The Goal, By Eliyahu Goldratt Essay
2434 Words10 Pages
When reading the book The Goal written by Eliyahu Goldratt, there were many lessons that I learned in order to have a clear and concise understanding of a positive level of productivity in a company. To have a positive level of productivity there are may components that are taken into consideration. Understanding what it actually means to be productive and how to increase the level of productivity by knowing the actual goal of the company that is trying to be reached and the components that go into the process of being productive. There are many factors that contribute to the level of productivity and being able to identify these factors is the key ingredient to having a successful level of productivity.
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To be able to understand the goal of your company you have to be able to understand the overall goal in relation to the measurements, meaning that the rate at which the system generates sales increases while at the same time decreasing the money that the company has used to purchase things and also decreasing the amount of money that is spent moving “inventory” into the throughput. The interesting part of these measurements is that they all have to do with the goal of the company, meaning that they all involve money, which is the overall goal of the company, to make money.
It is a common desire to have a balanced plant, but this cannot be reached if there are problems with the levels of capacity in the plant. If there is not enough capacity in the plant, it almost seems as if the possibility of having throughput is being lost and if there is an excessive amount of capacity there is money that is being wasted, which would be a problem when trying to reduce the operating expenses. However, in reality the closer that a plant comes to being balanced, the closer they get to losing money. “ Look at this obsession with trimming capacity in terms of the goal,
The Goal by Eliyahu M. Goldratt, is the story of a man who at his crossroads, and what direction he decides to take. The story is about a plant manager named Alex Rogo. We find Alex six months into his first plant managers position at UniCo, in the UniWare Division. The plant is located in Bearington Massachusetts, where Alex grew up. UniCo is definitely a manufacturing plant, what they manufacture, I still do not know.
The story begins when Alexâs supervisor, Bill Peach, comes into the plant and nearly turns everything upside down. After Alex puts out all of the fires that Bill had set, they sit down in Alexâs office and talk. Bill tells Alex that production has gone down in the six months that Alex has been at the helms, and an irate customer, Bucky Burnside, has an order that is fifty-six days overdue, and Alex must get that order shipped before anything else. Bill also says that if the plant does not turn around in the next three months, he will make a recommendation to close the plant. A few days later, Alex hears more of the same at a corporate meeting and figures out why Bill was upset. After the meeting Alex reaches for something and comes across a cigar he received from a chance encounter from and old physicist he knew from his college days.
While waiting for in between flights at OâHare, Alex wandered into an airport and found himself sitting next to the physicist named Jonah who worked on mathematical models while he was an undergraduate engineering student. Alex and Jonah start talking, and Alex mentions he is going to speak at a seminar. His topic is âRobotics: Solution for the 80âs to Americaâs Productivity Crisis.â Alex tells Jonah that his plant has more robots than any other plant in the division. Jonah is not very impressed. Jonah asks how much productivity has improved because of the use of the robots. Alex answers that there is a 36% improvement in one area. Jonah then asks if the plant is making 36% more money because the plant is using robots? Well, of course not is the response. Just the one department is producing 36% more.
Jonah continues the conversation and admits that he has been studying manufacturing processes. He asks Alex what productivity is and ends up explaining true productivity is accomplishing something in terms of your goal. Alex cannot even determine the goal of his company at this point. Jonah tells him to think about it and leaves. Back at the meeting, Alex hears talk about measurements of efficiencies, productivity, and cost per price, etc. He is not even sure what productivity is, so he decides to bail out at lunch to head back to the plant. His trip to the plant is interrupted by a pizza pie and a six pack of beer. Alex goes to a hill overlooking the plant and spends the rest of the afternoon contemplating what he is going to do over the next three months, and what exactly productivity is. He spends the entire afternoon thinking about âthe goalâ and finally comes up with the answer: The goal of the company is to make money, and everything else they do is a means of achieving the goal. Once Alex figures out what the goal of the company is, he decides to get a hold of Jonah to learn more about productivity. Alex spends the night at his motherâs house trying to contact Jonah, until he finally does at 2 a.m., with Jonah in London. Jonah explains to Alex that an action towards the goal is productive, and an action away from the goal is unproductive. He also gives Alex three new measurements: Throughput, the rate at which the system generates money through sales. Inventory, all the money that the system invested in purchasing things which it intends to sell. And finally, Operational Expense, all the money that the system spends in order to turn input into throughput. To make money, Alex must increase throughput while simultaneously reducing the inventory and operating expense.
