The Goal: A Process of Ongoing Improvement
by Eliyahu M. Goldratt, Jeff Cox
|
List Price: Our Price: $13.00 You Save: $11.95 (48%) Availability: Usually ships in 1-2 business days Buy Used: from $5.00 (click here) Category: Book See more book details and other editions |
|---|
Book Reviews of The Goal: A Process of Ongoing Improvement
Book Review: Quirky little book that was completely worth it...A personal review below:
Summary: 4 Stars
TOC Overview
Defying conventional opinion which says that books on business must be boring, Eli Goldratt introduced to the world his "Theory of Constraints" in this novel published in 1984. Highly readable, the book uses layman's terms to present an unorthodox approach to improving competitive advantage. The novel is written about a manufacturing plant, but its philosophy can be applied to any company that relies on a production process. The book has been called a "Socratic" novel because Goldratt uses a sort of teacher-student discourse method to explain his theories. Today, generally referred to as the TOC (Theory of Constraints) or constraint management, Goldratt's philosophy attempts to re-focus production processes on the single-most important goal common to all free-market business: making money.
The TOC's greatest appeal is its logical simplicity. Like other operation improvement programs, Goldratt is also concerned with reducing waste and generating/sustaining competitive advantage. But Goldratt's perspective is different from other management systems because he approaches the problem with a clean slate. Leaving all traditional operations management jargon behind, Goldratt starts from scratch with both his definitions and his analysis. Nothing in The Goal requires an understanding of abstract business or economic theory. Everything has an immediate application, and Goldratt explains every concept using a real-life analogy. No doubt his background as a physicist contributes to this tendency. By his own admission, he thought of "science as nothing more than an understanding of the way the world is and why it is that way." Likewise, his exploration of an under-performing manufacturing plant in The Goal is a simple yet profound look at how a process works, and why.
The TOC is based on three fundamental principles, and Eli's theory suggests that all companies which keep these premises in mind will make money:
1. The only reason that companies do anything is to make money.
2. Anything that a company does to speed up the processes that generate money is appropriate.
3. Each business operation is one big process with many sub-processes.
The constraint theory is nested with these principles in that all sub-processes of the operation are defined by how much each one limits total production. The most limiting factors are identified hierarchically as constraints. If non-constraint aspects of the process (whether that be a machine or a worker) need to sit idle sometimes in order to match pace with the constraints, that's okay. In fact, it's a necessity or else excess inventory and higher work-in-progress (WIP) levels will result.
Oftentimes, where operations, accounting, and marketing interface within a company presents a conflict of interest, and Goldratt's book contains several examples of this. Performance measurements such as machine productivity stats, for example, are sometimes meaningless indicators because they don't contribute or even correlate to the company's goal. Alex, the plant supervisor, begins to realize this fact when he tries to impress his mentor, Jonah, by telling him how his plant now uses robots at one of the process stations and productivity in that area improved by 36%. Jonah astutely responds by asking if any of the workers were laid off, or if the plant was selling any more products. Alex admits that neither of these had occurred, yet. Jonah then predicted, correctly, that Alex's plant had an excess inventory problem. Adding robots to a non-constraint area didn't increase overall production, it only increased WIP and total production time.
As Goldratt illustrates through Alex's trials and triumphs at the plant, the most fundamental principle of TOC is that all processes must be subordinate to the ultimate goal of making money. The performance measurements of that goal are:
1. Net Profit - an absolute measurement in dollars
2. Return on Investment (ROI) - a relative measure based on investment
3. Cash Flow - a survival measurement
Notice the absence of metrics such as station productivity or worker utilization. Goldratt helps managers mired in traditional thought re-vamp their definitions of performance indicators and the way managers look at making money. Goldratt makes use of three common terms, the correct understanding of which are key to comprehending any business process: throughput, inventory, and operating expenses.
Throughput is the rate at which the system generates money through sales (not the rate of production!). Throughput equals sales revenue minus direct materials cost - it measures the speed at which the company makes money. Inventory is all the money that the system has invested in purchasing things which it intends to sell, or the money currently inside the system. It is the raw materials value tied up in work in progress and unsold finished goods. Large amounts of inventory are undesirable because it means that the company has spent money for product that hasn't generated revenue yet. Put simply, inventory is money. Operational expense is all the money the system spends in order to turn inventory into throughput. This is the money the company must pay out to make throughput happen. All costs of operations other than direct materials costs are operational expenses. The objective is not to reduce operational expense by itself, or improve one measurement in isolation. To achieve the goal, a company must "increase throughput while simultaneously reducing both inventory and operating expense."
