The Goal: a process of ongoing improvement

By suryadeep jain (158), PGDM 13-15

Summary
A book that revolutionized the way we understand the interactions of human organizations and illustrates state-of-the-art economic theory. The Goal is a gripping, fast-paced business novel about overcoming the barriers to making money. A manufacturing text book, a novel or, some say, a love story. It combines the reality of the factory with the fantasy of a novel, and appeals to all those who face the daily pressures of a high-paced business atmosphere and the struggle to balance the different aspects of ones life. It is a modern days' epic; Alex Rogo is a newly-appointed plant manager working ever more desperately to try and improve performance. Bearington -the plant- can't seem to ship, it is losing money, and will be permanently closed if all this doesn't change soon. His marriage is also on shaky ground due to his long work hours and his manifest lack of emotional intelligence. His two charming kids are both sad but understanding when they find out Julie, their mother, has left home. While facing his most important professional challenge, Alex's emotional life goes through the hero's worse moment: what Campbell calls the dark night of the soul. When Bill Peach, Rogo's boss and former friend bitterly tells him that profits must increase or the plant will be closed, our hero realizes he desperately needs help. While day-dreaming during Bill's business presentation, Alex pulls out a cigar that Jonah, a former professor, had recently given him at O'Hare's Chicago airport. He remembers he was actually quite shocked by this encounter because through a short set of poignant questions, Jonah made him realize that, while trying to improve the performance of the plant, Alex had completely forgotten what the true goal of it was. That cigar reminded him to contact Jonah for possible help. Although his field is physics, Jonah is now a management consultant. From the beginning, he uses the Socratic Method as a way to stimulate Rogo's mind to learn. In turn, Alex starts using questions to stimulate the minds of his staff members to become better thinkers and doers. With the help of the enigmatic Jonah and his team, Alex turns the plant around while at the same time abandoning many management principles he previously thought were ironclad. The effective prescription for Bearington's problems is the core of Goldratts ToC: identify and explore the system's constraints. Once identified, the bottleneck should be "eased" in a creative way. Every other element of the system has to march to the tune of the bottleneck. By applying this simple but disciplined thought process, Rogo and his team achieve Bearingtons goal: to reduce operational expense and reduce inventory while simultaneously increasing throughput. And thus, they save their beloved plant. Simultaneously, Alex recovers the love of Julie, his wife, and reunites his family.

A true heros story that ends, as Campbell would put it, with the restoration of an order even more developed, inclusive, and powerful than before.

Plainly speaking The Goal is a book on Theory of Constraints. However along with the message, another important side to this book is the method the author has adopted to deliver the message.

Analysis
Through reading The Goal, by Eliyahu M. Goldratt and Jeff Cox, I have learned that there is a great importance for productive organization when running a business. The book is an investigation into the life of a redeeming plant that was headed into a downward spiral that would have closed them down. The book is an investigation into the life of a plant that is in a downward spiral until new management ideas start to arise and turn the business upside down and back on track to making money. The book portrays how scientific and systematic thinking processes helped this plant turn its functions into a more positive business, increasing their cash flow by reorganization within the plant.

The first positive step toward a comeback occurs when Alex Rogo, the plant manager, recognizes the true goal of his company: to make money. The goal of every company is oftentimes lost in statistical, production, and efficiency data. In order to make money, a customer must have a want or need for the companys product(s). A customer is going to value the satisfaction they get from the product. Customers want to find the best deal for the product they are buying. Usually customers look at prices, quality, and dependability. In this book we discover just how important it is to the plants customers to get their shipments on time. Fast delivery proves to be a key factor in gaining clients for the plant. When Alex realizes how well his plant is doing with the shipment dates, he decides to take it a step further by cutting the batch sizes in half. Not only does this benefit the customers but the plant as well by reducing the time parts sit in the plant and increasing the flow speed of parts. This gives Alexs plant an advantage in the marketplace because customers come to them for their faster delivery.

Before the new system, the plant was not giving their customers what they wanted. Jonah helped the plant realize that what was really needed was to have the orders sent to their customers on time. The plant was having trouble getting shipments out on time creating a backlog of orders. When there was a demand for a certain order, more expenses were added to put all efforts on one sale. This caused a negative chain effect throughout the plant because of their faulty cost management system. The cost management system was a mess. This caused a negative chain effect throughout the plant. Customers were unhappy, prices went up, and the plant was not making money. The cost management system was not relating to what the customers valued, a timely delivery. Thanks to Jonahs helpful questions and process thinking, Alex Rogo was able to put the information to good use and create a new management system that would cater to what their customers valued most.

