The Goal: A Process of Ongoing Improvement

The Goal: A Process of Ongoing Improvement

by

Eliyahu M. Goldratt and Jeff Cox

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Operating Expenses Term Analysis

Operating expenses are the money invested in a system to convert inventory to throughput. Operating expenses are intangible and cannot be sold, such as human labor, energy bills, or the depreciated value of machines as they age. A manager should keep operating expenses as low as possible without disrupting their throughput.

Operating Expenses Quotes in The Goal: A Process of Ongoing Improvement

The The Goal: A Process of Ongoing Improvement quotes below are all either spoken by Operating Expenses or refer to Operating Expenses. For each quote, you can also see the other terms and themes related to it (each theme is indicated by its own dot and icon, like this one:
The Importance of Goal-Setting Theme Icon
). Note: all page numbers and citation info for the quotes below refer to the The North River Press edition of The Goal: A Process of Ongoing Improvement published in 1984.
Chapter 36 Quotes

“Everywhere, improvement was interpreted as almost synonymous to cost savings. People are concentrating on reducing operating expenses as if it’s the most important measurement.”

“Not even that,” Bob interrupts. “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.”

Related Characters: Lou (speaker), Bob Donovan (speaker), Alex Rogo , Eliyahu Goldratt
Page Number: 297-298
Explanation and Analysis:
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Operating Expenses Term Timeline in The Goal: A Process of Ongoing Improvement

The timeline below shows where the term Operating Expenses appears in The Goal: A Process of Ongoing Improvement. The colored dots and icons indicate which themes are associated with that appearance.
Chapter 8
The Importance of Goal-Setting Theme Icon
Ineffective vs. Effective Business Metrics Theme Icon
...for finding the answer. He offers three new measurements to operate by: throughput, inventory, and operational expense . “Throughput” describes the money generated explicitly through sales. “Inventory” describes the money used to... (full context)
Chapter 9
The Importance of Goal-Setting Theme Icon
Ineffective vs. Effective Business Metrics Theme Icon
Efficiency vs. Optimization Theme Icon
...goal of making money. Alex decides the plant needs to increase its throughput while keeping operational expense and inventory as low as possible. He wonders if the robots further that goal, since... (full context)
Chapter 10
The Importance of Goal-Setting Theme Icon
Ineffective vs. Effective Business Metrics Theme Icon
...of them continue to debate how various functions and costs fit into throughput, inventory, and operating expense . (full context)
Chapter 19
The Importance of Goal-Setting Theme Icon
Working with Constraints Theme Icon
Efficiency vs. Optimization Theme Icon
...Bob states that they still need a way to increase their throughput without raising their operational expense . They need more capacity. Jonah assures them that if they can raise the capacity... (full context)
The Importance of Goal-Setting Theme Icon
Working with Constraints Theme Icon
Ineffective vs. Effective Business Metrics Theme Icon
Efficiency vs. Optimization Theme Icon
Jonah explains that although Alex and his staff would normally calculate the operating expense of each bottleneck machine based on its power and labor requirements, coming out to $20... (full context)
Chapter 36
The Importance of Goal-Setting Theme Icon
Ineffective vs. Effective Business Metrics Theme Icon
...thinking of expenses as the most important function, they prioritized throughput, then inventory, and considered operating expense as the least important measurement. Alex considers Lou’s observation critically important and reflects that it... (full context)