Not having your product sail through the factory is like having a traffic jam on the highway – lots of cash, in the form of inventory, creating its own constraint, just sitting there gathering dust, and slowing down all production and revenue.

As long as your cash is not converted back to revenue, it’s like you’re loaning out your money at no interest – in fact it’s worse than that, because that money laying around is probably stopping you from getting more sales. It makes it appear as if the capacity is full, while it’s probably just misallocated. The additional revenues get blocked at the constraint, limiting what you were probably expecting when you bought that new machine.

The cash you invest in materials, labor, etc., doesn’t come back to you until you convert it back into cash in the form of revenues. So when we manage Throughput, we are indirectly managing revenues – and better cash flow, and a fatter bottom line.