Contrary to previous thought on the subject, all production stations achieving max productivity, or all workers working all the time, is a sign that the business as a whole system may be running inefficiently. The sum is greater than its parts. Full utilization of any non-constraint will produce more work in progress than the constraint can handle. This is where TOC differentiates itself from other operations management systems such as TQM and Lean which focus on eliminating waste in every possible corner of the business, speeding up every process increasing "efficiencies". What the TOC does, by contrast, is attempt to increase total system efficiency.
With this in mind, Goldratt details the "how" behind this theory using Five Focusing Steps. These steps should be followed in order by any business considering using the TOC in a way similar to how Alex did in the book. These steps accomplish incremental improvement to the overall operation.
1. Identify the system's constraint(s), and prioritize them according to importance. In this step, the "Herbies" of the plant are identified, so named after an analogy Goldratt uses in the book to explain how the whole operation is only as fast as it's slowest sub-process. The slowest boyscout, Herbie, causes a backlog of hikers on a narrow trail while the faster boys in front of him get further and further ahead. Herbie is a bottleneck.
2. Exploit the system's most critical constraint. In this step, the company looks for ways to get maximum output from the constraint, usually by proper scheduling and control so that the constraint station only works on good inputs. Waste of time and effort occurred in the book when the constraint spent valuable time working on production items that were scrapped by QC later down the line.
3. Subordinate everything else to that constraint. In this step, the whole operations is slowed down to the pace of the constraint. All operation improvement opportunities that would increase productivity of a non-constraint should not be invested in (like the expensive robots which only served to increase WIP inventory).
4. Elevate the system's constraints. Elevating the constraint means to find methods of increasing the capacity of the constraint, such as:
a. Performing regular maintenance on the constraint to prevent breakdowns.
b. Running the constraint for extra shifts.
c. Automating the constraint.
5. Repeat steps 1-4, focusing on a different constraint. However, Goldratt says to be wary of allowing inertia to become the bottleneck itself. Constantly look for the next system constraint, break it, and repeat.
(Goldratt, 1984)
SWOT (Strengths, Weaknesses, Opportunities, Threats)
Strengths
The most prominent strengths of Goldratt's philosophy, already discussed briefly, are that it's philosophy is simple and its approach to understanding the whole production system is intuitive, logical, and yet profound. However, the theory has been the topic of many optimistic reviews (even after twenty years) because it provides very immediate and positive results to companies. By nature, focusing on the weakest and most critical link in any production chain will generate the greatest amount of improvement in a short amount of time (Spector, 2006).
Weaknesses
One of the weaknesses, or difficulties, inherent to the Theory of Constraints is that multiple bottlenecks can occur within a plant, and sometimes bottlenecks manifest themselves at different workstations at different times, particularly in a balanced plant. Achieving an unbalanced plant is what many manufacturers should, but do not do. Balancing capacity across a sequence of processes; attempting to match capacity with market demand at each work station, is usually detrimental to the system as a whole. Goldratt uses the "match bowl" game to illustrate how floating bottlenecks can occur in a balanced plant. A series of bowls is set on a table (each one representing a station). Matches represent product inventory and one die is used to simulate statistical fluctuations (variation) in performance at each workstation. The bowls are a series of dependent events and each operation has the same capacity (six products per day, or six matches). Each player has a workstation (bowl), and rolls the die to determine how many matches he can take from the previous player's bowl (representing one day's production). On the next turn, each player rolls the die, and again he can only pick up as many matches as are in the previous player's bowl even if he rolled a higher number. The demonstration shows that in a series of dependent events, where each operation has the same amount of capacity (a "balanced" plant), the variation will cause the bottleneck to move from operation to operation (bowl to bowl). Goldratt knew this and combated it by suggesting a version of continuous improvement (see Step Five of the Focusing Steps). It's important to realize that balancing each workstation in isolation against max production will cause excess WIP inventory and bottlenecks. Another weakness/difficulty in implementing TOC is that it is often met with significant emotional resistance, especially by institutionalized business minds. It is difficult to introduce anything knew, especially a philosophy that seems counter-intuitive and unorthodox at the outset. In the book, Alex encounters this defense mechanism amongst his peers and superiors. Goldratt recommends using the Socratic method (the way Jonah does) to elicit the answers from people's own minds, rather than preaching the new methodology. All parts of an organization need to decide together on how best to proceed - if accounting, for example, is kept in the dark, they're likely to be even more hostile towards the new performance metrics.
