Report on the book “The Goal” by Eliyahu Goldratt and Jeff Cox I really enjoyed this book. It was easy to read and easy to comprehend. The examples used in the book make the main ideas of the book memorable and easy to understand. I loved how the authors described the thinking process of the main character, Alex, in a day to day every person’s situations. To me the main value of this book is that its main concepts are applicable to every business, not just manufacturing facilities.
I work in marketing and I was surprised to gain knowledge that can help me in my job, specifically business-customer relationships. “The Goal” gave me a better understanding of how market operates in general. Below I described the summary of the book. The main character is Alex Rogo. He is a hardworking and ambitious 38 year old manager of the manufacturing plant at his hometown. He just took this job half a year ago trying to improve plant’s performance. Soon he finds out that he is actually trying to save the plant.
His boss, a Vice President of the UniCo tells him that the plant has not been bringing any profit but on the contrast only loss, so Alex has three months to either change its performance or he will propose to the board of directors of organization to close the plant. At the same time, Alex is facing serious family problems. He faces the conflict with his wife, because of him working and not paying enough attention to her and their children. On the staff meeting held by VP of UniCo, Alex recovers another random meeting with his physics professor Jonah, who was questioning the term of productivity.
Alex recovers that in the conversation about effectiveness of automation of his plant, the professor knew right away that Alex’s plant is not doing well. Jonah asked Alex to describe what productivity means in his own words, and asked what the one true goal of the organization is. Alex struggled defining the one goal, since his plant has so many different ones. He decides to leave the staff meeting help by VP and think about what professor was trying to tell him. After evaluating various ideas and trying to fit examples from different organizations, he realizes that the goal is to make money.
I really liked how the authors of the book described Alex’s thinking process and how he came up to this conclusion. Alex evaluated many ideas that would fit one single goal of every organization. He tried to find examples to support or reject every one of his assumptions, this way he arrives to a conclusion that the goal is to make profit. Then Alex realizes that what professor was trying to tell him is that in order to be productive, the decisions must bring the company closer to its goal.
In other words, if it brings company in the direction of making profit, then this action can be considered productive, everything else is unproductive. Alex is trying to figure out the measurements for such productiveness. He realizes that old methods and everything he knew before doesn’t quite apply, so he decided to find Jonah seeking advice. Jonah gives him a hint that trying to reduce the cost of production doesn’t help a company to reach its goal. He gives him three measurements of productivity: throughput, inventory and operational expense.
He tells him to write down the definition for each as it is different than what Alex thinks of: Throughput – “the rate at which the system generates money through sales;” Inventory – “all the money that the system has invested in purchasing things that it intends to sell;” Operation expense – “all the money the system spends in order to turn inventory into throughput. ” Alex is gathering his team of managers to help him find the answers to Jonah’s questions and how this can save the plant. Getting a feel that Jonah was right in his definitions, he goes to New York to meet with Professor for breakfast asking for help again.
Jonah is working as a business-consultant and travels all around the world; he doesn’t have time to fix Alex’s problems. Nevertheless he offers to help Alex by giving him rules, but Alex would be the one who will have to figure out how to apply these rules, what they actually mean and how to solve the plant’s problems. Jonah explains to him that the first thing he has to do is to identify dependent events (“events in which the output of one event influences the input to another event”) and statistical fluctuations (“common cause variations in output quantity or quality”).
Alex doesn’t understand what Jonah is talking about and how these two terms can be the problem if his plant, especially taking into consideration that the calculated efficiency of his plant is high. He doesn’t believe that these are the reason for late orders. The next day after returning home, Alex is taking his son and a class of Boy Scouts out on a hiking expedition. Here comes my favorite part of the book. One of the boys, Herbie, becomes a constraint because he slows down the whole group. While trying to manage the hiking and the boys Alex realizes that different average walking speed of the boys doesn’t compensate for itself.
He tries to figure out why the speed differentiations accumulate and the group is continuously spreading out farther and farther, even when Herbie is putting in extra effort not to lag behind the group. Alex tries to apply two of the principles of the theory of constraints into the hiking trip and then he applies it as a comparison model for his manufacturing cycle. Now Alex sees clearly that the professor was right – that in a chain of dependent processes, statistical fluctuations can occur at any step. Bingo!
I was impressed by the way the authors explained the complicated terms of dependent events and statistical fluctuations in such an easy to understand manner. Alex’s colleagues also cannot believe it at first, but when they need to ship an urgent order and it gets delayed because of accumulated variations in the volume of production, which leads to a significant decline in the output of the system, it becomes apparent that Alex and the professor are right. The next task that Jonah gives Alex is to find the bottlenecks on the plant.
Alex reviews the technological maps and calculations, but cannot find an answer. Jonah gives him a very simple advice: look for the biggest piles of blanks in front of the manufacturing machines. This way Alex defines the bottlenecks on the plant: NCX-10 and Heat Treat. Jonah then suggests maximizing the operation time of these machines to find additional capacity on the side for the operations and make sure that the bottleneck units handle only current orders. After several failed attempts Alex and his team come up with the system of “Drum Buffer Rope (DBR)”.
They introduce a system of controlling the orders by labeling them, and use a computer program to calculate the start of new batches in production, focusing on the schedule and performance of the bottleneck. Improvements made in the management of the plant enable Alex to ship orders without delay and to considerably reduce the execution time. I was surprised to find out that bottleneck can move customer demand and how the improvement can rapidly increase the sales. But it definitely makes sense – by illuminating the bottlenecks, the organization gains competitive advantage.
Closer to the end of the book, it appears that Alex’s plant is the only one that makes money for the company, and the rest are trying to reduce the manufacturing costs. Alex gets a promotion. He and his team continue to develop and execute Jonah’s ideas, and they work together to develop principles of constraint-based systems. Happy end! In conclusion, the main idea of the book is that the goal of most organizations is to make a profit by increasing the rate of income generation through sales, while reducing inventories and operational costs.
All the other activities that do not act accordingly towards these measurements are considered unproductive. The other idea of the book is to introduce the Drum Buffer Rope (DBR) model. Lastly, but more importantly, this book describes the algorithm of the improvement of the operational process: 1) Identify bottlenecks; 2) Define the ways to eliminate system bottlenecks, perhaps by increasing its capacity; 3) Arrange the manufacturing process accordingly to the bottleneck operations; 4) If the previous step bottleneck link has been removed, revise the entire process to facilitate ongoing improvement.
I really enjoyed this book because it proves that there is always a solution to the problem. I liked how Jonah wouldn’t give the answer to the problems to Alex, but instead would make Alex search for answers. I think this is the best approach to learning. I wouldn’t say that Alex handled the pressure perfectly, as he moved his family far aside on his priority list, but at the same time I have to give him credit for keeping calm dealing with both professional and personal parts of his life.
He didn’t panic, didn’t give up, thought logically, worked hard and utilized his team very well. I think that for business management it is very important to see the cause-effect relationships between actions and results, in my personal opinion that is the hardest thing to do, at least for me… This book motivates personal development, I would recommend it to any of my friends.