The path to publishing The Goal book was difficult. In 1984 there were no business novels. Eliyahu Goldratt or Eli would tell a story about publishers passing on his book because it was a business book and a “love story”, and they did not know what shelf to put it on. In the account I heard, he said it took talking to over 30 publishers before finding one that would take the risk. He also explained that his co-author wanted to get paid a flat guaranteed fee for his work. This turned out to be a great thing for Eliyahu Goldratt and a big missed opportunity for Jeff Cox. The Goal is probably the most read business book of all time — in the world. I say probably because it’s difficult to track worldwide sales. And pirated copies have been found in other languages around the world. Eli also explained another phenomenon that occurs – he said that most business books are purchased but only 1 in 4 are actually read. With The Goal, for each one purchased it was passed to 4 different people to read. There, of course, is no hard evidence of this. The publisher, North River Press, has indicated on the 30th anniversary edition (2014) that over 6 million copies have been sold.
6 Million copies sold and counting!
Here’s some stats compiled by www.politifact.com on bestselling business books. The data in this table looks suspect since Rich Dad Poor Dad has estimated sales lower than the Nielsen data and the 7 Habits has as huge estimated sales range, but as I said this data is hard to acquire. Please note that I’ve added the data in red. If The Goal has sold over 6 million copies up to 2014 and if many copies are passed to 4 other people and there are millions of pirated copies in China and other places, that certainly puts The Goal in the running for the most read business book of all time. And if the Rich Dad Poor Dad’s Nielsen data is wrong, as I suspect, this also puts The Goal as the bestselling business book of all time per Nielsen data.
The Goal Review
There are 2 main Theory of Constraints concepts introduced in The Goal.
- Drum Buffer Rope – This is the Theory of Constraints approach to operations and scheduling. You can find a full, how to description of drum buffer rope <– here.
- Throughput Accounting – This is the Theory of Constraints approach to accounting and measures including T,I, and OE. You can find a full, how to description of Throughput Accounting <– here.
So why is The Goal so popular? I think because it seems that Eli spent time in your plant documenting what was happening. Eli received many letters and emails stating something similar. I get the same response from my 9 Challenges ebook where I apply the concepts in the The Goal to custom job shops and machine shop scheduling. I think if you can explain a situation as well or even better than someone involved, it draws them in. It’s nice to have someone understand what YOUR going through. It is also an easy read. In fact, it is hard to stop reading.
“Written in a fast-paced thriller style, The Goal, a gripping novel, is transforming management thinking throughout the world. It is a book to recommend to your friends in industry—even to your bosses—but not to your competitors. Alex Rogo is a harried plant manager working ever more desperately to try improve performance. His factory is rapidly heading for disaster. So is his marriage. He has ninety days to save his plant—or it will be closed by corporate HQ, with hundreds of job losses. It takes a chance meeting with a professor from student days—Jonah—to help him break out of conventional ways of thinking to see what needs to be done. The story of Alex’s fight to save his plant is more than compulsive reading. It contains a serious message for all managers in industry and explains the ideas, which underline the Theory of Constraints (TOC), developed by Eli Goldratt.” From publisher North River Press
I really liked the boy scout hike that demonstrated the idea of a constraint with Herbie and the match game that demonstrated variability. Very powerful concepts were delivered in an easy to understand way that was entertaining. The Goal is used in more than 60 colleges to teach students about the importance of constraint management. Time Magazine listed the book as one of “The 25 Most Influential Business Management Books”.
The Goal book Summary Overview
Alex, the manager of a UniCo plant, gets transferred back to his small hometown of Bearington with his family. But he quickly realizes that his factory is facing challenges and might even get shut down! The plant is facing shipments that are always late and a production backlog that is growing, while at the same time inventories are increasing. The team wonders why they cannot seem to ship consistently on-time with the right quality and at a reasonable cost. So, Alex resolves to turn around his manufacturing plant. At home his wife, Julie, struggles to adjust to the pedestrian life in the small town. Alex needing to work long hours at the office puts stress on their marriage, as things go from bad to much worse. Given 3 months to turn the plant around, Alex bumps into his old Physics professor, Jonah, by chance. Jonah gives a series of clues about how to save the plant and really challenges his thinking. Jonah has the ability to explain complex topics like productivity and then defines them in very simple terms. One such example is this statement by Jonah:
Every action that brings a company closer to its goal is productive. Every action that does not bring a company closer to its goal is not productive.