Opportunities
The opportunities that TOC presents are exciting, especially when applied to old management accounting techniques. There are many accounting "truths" that Goldratt deconstructs quite effectively in his book (Hendricks, 2005). Traditionally, all sub-process improvements were seen as a good thing, but according to Goldratt, "improvement" expenses are wasted if they are spent on non-constraints. Also, another favorite accounting metric, station productivity, can actually lead the plant to make adjustment that detract from the total operating efficiency of the system (or plant).
Threats
The Theory of Constraints, when implemented, is often faced with both internal and external threats. Without everyone "on board," so to speak, it's all to easy to succumb to traditional thought and conventional practices. However, using some uncommon sense and logic in overcoming some of the more prevalent misconceptions is necessary in order to produce results, and ultimately, achieve the goal of making money. It's important to remember that the "TOC is not a panacea for everything. It's not going to solve cultural problems within an organization."
Associated Concepts
Goldratt introduced a new set of jargon to the world of operations management, not afraid to use some rather odd-sounding phrases (e.g., "Jonah," "Evaporating Cloud," or "Reality Tree"). Unfortunately in the early years of development, the Israeli physicist and his unorthodox (but successful) publication of the first business novel ever combined to create an aura of quirkiness amongst the managers who followed his philosophy. In an attempt to "de-cultize" the TOC, it is more commonly referred to as "constraint management." In recent years, constraint management has become a highly applicable business philosophy that can be applied to almost any profit or non-profit organization, and has even been successfully merged into Lean and SixSigma to amplify results.
Potential Areas of Application
The most successful applications of constraint management have occurred in highly competitive industries such as the low-cost airline business and the hardware technology production business. One example of this success is Seagate Technology LLC, a hard disk drive producer with 42,000 employees worldwide. The company experienced unprecedented results after adopting both Six Sigma and later, constraints management. After introducing SixSigma in 1998 and experiencing positive but plateaued results, Seagate's projects lacked the prioritization and the constraint focus that the TOC could, and did, provide. After superimposing the principles of constraint management on top of it's already-established system of SixSigma, the company increased production completion by 80%, and the number of projects completed in three months or less (half the time of the company's previous average of 6 months), was increased by 70% in just 90 days. Constraint management looks at the system as a whole, identifies limiting factors, and works to ensure a harmonious "team" operation of all workstations within the production line. Also called "synchronous manufacturing," (in contrast to the dated notion of a "balanced" plant), Goldratt's approach revolutionized the way operations managers and accountants work in unison to achieve the Goal.
Book Review: Julie Rogo Knocks It Down One Star
Summary: 4 Stars
Per my graduate class in quality engineering:
"Read The Goal and provide an executive summary of the book. The summary should cover the main points of the process that Mr. Rogo and his team took to turn around the plant. In addition to the summary, answer the following questions."
Part I -- Executive Summary
The problem of production has challenged human beings since they first evolved. Even hunters and gatherers had to do elementary planning to evaluate local resources and ration their prizes to assure they met the basic needs of the tribe. Moreover, gathering these basic commodities from nature -- wild game, fruits, nuts, roots, stems, berries, and so forth -- constituted only the first step of the tribal production process. A primitive division of labor within the tribe created the equivalent of an assembly line on the micro scale with hunters, gatherers, preparers, tribal elders, caretakers, medicinal specialists, etc.
Over the millennia, this division of labor continued to specialize and to multiply the range of possible productive occupations. This trend exploded with the advent of new individual freedoms after the American Revolution. The resulting Industrial Revolution greatly swelled the diversity, complexity, and specialization of knowledge needed in the rapidly modernizing society. It resulted in the modern fields of engineering and especially industrial engineering, the study of systems that keep industries humming.
Because of their long history of storytelling, humans still show a strong preference for learning through dramatic interpretation. Young people learn moral lessons like the just rewards of industry through stories such as "The Little Red Hen." Such fictional tales of virtue tend not to make their way so much to older generations. A few exceptions exist in novels such as Atlas Shrugged by Ayn Rand, a story which illustrates the role of the mind in man's life. A more recent exception comes in The Goal by Eliyahu Goldratt, a story which illustrates his "Theory of Constraints" dramatically.
