Factory Physics for Managers: How Leaders Improve Performance in a Post-Lean Six Sigma World

CHAPTER 5

Profit, Cash Flow, and Factory Physics Science

The ultimate measures for business are profit and cash. The Factory Physics approach has a direct impact on profit and cash, as reflected in traditional financial statements. While Factory Physics is primarily a theory of operations behavior, it can also be viewed in one sense as a theory of cash flow, profit, and return on assets. The buffers of inventory, capacity, and time and the demand-stock-production (DSP) framework essentially correspond to the financial resources of a company. Consequently, the key elements of the Factory Physics framework tie into the income statement, balance sheet, and cash-flow statement. Those ties are the topic of discussion of this chapter. For example, ...