Rakesh S K (15A3HP611)

Operations and Supply Chain Management

The Goal
BOOK REVIEW

Introduction:
The Goal book by Eliyahu M. Goldratt is a real guide for those who want to achieve
great success. The author starts his work with a note that, there is simplicity inside
every complexity. And he says that, in order to achieve success, we have to find that
simple things and capitalize on them. This book is about Alex Rogo, a plant manager for
UniCos Plant in Bearington. He is struck in a situation where he has to make his plant
productive and get back on the track within 90 days, if not the plant would be shut
down. Alex battles a lot along with his family problems, to get his plant back on track
with the help of his Prof. Jonah. Finally, Alex is able to achieve his Goal and move
forward in his career, so what all did he do to achieve his Goal is what the book says us.

The Team:
To achieve the success, team work is the most important thing in any given business
situation. Here the team was:
Alex Rogo: Plant Manager
Bill Peach: Divisional Manager
Bob Donovan: Production Manager
Stacey: Head, Inventory Control
Lou: Plant Controller
Ralph Nakamura: Planning
Jonah: Physicist, Consultant
Julie Rogo: Alexs Wife

The Steps:
The systematic approach to solve any given problem will be a very effective method to
achieve the success, the steps here are:

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Define the Goal: The goal must be defined correctly, the goal is to make money and
everything else you do is the means to achieve the goal.
Theory of Constraints
Identify the Constraints: The next step is to identify the constraints you have on
your way to achieve the goal. Constraints are things which comes as a hurdle limiting
your production capacity.
Exploit: Explore available options to get more products out of the constraint without
increasing any capacity. In the book we can see that they altered lunch breaks so that
the constraint machine could be running non-stop.
Subordinate/Synchronize: The Non-constraint resources produce at a higher rate
when compared to that of constraint resources. By limiting the non-constraint resources
production, you lower the carrying cost of the products waiting for the constraint
resources to be finished.
Elevate: Try to reduce 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

good

way

to

do

this.

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 the business will be.

Key Concepts:
Throughput: Rate at which system generates money through sales.
Operational Expenses: All the money system spends to convert inventory to
throughput.
Inventory: All the money system has invested in purchasing things it intends to
sell.
Bottleneck: Any resource whose capacity is equal to or less than the demand
placed upon it.
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Areas of Problems:
Inventory management: Every machine was used with 100% capacity which in turn
increased Inventories due to capacity mismatch between adjacent machines/resources
Inventory was high. Inventory turnover period increase. Cash conversion cycle increase.
Low Cash Inflow.
Bottlenecks capacity: Capacity is less than or equal to the demand. Bottlenecks
decided throughput of the system as a whole. Bottleneck capacity could not be
increased due to Capital Expenditure Constraint.
Robots: Robots were used, but production didnt increase. Labour wasnt laid off. Cost
of materials didnt go down. So, there was no tangible effect of using Robots.
Orders: Most of the orders were not completed and being shipped on time, they were
always getting late. Expediting was a norm in the plants.

How did Alex Achieve the Goal?

Jonah advices Alex concentrate on the bottlenecks (constraints) to achieve his goals.
The first thing Alex has to do is to locate the bottlenecks in the system and try to
remove them, this will help him in controlling the flow of materials in the system, which
will eventually decrease inventories, and work-in-process levels, decrease operational
expenses, and increase the throughput.
Alex and his team find two bottlenecks in the plant. One is the NCX-10 machine and
the other is the Heat-treat.
There are two things that should be done. They have to make sure that the bottlenecks'
time is not wasted, and make the bottlenecks work only on what will contribute to
throughput today. They realize that by running non-bottlenecks for efficiency, they have
piled up inventories excess of demand which means releasing materials faster than the
bottlenecks can process it.
In the book, the concept of "constraint" is clearly explained by an example. Alex takes
a group of boy scouts on an overnight hike. The slowest boy in the group, Herbie,
exemplifies all the characteristics of a constraint. Because he is very slow, it becomes
very difficult for Alex to keep the boys in line. Boys in front of Herbie hike faster than
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the other boys. Herbie being a constraint causes large gaps between the boys in the
line. This hiking trip helps Alex discover some simple processes. He uses his findings to
turn his plant in the right direction.
This example also explains the concepts of Dependable events and Statistical
fluctuations. Statistical fluctuations imply that most of the factors critical to running a
plant successfully cannot be determined precisely ahead of time. In a system with
dependable events, like an assembly line in a plant, if a process lags behind all the
process slows down. This explains the high level of inventories piled up in front of the
NCX-10 machine and the Heat-treat in his plant. Although a non-bottleneck process can
produce at full capacity, throughput of the whole system will depend on the capacity of
the bottleneck processes of the system.
If bottleneck processes lag behind the non-bottleneck processes, then higher work-inprocess and excess inventories will pile up. He finds that the throughput of the
bottlenecks is the throughput of the whole plant, and tries to increase the capacity of
bottlenecks, thereby increase the throughput of the plant in general.
Let us look at the steps Alex and his team followed to improve the performance of their
system by tackling the constraints with specific examples:
1. Identification: They first identified the NCX-10 and the Heat-treat as the
bottlenecks of the plant.
2. Exploit: They did everything for the bottlenecks to work at full capacity without
wasting time. For instance, they tried to keep them working during lunch breaks.
3. Subordinate: They tried to make sure that everything is marching to the tune of the
constraints. They used the red and green-tag system to make the plant operating
smoothly.
4. Elevate: They brought some old machines and tried to offload some of the work
from bottlenecks to these machines.
5. Go back to step 1, but do not allow inertia to cause a system's constraint: They
continuously checked the system to prevent the emergence of new bottlenecks.

Conclusion:
The key takeaways of this book are,
Balance the flow with demand, not capacity.
The level of activity of the system is determined by constraints in the system.
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 Activating a resource and utilizing it are not the same. An hour lost at a bottleneck is an
hour lost by the entire system.
An hour saved at a non-bottleneck is worthless. Performance of an operation should be
evaluated by its bottom line.
Alex and Lou identify three fundamental decision issues as critical to the success of
any manager, they are,
Knowing what to change.
What to change to?
How to cause the change?
The above three questions are answered through the Theory of Constraints
approach.

***Thank you***

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