Goldratt, a consultant by profession, considers himself a philosopher in his own right. His frustrations in the early 1980s in attempting to convey his new theory of production to his clients led him to write The Goal with the help of professional writer Jeff Cox. Goldratt seeks to show, in the form of a novel, how commonly held yet faulty assumptions about ideal production plant behavior, such as using all processing resources to capacity, neglect integrated thinking at a systems level and lead to net profits far short of potential. To borrow the words of Ayn Rand, Goldratt tells the reader, in effect: "Check your premises." By the end of the tale, protagonists and readers alike have profitably done just that.
Goldratt cleverly tells the story from a first person point of view of its main protagonist, Alex Rogo. The novel opens with Alex struggling to keep his manufacturing plant afloat. As the plant manager, Alex has done his best to apply his degree as an industrial engineer to solve mounting production problems at his plant. But he has had to face the hard truth that his best simply will not do. The plant has fallen into a perpetual "fire fighter" mode in which jobs get "expedited" based on whichever higher manager screams the most loudly on that particular day. Preposterously long work shifts resulting from this modus operandi have placed stresses on his marriage to his wife, Julie, as well as his relationship with their two young children.
Alex encounters Jonah, an old friend and science teacher who challenges Alex on a number of his basic assumptions with a Socratic method of inquiry. "Then, tell me, what is the goal of your manufacturing organization?" he asks Alex after a brief series of opening questions. Although seemingly innocuous, the answer to the question of "the goal" actually opens a floodgate of other questions. These in turn cascade into answers that help Alex and his team of managers to transform the plant from the biggest loser in the company to the most profitable one.
For any plant, of course, "the goal" proves actually quite simple -- to make money. But Alex takes pages and pages of thought and dialogue in the early part of the novel to answer this question, first refuting other common answers such as "to produce products as efficiently as we can" and other misleading slogans before arriving at the final answer to his own satisfaction. His ensuing exchanges with Jonah over the remainder of the novel, combined with many other plot elements, help Alex to work backwards from this goal to the intermediate tasks the plant performs to achieve it. This leads to open challenges and confrontations with management up and down the chain of command in the company as Alex and his new converts strive to drive dogma from the corporate culture and replace it with a well-reasoned production philosophy -- the "Theory of Constraints."
The "Theory of Constraints" itself seems obvious by the end of the novel. It simply shows, for example, that the throughput of a plant will remain constrained by the narrowest "bottleneck" in the production line, with that line including the market demand itself. Hence, attempts to use other resources up and down the line from that bottleneck to full capacity result in backlogs before the bottleneck and idleness after it. Other problems, such as excess inventory and untimely retooling, also result from the "full capacity" fallacy. Moreover, as a plant reorganizes its resources to make the plant more effective, thus increasing its overall capacity, it can experience the phenomenon of moving bottlenecks. Alex Rogo and his team of experts deal with just this occurrence as their plant improves and they later document this as a key component of their process improvement strategy. (See Part II Question 1 for the step by step strategy.)
Goldratt keeps the story interesting with side plots to illustrate his theory, such as a Boy Scout hike that stretches or shrinks depending upon the sequence and ability of the hiking troops. He also shows that "constraints" apply beyond manufacturing plants to human relations as Alex struggles to hold his family together under the "constraints" of 16 hour work shifts. By the end of the novel, Goldratt resolves the conflicts among the characters satisfactorily and shows the happy reality of practicing his "Theory of Constraints."
Readers who liked Atlas Shrugged will enjoy The Goal. While much narrower in scope, it nevertheless remains a novel that challenges many widely held assumptions. As did Ayn Rand, Eliyahu Goldratt demonstrates himself a profound thinker who dares all of us to think more profoundly.
Part II -- Questions and Answers
1. Review the step-by-step approach implementing the Theory of Constraints (TOC) approach. In your opinion, which is the hardest step and why?
Per Chapter 37:
1. IDENTIFY the system's constraint(s).
2. Decide how to EXPLOIT the system's constraint(s).
3. SUBORDINATE everything else to the above decision.
4. ELEVATE the system's constraint(s).
5. WARNING!!!! If in the previous steps a constraint has been broken, go back to step 1, but do not allow INERTIA to cause a system's constraint.