Effectiveness means having an intended or expected effect, while efficiency is the ratio of the useful output to the total input in a system. Effectiveness is a measure of achieving the goal of a business. Efficiency is the best use of a system of organization, classification, and coordination to get a job done. These two words obviously mean different things, a fact that many business managers must accept. Alex believed in the beginning of the book that by running his machines constantly he was being more efficient and maintaining the cost advantage. We learn in The Goal that in order to be productive, a business does not always have to increase or have high efficiencies. In fact, the book proved in this situation that a reduction in the efficiency of several operations made the entire operation more productive. The efficiency of individual employees or equipment does not add up to the efficiency of the whole plant. Individual success in not important to the goal of the plant; efficiency of the employees and equipment combined is what is important to the plant. Individual success in not important to the goal of the plant. The efficiency of the plant is reliant on the bottlenecks that are present rather than individual employee or equipment efficiency. Put in another way, the maximum deviation of a preceding operation will become the starting point of a subsequent operation. This means that the last operation cannot increase the production number after a preceding operation, but can only match it. The importance of separating the plant into two types of resources becomes essential. Jonah defines these two categories as a bottleneck resource (whose capacity is equal to or less than the demand placed on it) and a non-bottleneck resource (whose capacity is greater than the demand placed on it). A bottleneck determines the effective capacity of the plant. The bottleneck with the least capacity determines how fast the plant moves. The bottleneck is not necessarily good or bad but simply a reality. These constraints are important in producing goods and services because they must be used to control the flow through the system and into the market. While regulating the flow of output in the plant, the bottlenecks make it possible and easier to predict the date a shipment will be completed and sent. The capacity of the plant is equal to the capacity of its bottlenecks. Alex and his staff learned that the bottleneck time of production was so important because what that bottleneck produces in one hour is what the plant produces in an hour. Consequently, an hour lost on a bottleneck is an hour lost for the whole system. As Alex realizes that there are two bottleneck machines in his plant that are critical points determining the rate of production of the operation, he must develop strategies to overcome or live with them. Some strategies that Jonah suggests are: reducing the idle time on the machines for breaks and lunch, eliminating the processing of defective parts, and only working on the parts that are necessary for production today, not the future. This change and realization of the company gives shocking positive effects.

Later in the book, the necessity of equipment and people to be idle for part of the time is realized to be effective for the plant. Problems were occurring in the plant because inventory from the non-bottleneck machines were piling up before the bottleneck machines. This problem is easily fixed by only making the parts necessary for the production of current sales. This means that some of the plants people and machines will have to be idle. This way the unnecessary inventory will not waist waste money and the plant can run more efficiently. Jonah tells the plant staff that they are wasting money by making needless parts and should only manufacture what is in current demand. He says not to sacrifice present money for future money. Alex and his crew

come up with an idea in which the bottlenecks use the aid of computers to let them know when to let more inventory into the system. The Goal is used to portray Goldratts theory of constraints by using the Socratic method of inductive reasoning. It is a book that can be used by many for the use of positive managing techniques and thinking processes. The book is easy to read and understand while teaching the reader about effective business operation. I have learned so much through these new ideas and ways of thinking that have been brought to my attention in this book.

Learnings
1. The Goal: Identify the goal of your company. With this you then decide what is productive and what is not. Anything that is working towards the goal is considered productive. 2. Measurements: Measurements are important for keeping record of how your business is doing. Make sure these measurements are accurately defined in terms of the goal of your company. 3. Critical thinking: Be active in your quest for knowledge. Seek out answers, because they do not often find you. Experiment with ideas before putting them into action. 4. Teamwork: Teams are very important to critical thinking. The more heads on the job the better. People have different opinions and different outlooks someone may think of something that you never would have. 5. Never give up: There is always a chance to come back as long as your business in still running. When you give up is when you lose your chance to even try.

Five step process for improving constraints. 1. Identify: First identify the constraint in your company. A constraint is a something that limits the amount of output your company can produce.

2. Exploit: Figure out a way to get more products out of the constraint without using any more capacity. There are many different ways to do this, such as in the book they altered lunch breaks so that the constraint machine could be running non-stop.

3. Subordinate: Make adjustments to non-constraint resources. Non- constraint resources can produce at a higher rate than constraint resources. By limiting how much the non-

constraint resources produce you lower the carrying cost of the products waiting for the constraint resources to be finished. 4. Elevate: Take some of the workload off of the Constraint. The constraint needs to be able to produce at or close to the level of demand. Using other resources to produce constraint items is a good way to do this.

5. Repeat: Start over again on these five steps. There will always be a constraint in a business that needs attention. The more constraints identified and fixed throughout these steps the better off your business will be.