A Book Review Of Goldratts The Goal English Literature Essay

Unlike most other educational business novels that state facts and theories one after another, “The Goal” is different in that the author introduces and details his points in the form of a fictitious story, he creates a character and details his work, family and life interactions and experiences.

I found myself interested in the character, the situation he found himself in and how he was going to extradite himself and his manufacturing plant from a situation that seemed all but doomed. With the pharmaceutical plant I work in due to close down in the next twelve months I could really relate to some of the themes that are visited in the book and all being said found that as well as the important approaches and techniques that were described, the book is also very much a positive and motivational source.

The first few chapters introduce us to the stories protagonist Alex Rogo “a mere plant controller” who has the unenviable task of supervising a manufacturing plant that is struggling to survive. One day upon arriving into work Alex is met by his boss Mr. Peach, the Division Vice President who makes it clear that unless Alex turns things around in the plant within three months that it will be closed down.

The inefficiencies and dependencies that are present in the plant are straight away brought home by the overdue order #41427, the master machinist that quits and the necessity to have the NCX-10 machine “the only one of its type in the plant” up and running to complete the order. The fact that late orders are considered the norm indicates that things are not going well but really these are just a symptom of the many problems present.

Although it has only been six months since Alex took up the job and moved himself, his wife and children to his home town the pressure is beginning to mount, his wife is starting to feel that he is neglecting her and their children. The local newspaper has run an article on him and he can see the gradual decay and loss of businesses in the immediate area, what is at stake is put into perspective.

Chapter three and Mr. Peach has called a meeting at UniCo’s headquarters for all his immediate staff. It’s at this meeting that the true picture of how bad things are is revealed to all present. Alex finds out that the whole division has a year to improve or that too will be gone, but he cannot concentrate, his focus has gone and he reminisces on a chance meeting at O’Hare airport with an old acquaintance Jonah a physicist or more to the point a scientist, currently doing work in the science of manufacturing organisation.

It’s very obvious that Jonah is in fact the alter ego of the books author, he has written himself into his own novel, the similarities between them are plain to see in that the author is an Israeli physicist who obviously has become a management expert. We’ll see as the book progresses that Jonah will impart onto Alex vital information and direction much like the author does to the reader.

What makes Alex remember the fortuitous meeting they had is that somehow Jonah with no prior knowledge of Alex’s employment is able to, based on a few simple questions about the introduction of robots, predict the inability of the plant to meet shipping dates and the high inventories that are present. Jonah also puzzle’s Alex with finding what the one goal for all companies is?

Having had enough of the meeting Alex walks out to clear his mind, the idiom is usually that “necessity is the mother of invention”, however, in Alex’s case it’s a pizza and a six pack of beer, the goal becomes apparent, to make money, and any activity that brings the company closer to acquiring it is productive, all other activities are non-productive.

Alex sits down with Lou his plant controller and between them they try and establish what the minimum measurements that they would need to have in place to establish if the plant is making money. It’s not as easy as it sounds, expressing the goal does not lend itself well to daily operations of a manufacturing organisation, they hit a roadblock, going to bed that night he resolves to try and save the plant and to do this he must contact Jonah.

From his mother’s house Jonah is contacted again, what’s established is that the goal remains the same but it can be expressed in a different manner, Jonah has a set of measurements that express the goal of making money, there are three of them:

(1) Throughput-rate at which the system generates money through sales.

(2) Inventory is all the money that the system has invested in purchasing things in which it intends to sell

(3) Operational expense is all the money the system spends in order to turn inventory into throughput.

Using these measurements potentially everything in Alex’s plant is covered.

Chapter 9, as he leaves his mother’s house Alex realises that any company would want to have an increase in it’s throughput and to reduce operating expense and inventory, even better would be if these occurred simultaneously, this is the way to best express the goal. Back at work in the plant he assembles a team of his colleagues and goes over “the goal” and the necessity to turn the plant around in three months or face closure.

What he discovers is that the introduction of the robots has increased the costs, operational expenses and that direct labour has only moved around the plant, no efficiency or savings has been gained. All present agree immediate action is required, specifically with regard to the robots, Johan is again called, however, a late night flight to New York is required, his wife is far from happy.

Over breakfast Jonah, tells Alex that only he and his team can save the plant by showing improvements within the three month period, he’s unable to help directly due to his busy schedule and commitments.

Just like those who read the book, the ability to effect change for the good is up us and also in the way that Alex has to figure out for himself the meaning of the two phenomena of dependent events and statistical fluctuations. Alex is to call Jonah when he can tell him what the combination of the two mean to his plant.

So Jonah cannot just give him direct instructions, real understanding is gained in working it out for oneself, again this applies to anyone reading the book. Effectively we have been given the tools.