In my experience, the overcoming of inertia mentioned in Step 5 represents the greatest challenge to implementing TOC. Comfort embodies the core of inertia. With management content with how a process currently operates, overcoming that inertia can prove almost impossible.
2. The first edition of this book hit print in 1984. Are the lessons still relevant? Explain.
The lessons of this book remain as relevant today as they did in 1984. Although the industrial culture has learned much since then, the principles remain timeless and warrant consistent and unyielding repetition. Only repetition of a principle assures its continued practice.
3. What is your biggest takeaway from this book and why?
First, my personal takeaway: Julie Rogo behaves like a psychotic drama queen from hell, and her parents, lying sacks of garbage. I fantasize a novel called Alex Shrugged in which immature Julie leaves her hard-working, productive husband under cover of her conniving, coddling parents only to return to the house to find the locks changed, the house sold, and her husband, children, and assets vanished without a trace. She would have gotten her just deserts.
Now, my professional takeaway: The largest lesson I took from this book involves the importance of setting forth principles dramatically. The compelling and engaging story complete with plot, theme, character, and style help to illustrate otherwise dry principles. One can say much the same for Ayn Rand's great novel Atlas Shrugged which illustrated the role of the mind in man's life.
4. The author claims that the TOC is hard for management to accept because the result runs contrary to common practice (i.e., 100% utilization may not be good). Which of these results, or measurements, or practices is the hardest to accept for management (in your opinion)? Explain.
I agree with the author that a result such as using a resource at less than full capacity remains the hardest pill for management to swallow. Management mythology suggests the old nineteenth century whip cracking slave driver who gets maximum effort from his minions and punishes those who "slack." Reality shows that slack remains a vital and indispensable part of any good management system.
5. There is an old saying that "if you measure it, they will do it." How does this phrase relate to the TOC approach?
Every measurement implies an acceptable range of performance. When the plant measured efficiencies of individual components in the system rather than the overall performance of the system, the metrics misled management to focus on "improving" those efficiencies at the expense of overall plant performance. Once the focus changed to the right metrics, plant performance improved dramatically.
6. As the demand on the system increased, problems arose in the plant -- first diagnosed as moving bottlenecks. As the demand on any system reaches capacity, what are the keys to implementing TOC?
Per the answer to Question 1, management must follow the process of constraint identification regularly.
7. Would you have accepted the French order for $701 per part (Model 12)? Is the answer the book takes always the correct answer? Explain.
Per Chapter 38:
"We calculate the load that this large deal will place on the bottlenecks -- no problem. We check the impact on each of the seven problematic work centers -- two might reach the dangerous zone, but we can manage. Then we calculate the financial impact -- impressive. Very impressive. At last we're ready."
Yes, I would have accepted the order. Yes, the book offers the right answer under the conditions given. The Goal of the plant is to make money. This decision served that goal.
8. Are there any flaws in this philosophy? State your perceived flaws, if any, and defend your answer.
The philosophy assumes that management can identify and control all constraints. This does not always hold true, especially in an age of intrusive government regulations with origins in political ambitions. The novel could have at least mentioned this externality as a "constraint" to the effectiveness of the Theory of Constraints.
Book Review: The Goal by Eli Goldratt
Summary: 5 Stars
Eliyahu Goldratt's The Goal is a highly recommended book that engineering students (IE/MFE) should read and learn. The book demonstrates the "Theory of Constraints" in a very interesting and fascinating manner. It vividly shows what the goal of a business and suggests a number of methods that are both practical and logical. These methods could be applied in manufacturing and service companies.
In the book, Eli Goldratt raised key issues that concern management and family decisions. The author empahsizes that fact that society can be a source of information and inspiration where relationships can be applied relating to the business world. This was illustrated by the author using the hiking experience that was an essential chapter of the book. Also, it encourages managers or future managers to use common sense in making decisions and consider alternative ways of approaching problems or challenges. Furthermore, managers should be able to identify the need for change. It is very important to know what changes to make, what to change to and how to cause this change.
The Goal is a fictional story of a man who is at his crossroads and tells what direction the man decides to take. The story is about a plant manager named Alex Rogo. Alex is just six months into his first plant manager's position at UniCo which is a division of UniWare. This manufacturing plant is located in Bearington, Massachusetts where Alex Rogo grew up. What the plant manufactured was unclear or never answered in the book.