That lead Alex to question – what is the goal? With Jonah’s clues, Alex gathers his team to find ways to improve the flow of production so they could somehow ship the huge backlog of orders on-time. In the process they uncover the importance of bottlenecks/constraints and learn how to leverage them to achieve profitability and growth. Eventually, Alex gets that the path to achieving the goal is not with good purchasing practices, quality improvement, putting the right team on the bus, new technology, increasing market share, or even customer satisfaction, etc. but rather to make money now and in the future. Once operations stabilize, Alex spends more time with his family. He wife’s affection returns and his plant becomes the most productive plant in the division. Alex then gets promoted to Vice-President at UniCo and tasked with of implementing what they learned from Jonah throughout the entire division. Towards the end of the story, Alex begins to realize that constraints or bottlenecks can move over time and therefore, he knows, he must change the systems and processes. But Jonah has provided him the questions to raise as these challenges arise… which as it turns out, is the secret to the Process of On-Going Improvement (POOGI).
The Goal Book Summary by Chapter
The Goal Chapter 1
This chapter introduces the main character Alex Rogo, an industrial engineer and an MBA graduate. Alex is the plant manager of the UniCo Manufacturing Corporation. The story starts as he arrives at the plant to discover that his parking space has been taken by the division Vice President Bill Peach. His conversation with Peach becomes heated when they discuss a seven-weeks overdue order #41427. Peach is very angry and gives Alex an ultimatum – he must turn around the plant within three months or face shut down. In addition, the pastdue order must be shipped that day.
The Goal Chapter 2
Alex reflects back on his life’s journey, finding himself back at the place where he started. He thinks:
I’m 38 years old and a crummy plant manager.
The story shifts to Alex’s home life. Julie, his wife, is from a big city which is causing her to struggle with adjusting to small town living. An argument ensues when Julie requests to go out for lunch. Alex promises her to be home early that night and then leaves to return to the plant. Alex reaches the office only to discover a crisis wherein a machine has completely stalled. He has all the employees work extra hours and finally order #41427 gets shipped late that night. But this achievement results in increased costs and further delays of other orders. Later that evening at dinner, Alex reflects upon the mismatch between the company’s information system reports and actual profit.
The Goal Chapter 3
The next morning, Alex rushes to attend a meeting at headquarters. In route to the meeting, Alex runs into Nathan Selwin in the elevator. Nathan explains why Peach has been on edge. The entire division, Peach’s division, has been given 1 yr to improve or it will to be sold. During the meeting, Peach explains the divisions poor performance and hands out new stretch goals for the next quarter.
The Goal Chapter 4
Alex recalls running into Jonah, his old physics professor, at the airport. Alex is impressed with how well Jonah seems to understand his situation. With no prior knowledge, Jonah accurately predicts high inventories and missed shipping deadlines. Their conversation is cut short as Jonah needs to leave for his flight. Jonah leaves Alex with a question.
What is his company’s goal?
The Goal Chapter 5
Alex cannot stop pondering over Jonah’s question. Suddenly it dawns on him that his company’s goal is to make money! Anything that brings him closer to that goal is productive. Any other activity is non-productive!
The Goal Chapter 6
At his office, Alex sits with the plant’s controller, Lou. They discuss how they could go about achieving the goal of making money and the new targets. They urgently need to increase cash flow, return on investments (ROI), and the net profits (NP). Alex runs the numbers, the new targets seems almost impossible. Their conversation goes late, and Alex finds himself in trouble with Julie again.
The Goal Chapter 7
Returning home from work late, Alex is surprised to be greeted by his daughter Sharon. She wanted to show him her school grades, and this was the only time when she could get her father’s attention. After tucking Sharon into bed, Alex returns to thinking about his work situation. He realizes that he might need more guidance from Jonah.
The Goal Chapter 8
At work the next morning, Alex tries to call to apologize to Peach about missing his meeting the previous day. Unable to connect, Alex decides to try Jonah instead. In response to Alex’s questions during the call, Jonah reveals three key operational measurements.
