ABSTRACT
OBJECTIVES <II To understand the basic concept of policy analysis • To present a process for analyzing poor policies <II To begin to understand how to overcome policy problems associated with
the five-step improvement process discussed in Chapter 2 so that constraints can be exploited and other resources can be subordinated to them, and so that constraints can be elevated when desired
<II To begin to understand how to create simple solutions
Perhaps the most limiting factor to a company's ability to make money is its internal policies. Poor policies inhibit the maximization of Throughput from existing constraints and create false assumptions about suboptimization. As an example, a policy of maximizing the utilization of every resource, instead of maximizing profitability, would ultimately cause bankruptcy by increasing inventories and interfering with a physical resource's ability to create Throughput. Economic order quantity (EOQ) assumes that a balance of suboptimization must be struck between the cost of setup and the cost of carrying inventory. But setup costs are not constant. The cost of setup at one work center may impact Throughput while the cost at another may not exist at all.