The story begins when Alex's supervisor, Bill Peach, comes in the plant and changes everything. Bill Peach turns the plant upside down. Bill tells Alex that the production of his plant has gone down in the six months that Alex took over the plant mananger position. This situation created irate customers like Buky Busnside who has an order that is fifty six days overdue. Alex must get thsi order shipped before anything else. Bill Peach gives the plant an ultimatum that if the plant does not turn around in the next three months, he will recommend that the plant be closed. The next few days, Alex hears more of the same news at a corporate meeting and figures why Bill was upset. During the meeting Alex reaches for something in his pocket and comes across a cigar he received from a chance encounter from an old physicist he knew during his college days.
Waiting in between flights at O'Hare, Alex wandered into the airport and found himself sitting next ot the physicist name Jonah who worked on mathematical models wile he was an undergraduate engineering student. Alex and Jonah started talking. Alex mentioned that he si going to speak at a seminar and his topic is "Robotics: Solution for the 80's to America's Productivity Crisis." He tells Jonah that his plant has more robots than any other plant in the division. Jonah was not impressed. Jonah asks how much productivity has improved because of the use of the robots. Alex answers that just one department is producing 36 percent more. Before leaving Alex at the airport, Jonah raises this question to Alex, "What is the goal of hsi company?" Jonah tells him to think about it as he leaves Alex at the airport.
As Alex spends an entire afternoon thinking about "the goal", he 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 this one out, he decides to get a hold of Jonah to learn more about productivity. As he gets a hold of Jonah at 2 a.m. in London, Jonah explains that an action towards the goal is productive, and an action away form the goal is unproductive. He also gives Alex three measurements: Throughput, the rate at which the system generates money thru sales. Inventory, all the money that the system invested in purchasing things which intends to sell. 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. In a meeting in New York over breakfast, Jonah explains to Alex that Traditional manufacturing goals are always to run a balance plan where the capacity of each and every resource is balanced exactly with the demand from the market. But Jonah stressed that the closer you come to the perfectly balanced palnt, the closer you are to bankruptcy.
Alex is woken by his son woho reminds him that he promised to help lead the scout hike overnight. Alex leaves without saying goodbye to Julie, his wife, and finds himself the only parent helping on the hike. Throughout the course of the hike, Alex realizes that on overweight boy, named 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. He fixed the problem by putting Herbie in front of the line and distributing the load of Herbie's backpack to the rest of the scouts. As father and son returned home from the hike, Julie has left. Alex realizes that he needs to work on his marriage as much, if not more that his work. Both are on the rocks. This is where Alex reevaluates the way he has been looking at things for the past few months or maybe hsi entire life.
Alex's mother moves into the house to look after the kids. Alex calls Jonah to expale what he leared from the hike and how it relates to the factory. Honah 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 nonbottleneck is where capacity is greater than demand placed on it. Alex must determine which processes are bottlenecks. Alex and his staff seach the plant to find bottlenecks.
Alex and his staff determine that the plant's bottlenecks are heat treat and the NCX-10. Jonah explains that they mus increase the capacity thru the bottlenecks in order to increase thoughput and improve cash flow. At this point Jonah introduces new ways for Alex and hsi staff to look at machine hours and costing. Over a few weeks, with many trial and error, Alex and his staff finally turn out the first month of profit along with lowering invetory and improving cash flow. Also, Alex starts to think about his marriage more and talks with Julie again. They even went on a few dates together. Alex begins to include Julie in his process of growth, by explaining to he the changes that are going on in the plant, and finds that she is very interested.
The next step for Alex is to cut his batch sizes to cut his invertories 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, will now only take four weeks due to the shorter lead times. The three months is up and Bill Peach still is not completely convinced whether or not this current success is not just a sudden spark. Bill tels Alex that if he does not see a 15% improvement the plant will close. Business is great and Lou, Alex's accountant, helped in showing a 17% improvement however according to traditional accounting this is only a 12.8% increase. Hilton Smythe, the productivity manager and rival aof Alex takes notes and make his rocommendation for the plant to be closed because of the awkward style of productivity. Alex haunts down Bill Peach to see what he has to say about this. Bill tells Alex to calm down and congratulated him on his new position as division manager. Bill wanted to see who would be able to see beyond conventional methods, in order to compete in the new market.
Alex is successful at home and at work. Julie decides to move back in after rekindling and working on their relationship. In her time away, Julie read about Socrates and found that Jonah had been using the Socratic method all along. She shows Alex that giving the answer isn not always the key but helping one ask the questions is the true answer.
