Since a Stock is a pool of resources, it helps to know how much of a resource you have to work with. Slack is the amount of resources in a Stock. The more resources you have, the more Slack you have.
To run efficiently, a System should have just enough Stock – not too much, and not too little.
Take an automotive manufacturing system as an example. If there’s no Stock of engines available to be installed when a car reaches that part of the assembly line, that’s a problem – the car must wait until an engine is ready, holding up everything in line behind it.
To prevent this issue, ensure that the Stock is large enough to handle the level of Outflows that are needed to keep the system running. Add Inflows as they’re used up.
Large Stocks have the most Slack, but that flexibility comes with a cost. If you have four hundred engines waiting to be installed, you’ll have lots of money tied up in inventory, which reduces your cash flow. You’ll also need to pay for space to store the engines, which increases your costs and decreases your Profit Margin.
Small Stocks are more efficient but have less Slack. If you only have a Stock of four engines, you won’t have a large amount of resources tied up in inventory. But the chances of running out of engines is greater if the assembly line speeds up, or if there’s a problem with the engine manufacturing system.
If you have too much Slack, you’re wasting money. Too little, and your system may run out of the resources needed to continue operating. The key is to find the right balance.
To learn more about slack, check out The Personal MBA by Josh Kaufman.