Throughput is the rate at which the system generates money through sales. Inventory is all the money that the system has invested in purchasing things which it intends to sell. Operational expense is all the money the system spends in order to turn inventory into throughput.
Their discussion gets cut short again and Alex is still wondering how to relate them in terms of his plant’s operation.
The Goal Chapter 9
The head of UniCo arrives for a photo shoot with the factory robots. This causes Alex to reflect on the viability of the robots. Alex pulls together Lou – the head accountant, Stacy – the inventory control person, and Bob – the production manager to discuss the robots. During the discussion, they discover that the robots increased operating expenses but did NOT reduce any costs. Not even direct labor. The costs were merely shifted to other parts of the plant. Since operating costs stayed the same and throughput did not increase, the profits of the plant actually decreased as a result of adding the robots!
The Goal Chapter 10
Alex and his team (Bob, Lou and Stacey) reviewed the meaning of throughput (T), inventory (I) and operating expense (OE) until they reached agreement and understanding. Lou, summarized
Throughput is money coming in. Inventory is the money currently inside the system. And operational expense is the money we have to pay out to make throughput happen.
Bob was suspicious that everything could be accounted for with just 3 measurements. So Lou explained that tooling, machinery, and the building are all just various forms of inventory. Stacey stated, “So investment is the same thing as inventory.” This fruitful discussion led them to decide that something drastic need to be done. But they were not clear on how what they could do that would not lower the plant efficiency. So, it was clear that another call to Jonah was in order. To catch up Jonah, Alex needed to take a trip to New York.
The Goal Chapter 11
Alex does catch up with Jonah at his hotel in New York and provides more details of his plant’s problems. Jonah listens, then assures Alex that the problems they discussed could be resolved before the deadline. First, Jonah advises Alex to stop focusing on the robots. And to forget about chasing efficiencies. After all,
a plant in which everyone is working all the time is very inefficient.
Next, Jonah challenges Alex’s understanding of what a balanced plant is, stating
the closer you come to a balanced plant, the closer you are to bankruptcy.
Of course, Jonah needs to leave. But he gives Alex another clue. He told Alex to consider the role “dependent events” and “statistical fluctuations” play in the plant? Alex is perplexed because don’t those just average out over time?
The Goal Chapter 12
Returning home, Alex argues with his wife about not answering her phone calls. At this point their marriage is very strained. Alex promises to set aside some time for her and his family over the weekend.
The Goal Chapter 13
On Saturday morning, Alex awakes surprised to find his son Dave dressed and ready for the hike he had promised. Alex forgot that he had volunteered to lead Dave’s Boy Scout troop hike! During the hike, the troop keeps getting separated and spread out in distance. This helps Alex to discover the true meaning of dependent events as related to statistical fluctuations. A manufacturing plant and a single file hike through the mountains are a good analogy. Thinking about the similarity helps Alex understand the difficulty of making up being on the downside of fluctuations following dependent events. The last event would need to make up the difference of all the down fluctuations to average things out. Since this rarely, if ever, happens the combination of “statistical fluctuations” and “dependent events” create less output.
The Goal Chapter 14
To understand this effect more fully, Alex creates a dice game and instructs the Boy Scouts on how to play. The game makes it clear that a balanced plant with statistical fluctuations and dependent events will experience throughput decreasing and inventory going up. This means that Jonah was correct that a balanced plant is not the answer.
The Goal Chapter 15
The next day, the troop resumes the hike. This time, with new understanding, Alex asks the slowest kid named Herbie to lead. In addition, he distributes some of the weight that Herbie was holding in his backpack. And, as suspected, the fluctuations of the line balance out and the hikers reach their destination together and on-time, increasing the “throughput” of the troop!
The Goal Chapter 16
Julie is missing on Sunday evening when they return home from the camping trip. Julie left a note for Alex. In the note, Julie explains her frustration about Alex spending all his time at the office and has again broken his promise to spend time with her. Alex picks up Sharon from his mother’s house and tries to phone Julie. After several calls to friends and acquaintances, Alex is unable to locate Julie anywhere. Now the kids are Alex’s responsibility along with all the plant problems.