The book is easy to understand and read. This book should be in every engineers book collection or library. I hope you guys enjoy reading it as much as I did.
Book Review: The Goal: make me jab garden shears in my Eyes
Summary: 1 Stars
If Eliyahu M. Goldratt's astonishingly pretentious, enragingly smug, and eyeball-rippingly turgid "The Goal" is the answer---well, it must have been a pretty stupid question.
The real Goal here, I'm convinced, is this: to drive poor First year MBA students, tasked with getting something out of this colossal yawner, into jamming garden shears into their eyes.
What is "The Goal" like? Imagine Ayn Rand, with, say, 1/10th her intellect, deciding to put aside her pursuit of excellence and theories of individualism and liberty, and instead devote her life's work to---ummm---studying the best way of moving widgets around a factory in a dying industrial town.
Take the usual stock Rand characters, dumb them way down, render them featureless, whiney, unctuous little cog-toads without a scrap of verve or intelligence, and then barf them into a bunch of platitudes, taped together with a lot of whining, lip-biting worry and doubt, and packaged up with a whole Sunday serving of sixties pseudo-Zen crapola---all when a nugget of common sense and a halfway competent editor would have done the job.
It's like Deepak Chopra for the Rust Belt-set.
"The Goal": a soupy, syrupy little exegesis on throughput and Operations 101, amped up to sound like high-falutin' wisdom, crammed down the throats of MBAs throughout the country who are supposed to sit down at the gouty feet of Elihu M. Goldratt (hey, wasn't that the name of the Enemy of the State in 1984 on all the hate rallies?)and worship.
And why? Because this kind of New-Age hippy neo-business pap and babble is wound together with an uncritical worship of GE's goofy Six-Sigma scientology-lite culture, less a model of business success---the real success at GE has nothing to do with Six Sigma, and everything to do with GE's ruthless monopoly business model and sheer humongous size---than an outgrowth of former CEO "Neutron" Jack Welch's super-sized ego and relentless hunger for self-promotion.
The whole tedious setup revolves around Alex Rogaine, a middle-manager stuck in a dying manufacturing company, in a dying town, simultaneously struggling with his dying marriage. Rogaine has to get things under control and profitable muy pronto!, baby, or Corporate is gonna shutter the whole operation and next thing ya know, Michael Moore will be hitting the beaches with a new Business is Bad docu-drama.
So what does Rogaine do? He whines! He bites his lip! He wheedles to his harpy of a wife, who has contempt for this whiney creature with the spine of a jellyfish.
Worse still, he starts stalking his old college physics professor Jonah, who has given off teaching the Five Easy Pieces for 30 grand a year and started jet-setting around the world as a Management Consultant (warning bells going off yet? Getting that late-1990's feeling again?) offering up his Profound Wisdom to other Jet-Setters, Movers & Shakers, and Titans of Industry.
Jonah agrees to meet Rogaine in the Great Barrington airport, and tells him---mystically, with that sh*t-eating grin shared by fortune tellers and McKinsey consultants the world over, that his complex, baffling, soul-devouring problem is really simple: it's all about finding The Goal. And then he shuffles off into the Admiral's Club for a martini.
Rogaine spends the next 180 pages or so pushing his 45 points of IQ to the limit: what, in the name of God, is the Goal? What is it? Is it Love? Money? Freaky sex? Is that what makes this town the Best? What is it?
In between bouts of soul-searing self-doubt and high-octane lip-biting, he stalks Jonah for more answers, and it's always the same: Jonah materializes for a few minutes, serves up more of that same psycho-babble and sh*t-eating grin bullsh*t, drops a few names, and disappears for a martini, or maybe a vodka gimlet, in the Admiral's Lounge.
And Rogaine is left to wonder: what the Hell is the Goal?, while the Reader, for the 89th time wonders "when the Hell is this torment going to be over?"
Or not: see, friends, the heart of The Goal is really nothing more than a thinly-veiled blueprint for the whole Management Consulting industry: fly into Dallas or Topeka or Flint to some hopelessly befuddled old-line company with more staff than brains, bill them a gazillion dollars to do something that Marty the Shop Foreman had been telling them to do for decades, and then shuffle off to the Admiral's Club for a martini and a club sandwich.
When, in fact, the Real Goal should have been: find a corporate raider willing to buy up the dying Operation, sh*t-can the employees, offshore everything to Bangalore, sell the parts for a tidy profit, and retire to a tropical island.