Alex goes back to the plant and realizes he needs a lot more of Jonahâs advice. Jonah agrees to meet Alex in New York over breakfast for an hour. They start to discuss the idea of a balanced plant. Traditional manufacturing goals are always to run a balanced plant, where the capacity of each and every resource is balanced exactly with the demand from the market. But, Jonah points out, the closer you come to the perfectly balanced plant, the closer you are to bankruptcy.
At home, Alexâs wife, Julie, complains again that Al is never home. Al explains again, that it is because of the plant. After arguing about why he needs to work as much as he does the two reach a compromise. Alex tells Julie that he will bring his paperwork home, and take care of the fires at the office while he is there, in order to spend more time with Julie and the kids. The next morning, Alex is woken by his son who reminds him that he promised to help lead the scout hike overnight. Alex leaves without waking Julie, and finds himself to be the only parent âhelpingâ on the hike. Throughout the course of the hike, Alex realizes that an overweight boy, Herbie, slows down the middle and the end of the line. Alex does not understand why the line separates so greatly if all the boys are walking at two miles per hour. Eventually it dawns on him that Herbie is the statistical fluctuation and the rest of the line of kids are dependent events. When Alex returns home the next day from the hike, Julie has left. Alex realizes that he needs to work on his marriage as much, if not more than his work, because both are in trouble. In my estimation this is the turning point of the story, this is where Alex reevaluates the way he has been looking at things for the past few months, years, maybe his entire life.
Julie moves in with her parents, and Alexâs mother moves into the house to look after the kids until the end of the school year. Alex calls Jonah to explain what he has learned from the hike, and how it relates to the factory. Jonah explains that Alex has two kinds of resources; bottlenecks, and non-bottlenecks. A bottleneck resource is one in which capacity is equal to or less than the demand placed on it. A non-bottleneck is where capacity is greater than demand placed on it. Alex must determine which processes are bottlenecks. Alex and his staff search the plant to find bottlenecks. At first, they go through statistical data, then physically walk the plant to see workstations with work-in-progress piled up. The processes that have a lot of work backed up in front of them are bottlenecks. Jonah tells Alex that he should start balancing the flow of production with the flow of demand. The bottleneckâs flow , which determines the rest of the flow down the line, should then be balance with the markets demand.
Alex and his staff determine that the plantâs bottlenecks are heat-treat and the NCX-10. Jonah explains that they must increase the capacity through the bottlenecks in order to increase throughput and improve cash flow. At this point Jonah introduces some new ways for Alex and his staff to look at machine hours and costing. The NCX-10 is a machine that must be running as many hours a month as humanly possible, Jonah explains. However, it is often idle during break times and this costs the plant thousands of dollars in expenses every month and they do not even know it. Over a period of a few weeks, with many trial and errors, Alex and his staff finally turn out the first month of profit along with lowering inventory, and improving cash flow. Alex starts to think about his marriage more at this point. School is out and the kids are living with Julie and her parents. Alex talks with Julie again and they even go on a few dates together. He sees her now more than when he was living with her. Alex begins to include Julie in his process of growth, by explaining to her the changes that are going on in the plant, and finds that she is very interested.
The next step for Alex is too cut his batch sizes to cut his inventories down and improve overall efficiency of the plant. With shortened lead time, the whole production process is able to respond to market demand faster. Alex starts promising sales that orders that used to take five months, now will only take four weeks due to the shorter lead times. The three months is up, and Bill Peach still is not completely sure about whether or not this current success is not just a flash in the pan. Bill tells Alex that if he does not see a 15% improvement the plant will close. Business is great and with the help of Alexâs accountant Lou, the plant show an increase of 17%, however according to traditional accounting methods the increase is only 12.8%. On the day of the performance review, Bill Peach does not show up. Hilton Smythe, the productivity manager, and a rival of Alexâs takes notes and makes his recommendation for the plant to be closed because of the awkward style of productivity. Alex immediately hunts down Bill Peach to see what he has to say about this. Bill calms Alex down by congratulating him on his new position as division manager. Evidently Bill wanted to see who would be able to see beyond conventional methods, in order to compete in the new marketplace.
Alex is successful at home just as much at work. Julie decides to move back in after rekindling their relationship. In her time away Julie read about Socrates and found out that Jonah had been using the Socratic method all along. She shows Alex that giving the answer is not always the key, but helping one ask the questions is the true answer.
A Process of Ongoing Improvement
by Eliyahu M. Goldratt and Jeff Cox
Word Count: 1701