Pull Systems at the Grocery Store

Your local grocery store carries shelves full of items so they are ready to be purchased as soon as you walk in the door. Shelves are restocked according to what gets sold, with the goal of always keeping a few items on the shelf. If there is too much inventory, the store needs a huge space and risks products expiring before they sell. Too little inventory, and the items will sell out leaving an empty store where no one wants to shop. By stocking a small inventory and replacing items according to sales, the store stays in business. Your studio should take the same approach to stocking and restocking inventory for sale.

The Real Metric from The Goal: Make Money

The three important metrics of the book The Goal combine to help the factory make money.

INCREASING throughput means that more product is sold from the factory.
DECREASING inventory means less money is invested in purchasing things to turn into throughput.
DECREASING operational expense means less money is needed to turn things into throughput.

Do you track any of these three metrics at your studio?

Metrics from The Goal: Operational Expense

The final of three metrics used in the book The Goal is Operational Expense.

Operational Expense is defined as "all the money the system spends in order to turn inventory into throughput".

In other words, what does it cost to take materials and sell them? Equipment, maintenance, consumables like safety gloves, and all of the labor costs are part of this.

Reducing Operational Expense helps to spend less money while making product to sell.

Metrics from The Goal: Inventory

The second important factory metric from the book The Goal is Inventory.

Inventory is defined as "all the money the system has invested in purchasing things which it intends to sell".

The book demonstrates that the best approach is to reduce inventory. Inventory is product sitting somewhere in the factory: it can go obsolete, become damaged, or simply tie up cash that could be better used somewhere else.

Metrics from The Goal: Throughput

In the manufacturing-production novel The Goal, our production manager eventually understands that there are three key metrics that show the health of his factory. The first is Throughput.

Throughput is defined as "the rate at which the system generates money through sales". A higher number is better and represents more money made for the factory.

Important: this is NOT simply how much product is made. It has to be sold in order to count as throughput. This means you don't get to cheat by over-producing product that sits on the shelf. It doesn't matter how many products you make that don't sell.

The best way to increase your throughput is to make products to match all of the potential sales. However, this will have an impact on the other two metrics, which are Inventory and Operational Expense. 

  

Book Club - The Goal

If you enjoyed the book The Bottleneck Rules, a longer version, in novel form, is The Goal by Eli Goldratt.

It's a manufacturing classic. The book follows the manager of a production plant with problems completing orders on time. By walking you through some counter-intuitive examples, you can see how a better manufacturing facility would work. One example? Not everyone in the factory should be busy every second of every day.

The book eventually reaches a point where it recommends three key metrics for a manufacturing plant: Throughput, operational expense, and inventory. These are the main items to keep an eye on to see if your factory is running well.

Lumi Packaging

Lumi packaging is an interesting potential source for branded packaging for ecommerce businesses. They seem to be a one-stop-shop for getting your logo splashed all over every box and envelope you ship to a customer.

https://www.lumi.com/

Lumi declares that their process works best for companies shipping 1000+ orders per month. Even if you're below that amount, you may get some ideas for adding branding to your shipping packaging.