Summary of The Goal
- Length: 1363 words (3.9 double-spaced pages)
- Rating: Excellent
Alex, with the help of Jonah, finds that the goal of a manufacturing organization and all organizations in general is to make money. Jonah explains the measurements which express the goal of making money in a different way. These measurements are:
Throughput is defined as the rate at which the system generates money through sales. Inventory is all the money that the system has invested in purchasing things which intends to sell, and operational expense is all the money the system spends in order to turn inventory into throughput. Then it turns out that the goal of an organization is to increase throughput while simultaneously reducing both inventory and operating expense.
To help Alex in achieving his goals and solving problems in his plant in terms of the measurements which express the goal of making money, Jonah introduces him the theory of constraints. Theory of constraints approach includes the following steps to improve the performance of a system:
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.
Theory of constraints approach requires answering three basic questions. These questions are:
What to change?
What to change to?
How to cause the change?
Alex uses the concept of "theory of constraints" to find the constraints or the bottlenecks in his plant. Jonah defines a bottleneck as any resource whose capacity is equal to or less then the demand placed upon it. And a non-bottleneck is any resource whose capacity is greater than the demand placed on it.
When Alex first meets Jonah at O'Hare Airport they start to talk about the robots Alex has been using in his plant. Jonah asks Alex if the robots in his plant had increased the productivity. Alex believes that the robots has increased productivity in one area about thirty-six percent. Then Jonah asks him if his plant was able to ship more products per day as a result of what happened in the department where they installed the robots. And then, he asks if he had fired anybody, and if their inventories had gone down. Alex's answers to all these questions were no! And the discussion goes on. The important point Jonah mentioned here was that the robots were working in non-bottleneck processes. Adding robots to non-bottleneck processes to a system in which bottleneck processes are present does not help increase overall productivity. Instead it increases inventories. What Alex has to do is to locate the bottlenecks in the system and try to remove them, thereby 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 of the whole plant.
In a system which includes dependent events, a bottleneck with a limited capacity reduces the capacity of the whole system. Alex and his team find two bottlenecks in the plant. One is the NCX-10 machine and the other is the heat-treat. Jonah advices Alex concentrate on the bottlenecks (constraints) to achieve his goals. 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 also that by running non-bottlenecks for efficiency, they have built 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 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-in-process 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. This gives him the idea of optimizing the whole system.
When we look at the steps Alex and his team followed to improve the performance of their system with specific examples:
Identify the system's constraint(s): They first identified the NCX-10 and the heat-treat as the bottlenecks of the plant.
Decide how to exploit the system's constraint(s): 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.
Subordinate everything else to exploit the constraint(s): 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.
Elevate the system's constraint(s): They brought some old machines and tried to offload some of the work from bottlenecks to these machines.
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: They continuously checked the system to prevent the emergence of new bottlenecks.
In my opinion, the concepts and the methods presented in the book can be applied to all kinds of organizations. All manufacturing organizations as well as service organizations whether they are small or large have some kind of production system which takes inputs and through a number of transformation processes converts them into outputs. For example, a bank's branch receives some kind of credit applications every day. And after processing them in the branch, sends them to the headquarters for the final review and approval. If an application waits too long at the responsible departments in the headquarters, we can talk about the presence of bottlenecks (constraints) in this case. Maybe the branches are sending too many applications and the headquarters is not able to process all applications in a timely manner. In this case, very similar to a manufacturing plant, the throughput of the bottlenecks is the throughput of the whole credit approval process. Increasing the capacity of bottlenecks, responsible departments for the approval process in the headquarters, increases the throughput of the system, number of approved credits in this case.
In conclusion, the book helps us look at the relationships between the processes in the systems from a different perspective. It gives new ideas to help increase efficiency, and how to improve systems by trying to remove bottlenecks (constraints) which are the core problems of many organizations today.