The Goal Chapter 17
Monday, back at work, Alex explains his revelation about “dependent events” in relation to “statistical fluctuations” to his hesitant team. He is able to prove his point by completing a large, overdue order using these principles. The starts to buy-in and even the skeptical production supervisor agrees. So now, Alex ponders … now what?
The Goal Chapter 18
The team is beginning to trust Alex and appears ready to proceed. But Alex is unsure about what to do next. Time to reach out to Jonah again. Jonah summarizes the Theory of Constraints (TOC):
A bottleneck is any resource whose capacity is equal to or less than the demand placed upon it. A non-bottleneck is any resource whose capacity is greater than the demand placed on it.
Jonah continues to explain that Alex should NOT make the mistake of balancing capacity with demand. Instead, Jonah explained he must balance the flow of product through the plant. Now Alex and his team need to find their bottleneck. They identify the NCX-10 machine and heat treatment.
The Goal Chapter 19
Jonah visits the UniCo plant in person. He shares that every plant should have a bottleneck, and that a system can only increase output by increasing output at the bottleneck. Alex wonders what he needs to do to increase the capacity of the plant? He considers purchasing an additional NCX-10 machine, but he doesn’t have the time nor the budget for that. Jonah suggests that adding another machine to do the bottleneck operations could help, but couldn’t they make the existing machines run more effectively? A number of questions were asked and answered. What is the cost when the bottlenecks (NCX-10 and heat treatment) machines go down? Lou responds with $32 per hour for the NCX-10 and $21 per hour for the heat treat. How much does it cost when the whole plant stops? And Lou answers – About $1.6 million per month. And, how many working hours are there in a typical month? About 585 hours. Jonah was listening Jonah calculates that when the bottlenecks stop producing for just an hour, the true cost is closer to $2,735 ($1.6 million/585 hours). He explains that the output of the constraint is the output of the entire plant. A minute of down-time at the constraint translates into a minute of lost output and throughput for the entire plant!
The Goal Chapter 20
Work for the constraint is prioritized so they work on the most overdue orders down to the least. While this plan is being executed, Alex discovers Julie has been staying with her parents. When they next talk, he tries to convince her to come home. She declines, insisting that she needs more time.
The Goal Chapter 21
The UniCo team creates a detailed plan to ensure the bottlenecks are fully utilized. In doing so, they discover that they need to be clear about the priority sequence at non-bottlenecks as well. Red and green tags are used to map priorities visually. Red tags are for bottleneck parts and should be worked on first. Green tags are for non-bottleneck parts which are second in priority. In an attempt to make up with Julie, Alex asks her out for Saturday. Julie accepts and Alex manages to keep the date.
The Goal Chapter 22
Back at the plant on Monday Alex is excited to hear that their changes are working. They managed to ship twelve overdue orders! Alex is happy with the progress but needs more. So he asks for suggestions from his management team. The production manager, Bob finds and refurbishes an old machine that was in storage that can do NCX-10 work. With this machine in place, things are finally improving.
The Goal Chapter 23
New problems surface at the bottlenecks and disrupt production. There is no work for some people while waiting for the bottleneck to finish its batch, so those workers were moved to other departments between batches to keep busy. However, when work was ready for the bottleneck no one was there to do it. To eliminate this situation, Alex dedicates that there should be one foreman at each bottleneck at all times. In addition, one of the foremen a way to process more units by mixing and matching by priority, further improving efficiency at the bottleneck by a 10%. Alex and Julie are getting along better.
The Goal Chapter 24
The sudden increase in performance has the team excited. After a short celebration, Stacey dropped Alex home. Alex arrives to find Julie waiting up for him. Julie becomes suspicious that Alex is cheating on her and again leaves. Now that the new priority system is in effect, the flow of work has increased considerably, while reducing inventory. All the efforts to increase the output at the bottleneck have work so well that the bottlenecks appear to have shifted. Jonah finds this intriguing and decides to make another visit.
The Goal Chapter 25
Jonah explains that there aren’t any new bottlenecks, instead the practice of prioritizing non-bottlenecks to work first on parts headed for a bottleneck, inadvertently created the issue. One of the parts which is needed for final assembly, does not require any of the bottleneck’s capacity so they were secondary priority. With those parts being produced on lower priority, lead to the experienced shortages at final assembly. The priority system was adjusted to tying the production of parts that utilize the bottlenecks to ensure timely availability of child parts that don’t utilize the bottlenecks. This change should reduce the accumulation of bottleneck parts in work in process (WIP), waiting at the assembly line since they won’t have to wait.
