The World Of Business, Obtaining Success - 1302 Words

In the complex world of business, obtaining success can often seem quite difficult. Problems arise, opinions differ, personalities clash, and often time’s solutions seem near impossible. The important idea to recognize in these situations, however, is that all businesses can be simplified to one main fundamental goal, making money. When thinking about making money, there are three important terms that must be understood. These terms are throughput, inventory, and operational expense. In the accounting world, throughput is revenue earned from selling a product or service, inventory is money spent on fixed assets which lead to throughput, and operating expenses are money spent to turn inventory into throughput. Each of these terms plays a†¦show more content†¦This leads to Alex getting in contact with an old professor, whom may be able to help. The professor teaches Alex about â€Å"The Theory of Constraints†, which is the main foundation that ultimately helps Al ex save the company. The idea of dependent events states that the outcome of one decision affects the outcome of future decisions. This idea is first evident to Alex while he is observing the children on the hike. The group’s productivity is dragged down by its slowest member, but by lightening the load of the slowest members and placing this person in front of the line, the productivity is able to increase, increasing throughput of the team or process. This is how Alex learns about the concept of the bottleneck. A bottleneck is any station or resource within a process that has a capacity less than the demand being placed upon it. Bottleneck’s slow down production causing backups at some stages of the production process. This leads to increased inventory and higher expenses. Although Alex learns that bottlenecks are necessary, he also learns that to increase their capacity it is vital to minimize their downtime. Another strategy that Alex uses to improve the process is to reduce the batch s ize. By reducing the size of the batches in the process, Alex is able to cut costs. Alex ends up reducing the batch to half its size. This in turn cuts the costs in half, as well as gives the company