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The Nature of Weak Links

In many enterprises there is, and has been, the view that to achieve profitability there needs to be a strong focus on expense reduction, "Right Sizing". This focus on "Right Sizing" and expense reduction neglects to recognize that, outside of short-term cash management, the goal of the business is not to save money but to make money. Making money comes from satisfying customers, getting more orders, and increasing throughput (sales of goods and services). If you are not selling enough, you can continue to cut your expenses and save money, but how will that ever reverse the trend? An enterprise must focus on increasing throughput. Yes, cost control is critical too. In actuality the right actions from an enterprise perspective to increase throughput will almost naturally lead to lower operating expenses and reduced inventories and investments. But, in general, a focus on only expense reduction and not throughput enhancement won’t work.

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"The weakest link in an enterprise is not usually physical, but rather it is a policy or set of policies..."

The weakest link in an enterprise is not usually physical, but rather it is a policy or set of policies that were derived by a focus that was not directed toward the global perspective of increasing throughput. A focus that did not view the enterprise as an interconnected and interrelated chain of events and interactions. The direction of focus may have been local optimization or expense reduction or "Right Sizing" as the key to profitability.

In any case, the direction of this focus as expressed in a policy or policies becomes cast into behavioral patterns that now limit the enterprise from achieving the potential of its goal – "increased and sustained profitability now and in the future". Marketing strategies, product development, sales and production techniques, inventory and logistics strategies are all dominated by concepts and behavioral patterns that evolve from these constraining beliefs and policies.

The 5 steps of the Theory of Constraints act as a guide to continuous business improvement.

"...cast into behavioral patterns that now limit the enterprise from achieving the potential of its goal – increased and sustained profitability now and in the future."
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