The Goal Chapter 26
Jonah and the rest of the UniCo team, which includes Ralph from data processing, predict which products needed to be completed when and schedule their release accordingly. The idea is to create the right balance between production of the non-bottleneck and bottleneck parts. With the plan in place, Alex takes Jonah back to the airport to catch his flight.
The Goal Chapter 27
Alex is called for another corporate meeting with Peach. But this time, he is expecting more positive feedback for the result they have been able to achieve. But it doesn’t happen that way. While Alex’s plant improved their results since the last meeting, none of the others had. They are considering closing the entire division. Alex confronts Peach in private. During that discussion Peach explains that if he can improve another 15%, he might be allowed to keep Alex’s plant open. The 15% seems impossible given it would require generating additional sales. But Alex promises to achieve it without sharing his concerns. Alex returns home to spend time with Julie and the kids. Shortly thereafter, he gets into another fight with Julie that was short lived.
The Goal Chapter 28
Alex ponders how to increase 15% while reducing inventories but he’s interrupted by the telephone. Jonah called to let Alex know that he will not be available for the next few weeks. Alex shares his concern over the new 15% commitment. Jonah suggests cutting batch sizes in. Doing this, Jonah explained, could reduce inventory levels by half and reduce lead-times. However, cutting batch sizes would require several operational changes including negotiating with vendors. Alex runs into the division sales manager, Johnny Johns, and asks him to create a sales strategy to achieve the 15% target.
The Goal Chapter 29
As luck would have it, Johns has found a customer needing 1000 units but they need them in two weeks. And, this order could lead to additional business if they perform well. This was great news but Alex was concerned about producing that much, along with all their other orders. Alex’s team comes to understand that smaller batch sizes will help but will not completely get them to the target. Challenging assumptions and working together, they found a way to deliver the contract. They were able to spread out the deliveries over four weeks with 250 products per week which the customer preferred. So it turned out that cutting the batch sizes was a key factor in increasing sales. Again Alex worries. The plant efficiencies and P&L are worse, despite all the productivity improvements and growth. Lou, the accountant, explains that reports are clearly misrepresenting the reality.
The Goal Chapter 30
The month ends and Lou calculates the improvement at 17%. The increase is credited to delivering the new order. Hilton, the productivity manager, hears the news and decides to audit the plant. Hilton calculates the increase to be 12.8% using the standard accounting method. Meanwhile, Bucky Burnside appears at the plant to personally shake the hand if every team member for delivering their order so quickly. He is new customer who placed the 1,000-part order. In addition to shaking everyone’s hand, he announces that he will be increasing the contract from 1000 to 10000 parts! Back at home, Alex and Julie are doing well. Alex is glad for that but realizes that tomorrow he goes back to division headquarters with 12.8% and not 15%, short of the target.
The Goal Chapter 31
The meeting is different than Alex expects. He expected to meet with the boss but finds himself talking with a group of Peach’s subordinates. They seem to believe that that the growth Alex’s plant experienced is just temporary, and that they will soon revert to losses. Lou in talking to the division controller, points out the flaws of the old accounting method. Lou further demonstrates that the actual growth for Alex’s plant for the month was almost 20%. Alex tracks down Peach to defend his plant’s growth, but the decision has already been made. Alex is surprised to learn the plant will not be shut down. What’s more, Peach has been promoted and so has Alex. Alex is to take over Peach’s old position as division head! The promotion means that Alex is now responsible for 3 plants instead of just 1! With news and in search of advice, Alex calls Jonah, but Jonah has a few questions of his own.
The Goal Chapter 32
Alex and Julie celebrate his promotion over dinner. Over dinner, they discuss Jonah’s role the past months. Alex wondered why couldn’t improve without Jonah’s questions and guidance, which seemed like common sense. The challenge now is to get 2 more plants to buy into these ideas who did not have the experience Alex and his team had. What’s the best way to approach this?
