I finished this book in January 2025. I recommend this book 9/10.
Why you should read this book:
It might be one of the most used books in MBA programs. In this book, you are following a plant manager at a manufacturing plant who has to turn profits around within three months. Following the principles of Toyota's Production System, you learn how to identify bottlenecks/constraints and focus on net profit, ROI, and cash flow.
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🚀 The book in three sentences
Identify and operate to key business measures
Always focus on flow
Run towards problems and focus on the 5 steps
📝 My notes and thoughts
P49. So this is the goal: To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow.
P60. "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 expenses."
P87. The goal is not to improve one measurement in isolation. The goal is to reduce operational expense and reduce inventory while simultaneously increasing throughput."
P140. "No, bottlenecks are not necessarily bad—or good," says Jonah, "they are simply a reality. What I am suggesting is that where they exist, you must then use them to control the flow through the system and into the market." That makes sense to me as I'm listening, because I'm remembering how I used Herbie to control the troop during the hike.
P159. "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 capacity is to take some of the load off the bottlenecks and give to non-bottlenecks."
P301. The five steps from the plant:
Step 1: Identify the system's bottleneck. (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 bottleneck. (That was fun. Realizing that those machines should not tak 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 previous step, a bottleneck has been broken go back to step 1.
P363. The Five Focusing Steps:
1. IDENTIFY the system's constraint.
2. Decide how to EXPLOIT the system's constraint.
3. SUBORDINATE everything else to the above decisions.
4. ELEVATE the system's constraint.
5. If in the previous steps a constraint has been broken go back to step 1. but do not allow inertia to cause a system constraint.
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