Understanding Systems -

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.

Few things, if any, exist in the word by itself.

Complex Systems almost always rely on other systems to operate. Your kitchen light needs electricity to operate. If your power plant fails, your kitchen light fails too. That’s Interdependence.

The more interdependent the processes in a system are, the more likely failures or delays will affect other parts of the system. Highly interdependent systems are usually time dependent, rigidly ordered, and have very little Slack. There’s often just one path to a successful outcome, and failure in any part of the system can disrupt the rest of the system. For example, in an arrangement of dominoes, if one domino fails to knock over the next, the entire system comes to a stop.

In project management, the term “critical path” illustrates the importance of Interdependence. The critical path contains just the tasks that must be completed for the project to finish on schedule. If anything on the critical path changes, that Change affects everything else on the path. A delay in a task on the critical path will delay the entire project.

You can make a system less Interdependent by removing dependencies. A dependency is an input that’s required before the next stage of the process can take place.

Here’s an example from an automotive assembly line: if you must put in the engine before the windshield is installed, any engine problem will delay the entire system. But if it doesn’t matter in which order the parts are installed, it’s possible to put together a finished vehicle in more than one way.

Get rid of unnecessary dependencies, and you’ll reduce the risk of a cascading failure.

To learn more about interdependence, check out The Personal MBA by Josh Kaufman.