The Goal Chapter 33
Alex makes his first appearance at the plant as the division Vice-President. He promotes Bob, Lou, Ralph, and Stacey to higher positions within the division. These promotions will help with the next stage of growth.
The Goal Chapter 34
With Alex’s core team in their new positions, it is time to expand their model. The concepts they used in their plant must be adapted to work for the entire division. A large task, no doubt that will require each team member’s intense involvement. They decide to daily meetings were in order as they begin this important work.
The Goal Chapter 35
As the team gets to work, they brainstormed the best approach. They discussed the periodic table of elements that chemists use to classify vast elements into one simple table. Maybe they can do something similar with the massive problems of their division? Those chemists observed vast chaos and gradually derived the underlying order. By thinking like scientists, maybe they could design a common framework for the problems they experience in the division??
The Goal Chapter 36
The team reviewed the process they followed at their plant. In doing so, they Gradually formulate a 5 step Process Of On-Going Improvement (POOGI):
Step 1: Identify the system’s bottlenecks.
Step 2: Decide how to exploit those bottlenecks.
Step 3: Subordinate everything else to the above decision.
Step 4: Elevate the system’s bottlenecks.
Step 5: if, in a previous step, a bottleneck has been broken, go back to Step 1.
Although simple, it seems difficult to implement.
The Goal Chapter 37
As the team reviews the 5 Focusing Steps they just wrote down, they discover various issues to be addressed. For example, the last step in the 5 step process must ensure that inertia does not set in. They also discover that fictitious orders were placed to keep the bottlenecks working. Removing these fictitious orders will free up 20% capacity. This available capacity could then be used to fill real orders. Stacey sees a need to modify the tagging system. Alex gets with Johnny Johns to plan future expansion in the market.
The Goal Chapter 38
Johnny Johns finds a new client who is large enough to consume the excess capacity that was uncovered. But this new business comes with a catch. The European customer is requiring a significantly lower price than their what the local market pays. However the deal could open up additional opportunities in Europe, many other large prospects. Alex analyzes the situation like Jonah would – like a physicist. To meet the contract, they could use their existing excess capacity and raw materials are the only additional costs. This contract would result in incremental profit despite the lower price. And, since the customer is in Europe, the lower price should not affect domestic pricing.
The Goal Chapter 39
As the new orders are coming in, it seems there are new bottlenecks everywhere. Julie has been reading Socrates. She explains ‘if… then’ deduction. She also explains the importance of considering all possible scenarios and how to prepare for the side effects of a new initiative. The team analyzes the situation and decides to increase the inventory in front of the bottlenecks to ensure full capacity utilization. This additional inventory will increase cycle times and hence sales needs to increase lead-times to 4 weeks from 2 weeks. This may jeopardize some new customer relationships but it appears to be required. Business is an on-going process of improvement and new problems must be dealt with head-on. Meanwhile, Peach calls upon Alex to help Hilton with his plant’s improvement.
The Goal Chapter 40
Alex and Lou consider Jonah’s questions and create 3 of their own:
What to change?
What to change to?
How to cause the change?
Alex surmises that he should not rely on Jonah, but instead become self-sufficient. He must become expert at how to get to the core of any complex situation and solve it without creating new issues.
The Goal Book Main Lessons
At the start of the book, Alex’s thinking is distorted by conventional accounting practices and metrics. These practices and metrics caused him to waste energy, time, and money improving efficiency even though it has no impact on profits unless it is at the constraint. Jonah guides Alex to align his organization with the Goal by introducing 3 operational measurements which are now part of Throughput Accounting:
- Throughput (T) – the rate at which the system generates money. T = Sales – Totally Variable Costs (TVCs).
- Inventory (I) – all the money that system has invested in purchasing materials which it intends to sell. This was expanded later to include other types of investment such as the building, property, equipment, etc.
- Operating Expense (OE) – all the money the system spends to turn inventory into throughput. These are fixed costs and include things like rent and wages. These costs are incurred whether throughput increases or decreases.