Want a real business lesson? The Goal is to make money, by any means necessary. That means being smarter, more nimble, and more ruthless than the Other Guy. It means, in an operational setting, figuring out who's holding up the Widget Line and ruining his sh*t, with Extreme Prejudice, and then getting back to Making Money. Rinse, repeat.
View anyone who subscribes to The Goal with extreme suspicion: that person is either a tap-dancing bullsh*t artist or a simpleton.
One star given because the book burns well.
JSG
Book Review: Concepts from The Goal
Summary: 4 Stars
The author of this business novel thinks he's the Messiah. The gist of the 384-page book could have been expressed in a page, and some of it is obvious. But it may be useful anyway, and it's an entertaining read.
His schtick is that one can achieve great gains by identifying the bottlenecks ('constraints') that are blocking improved performance toward your goal, and then doing anything necessary to unblock those constraints - even if this means inefficiently using other non-bottleneck resources.
He says that one should think of the cost of each resource as including its effect on the whole system. So if a machine costs $1K/month to operate, but its rate of production is preventing the business from accepting or fulfilling extra orders that would represent $10K/month in profits, then the true cost of the machine is $11K.
It follows that anything one can do to remove that bottleneck would be worthwhile, provided it adds less than the amount saved to the cost and doesn't introduce a new bottleneck. It's fine if you have to overpay for other resources or use them inefficiently as long as you accomplish this.
It then becomes a matter of analyzing and brainstorming all the ways that bottleneck can be reduced. For instance:
- Can extra capacity be added, even if it is less efficient or uses antiquated equipment or is outsourced to a vendor?
- Can you prioritize the use of the bottlenecked resource so that high-profit and time-sensitive work comes first?
- Can you divert work that doesn't need to go through the bottleneck, even if it would then go through another more cumbersome process?
- Can you prevent work from reaching the bottleneck if Quality Control will eventually reject it?
- Can you increase the rate of output of the bottleneck resource by doubling up batches?
This logic applies regardless of the nature of the bottleneck - whether it relates to a machine (production capacity), marketing effort (how much business is coming in), or any other element of one's environment.
To help identify the bottlenecks and judge tradeoffs, one should identify one's goal as a measure (in a business context this is generally profits or ROI), then identify the factors that influence that measurement and create an equation. For instance,
Profits = Sales - Cost of Inputs - Cost of Transforming Inputs
or,
Return On Investment = (Sales - Cost of Inputs - Cost of Transforming Inputs) / Money Trapped In Unfinished Goods And Inventory
Essentially, his thesis is that by focusing on these bottlenecks, and analyzing and brainstorming their solutions, one takes advantage of the 80/20 rule by prioritizing those few factors that most greatly impact one's performance.
The most rewarding part of the book are the examples in the Testimonials section at the end. The testimonials describe creative solutions to tough bottleneck situations. The book doesn't help the reader come up with this type of creative solution - it only mentions where to look for the problem. Here are the memorable examples he cites:
1. A large office supply company (similar to Staples) was losing business to companies that were charging very low prices. Investigating this marketing bottleneck, they determined that from the customers' perspective, the larger problem was the overall cost of stocking and procuring and purchasing and tracking the office supplies.
Rather than competing on price, its owner fixed the Sales bottleneck with an innovative concept, where they arranged to place fully stocked cabinets filled with office supplies throughout their client companies, just like a hotel minibar. They'd visit each week, restock any items that were used, and charge the company for the items that were removed, thereby saving the company the aggravation and cost of even having to purchase or account for office supplies. They also supplied each customer with detailed information regarding what was used, when. In exchange for this unique convenience, they charged higher prices and achieved large profit margins.
2. A printing company, constrained by the number of presses available to print jobs, made more efficient use of its presses by routing jobs to different types of presses in a way that would maximize the total output of the presses.
3. A manufacturing company's output was limited by a saw that cut pipes. They dug up an old, inefficient saw, put it to work to remove that bottleneck, and increased output and profits significantly.
4. In the book itself, the protagonist's factory increased its Return On Investment (profit/money tied up) by shortening the time it took for a product to be manufactured (as doing that reduced the money tied up, hence increased ROI). This was accomplished by removing delays that were keeping costly unfinished products sitting around the plant. For instance, by reducing the 'batch size', a product would wait less time for its batch to be complete, allowing it to move to the next step of production sooner.