too.
alex talks to eddie the second shift supervisor who updates him about what’s going on this shift. alex realises eddie knows nothing about how his work affects net profits, roi and cash flow.