Alex, armed with these metrics, has a basis to analyze whether his decisions are moving the plant closer to the Goal to make money, increasing Throughput, and/or decreasing inventory and operational expense. Increasing T impacts profits far more than reducing I or OE. The slowest operation determines the speed at which products can be produced and the maximum rate of output and Throughput. This slowest operation or machine is called the Bottleneck or Constraint. Any production time lost on the bottleneck is time lost for the whole. Jonah outlines the secrets to managing constraints, with what has become known as the Theory of Constraints (TOC), by asking questions. The answers to his questions form the 5 Focusing Steps of TOC to improve the performance of any system. These steps are known as the Process of On-Going Improvement or POOGI which was the subtitle of The Goal book.
The 5 Focusing Steps of POOGI
Identify the system’s constraint(s)
Decide how to exploit the system’s constraint(s)
Subordinate everything else to exploit the constraint(s)
Elevate the system’s constraint(s)
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.
These 5 steps should be followed in order. In other words, exploit the constraint before elevating it, because elevating it requires adding capacity which requires capital investment. Also note that the constraint may be internal to the organization or external, such as market demand.
Driving Continuous Improvement
1) Policies, Procedures and Measures Drive Behavior: Goldratt has a saying – “tell me how you measure me and I’ll tell you how I will behave”. Misalignment in policies, procedures, or measures can cause a wide variety of destructive outcomes and behaviors. As managers, it is our responsibility to identify The Goal, the corresponding constraint, and then make sure that our metrics completely align. Read about the secret to improving operations. 2) Ask the Right Questions & Seek Answers: The right answers start with the right questions. The Goal gave you some of the right questions. Now what are your answers? Realize that TOC is simple, yet counterintuitive and not common practice. Don’t be afraid to work with a “Jonah” like Dr Lisa Lang who has vast experience applying the concepts in The Goal to well over 350 shops. This is accomplished in the 14-week online Velocity Scheduling System Coaching Program and Dr Lisa takes you step by step through the process. Check out a overview by watching the scheduling webinar. 3) Teamwork: An improvement project like the one Alex’s team underwent in The Goal created a strong team. Not only did it take input from the entire team to implement the needed changes, the team development and become more cohesive as a result. Read Joint Production Technology’s (JPT) teamwork story to see what I mean. 4) Challenge Your Assumptions: TOC is counterintuitive, but if you begin to identify assumptions, long held beliefs, and the status quo that is a great start. It can be difficult to analyze the situation you’re in the middle of, so you may need a little perspective. See this article on Theory of Constraints Continuous Improvement. 5) Work Smart: Often, our greatest efforts are ineffective or even counter-productive. Have you taken on a Lean Manufacturing initiative and got little or no results? Maybe you were working on a non-constraint? By focusing on the right places with the right change, the result can be fast and big. Theory of Constraints can help you decide where to focus your limited resources, only then can Lean and Six Sigma tools be applied with effect. Read more about Theory of Constraints, Lean, and Six Sigma (TLS): Better Together 6) Remove the Silos, Improve the Overall System: Coordination between Sales/Marketing and Operations is critical to achieving your goal. Throwing sales over the wall will not lead you to your goal. And no less important is the need to focus on profitability of the company as a whole and not the profitability of a job, a department, a location, or a division. Breaking your company into pieces to make decisions is a fast way to go astray. Read more on why Products Do Not have Costs or Profits!
The Goal Movie
The Goal book was also turned into a movie! It’s available for online viewing and for purchase. For more information: the goal movie
Executive Summary of The Goal
If you haven’t yet read The Goal by Eliyahu Goldratt (<–Amazon purchase link) it’s time to read it or re-read it! But it you don’t have time, here’s a PDF book summary of The Goal. It’s a one page visual summary:
The Goal by Eliyahu Goldratt is on Amazon Top Executives Book Club
In an interview with Amazon CEO Jeff Bezo, Jon Fortt for CNBC reported:
This summer he (Amazon CEO Jeff Bezo) spent time at Lab126, a Silicon Valley outpost about a mile from Apple headquarters where Amazon engineers hash out hardware designs. And he also hosted three all-day book clubs with Amazon’s top executives, capped by nice dinners at the end. Bezos said he used the books as frameworks for sketching out the future of the company. Which books? Bezos was kind enough to share the titles.
- The Effective Executive by Peter Drucker
- The Innovator’s Solution by Clayton Christensen
- The Goal by Eliyahu Goldratt
The Goal was originally published in 1984 but is still very relevant today. And, as you likely know, it take place in a machine shop. Many job shops and machine shops use The Goal as their Bible. The only problem is that most have no idea how to apply it to their unique shop. Well, I have good news. If you own or manage a highly custom job shop or machine shop and want to apply what you read in The Goal to YOUR shop, you can do that with expert guidance very inexpensively. Just check out the Velocity Scheduling System (VSS) Coaching Program. VSS is NOT software but a visual manual scheduling system developed specifically for highly custom job shops and machine shops which are typically low volume high mix environments where the constraint can move week to week or even day to day. Who’s the expert that would guide you? Well that’s Dr Lisa Lang. She is one of the foremost Theory of Constraints experts who has worked with Dr Goldratt and specializes in applying Theory of Constraints to highly custom job shops and machine shops. Check out Velocity Scheduling System here: www.VelocitySchedulingSystem.com. Also check out the free webinar called “How to Get More Jobs Done Faster“. You’ll be glad you did!
Frequently Asked Questions about The Goal Book:
What is the goal in the book The goal? – The goal is to make money! Alex is initially stumped but realizes what the goal is while reflecting on his discussion with Jonah. Is the goal a true story? – No, but it was based on several clients Dr Goldratt had worked with. Who is Jonah in the goal? – Jonah is one of Alex’s former physics teachers. Jonah reconnects with Alex by happenstance at an airport. Jonah asks Alex socratic questions to help him save his plant. What is Goldratt’s Theory of Constraints? – The Theory of Constraints (TOC) is a management philosophy that states there is one or few things (the constraints or bottleneck) that is limiting your ability to reach your goal. TOC includes thinking processes and tools to help you to focus on and leverage your constraint. What is the bottleneck in the goal? – The constraint in manufacturing is often referred to as the bottleneck or capacity constrained resource (CCR). In The Goal book, the bottleneck was the NCX-10 at the start of the story. But as Alex improved the productivity at the constraint, the constraint moved to the market – they had more capacity than sales. What is a balanced plant the goal? – A plant is balanced when each operation has the capacity to produce the same number of products or jobs. this is explained more fully in the How To Get More Jobs Done Faster scheduling webinar. What happened to Alex Rogo’s father? – Alex’s father was not part of The Goal story. What causes a balanced plant to fail? – When you balance the capacity of a plant, the constraint moves! It’s very difficult to focus on and leverage a moving target! To read more about Drum Buffer Rope and why balancing FLOW is a much better approach. Why does Jonah say a plant should have bottlenecks? – There will always be a bottleneck. But if you don’t select one, what tends to happen is that you end up with balanced capacity which causes your constraint to move based on your mix of work. What is the bottleneck? – A bottleneck or constraint is any resource that does not have enough capacity for the demand in a time period. What did Alex Rogo learn about managing his plant on the Boy Scout hiking trip be specific? – 1) That the constraint (Herbie) dictates the output of the entire organization. 2) Variability (the dice game) plays a significant roll in the output. Who are the cast of characters in The Goal book and movie?
- Alex Rogo: plant manager (the main character)
- Jonah: Alex’s college physics professor, who offers critical advice & clues through a Socratic approach
- Bill Peach: UniCo division vice-president, Alex’s boss
- Fran: Alex’s secretary
- Lou: the head accountant reporting to Alex
- Ralph Nakamura: Data Processing Manager reporting to Alex
- Stacey: the plant inventory manager reporting to Alex
- Bob Donovan: the production manager reporting to Alex
- Johnny Johns: UniCo division sales manager
- Hilton: UniCo division productivity manager
- Bucky Burnside: new customer
- Herbie: the slowest hiker on a boy scout outing and who metaphorically symbolizes the bottleneck or constraint in the plant
- Sharon: Alex’s daughter
- Dave: Alex’s son, and one of the boy scout hikers
- Julie Rogo: Alex Rogo’s wife
If you liked The Goal by Eliyahu Goldratt, you will also like:
The Quote by Brad Stillahn and Beau Ganas. It’s short novel that takes place in a custom job shop. The story covers the challenges of job shop quoting and pricing. The authors are working on turning it into a full novel, but right now it’s a couple chapters you can download for free. I highly recommend it! Just put your email in and they send you a link to download the Job Shop Quoting eBook PDF.