This then leads on nicely to the scouting expedition as described in Chapter 13, here Alex faces a constraint in the form of the slowest boy in the group, Herbie.

This is a perfect situation where he gets to see a real situation involving the two principles Jonah talked to him about “dependent events” (events in which the output of one event influences the input to another event) and “statistical fluctuations” (common cause variations in output quantity or quality), as illustrated by the rolling of the dice game.

What he learns is that in a chain where processes are dependent on one another, statistical fluctuations can occur at any point in the process. These result in time lags between the processes that can accumulate and become more apparent the further down the chain you go, the result is that performance becomes worse than the average capacity of the constraint, this along with the fact that throughput is governed by the slowest moving part in the process, Herbie in the case of the marching column of scouts.

By moving him to the front of the line and lightening the load in his backpack, the overall pace of the scout column is vastly improved, he has decreased the inventory and increased the throughput. On one hand a successful milestone in understanding has been reached, on the other he arrives home to find that his wife has left him.

I believe this second concurrent theme (Alex’s family life) that the author describes throughout the story, is to highlight another balance that needs to be reached, that of a work and family life. The idea of achieving a balance is a theme running through the entire book.

On the next call to Jonah, the team are assembled again and they are advised to

distinguish between two types of resources in the plant, bottleneck and non-bottlenecks. Bottleneck are any resources whose capacity is equal to or less than the demand placed upon it, non-bottle neck are any resource whose capacity is greater than the demand placed on it. Jonah advises them to try and balance flow of product through the plant and not capacity. The task that is set to Alex this time, prior to placing the next call is to discover what bottlenecks they have, if any?

After a time, the team discover the bottlenecks present in the plant, the areas where capacity and demand are not equal, that NCX-10 machine again is used as an example, inventory is stacked up beside it and training on it takes six months, another example is the heat-treat department, furnaces running half empty. The problems associated with the bottlenecks are not an easy or quick fix for Alex, the production process cannot be moved around so easily, so he plans to turn the bottleneck to non-bottlenecks by increasing capacity, but the costs involved to achieve this will not run with Mr.Peach, especially at this time, given the overall state of the company and an impending site decision.

Chapter 19, as he’s sitting around the breakfast table with his mother and kids we learn that Jonah is coming to town, specifically to visit the plant. Jumping straight into it, Jonah puts himself on the shop floor and visits the bottlenecks, what’s required is to increase the capacity of the bottlenecks, essentially a plant without bottlenecks has excess capacity, every plant should have bottlenecks. This concept confuses everyone at the meeting, why should bottlenecks be present?

So that the bottlenecks can become equal to the demand, this can be achieved by increasing the capacity of the bottlenecks by taking advantage of their hidden capacity. Hidden because they are not straight forward or obvious, an example described in the book is the heat treatment machine, the true cost per hour the machine is down is calculated with Jonah’s help, it’s an eye opener for those present from what they believed to be $21 dollars an hour is in reality $2, 735, all are flabbergasted.

A system of tagging the overdue orders in implemented by Alex, along with moving the QC testing to a point prior to the heat treatment process, this reorganising of the bottlenecks should improve efficiencies along with the implementation of new rules for lunch breaks. The saga with his wife continuous, without the need for a private detective he tracks her down to her parent’s house, a new start is required, very much similar to situation in the plant, he is going to have to change too.

Chapter 22 and the plant is starting to see some improvements, twelve orders have shipped and the lead time on the overdue items have reduced, the production manager has rounded up some old zmegma machines that will help with capacity, however, there is still room for improvement.

A new set of problems become apparent. Some parts are spending too much time in the furnace and there is still down time on NCX-10 due to staffing levels. The solution for both problems is to dedicate staff that will be permanently stationed at the machines. Alex lets it be known to the foremen on the heat-treatment machine that there will be great rewards for anyone that can improve the output of the heat-treated parts. It does not take long for one of the night shift foremen to come up with a way of processing more parts by mixing the parts by priority and sorting the stacks in advance, efficiency increases ten percent as a result, it also turns out that some of the parts may not need heat treatment after all, twenty percent in fact, more good news.

Chapter 24 and the champagne is out, a new plant record in shipments of product has been set and a twelve percent net decline in work-in-process inventory, even Bill Peach is on the phone thanking him for the improved customer service. The incident with Alex falling in the door of his house with Stacey is amusing, timing is obviously not one of his good points and again he is in the wife’s bad books, will this turn for the worse with his personal relationship be reflected / mirrored with a work problem? You bet it will.

Apparently new bottlenecks are revealed as the inventory decreases. This example is very similar to the “Sea of Inventory” example used by Taiichi Ohno, the father of lean manufacturing, and is commonly used in Lean (Method 4) training in the pharmaceutical industry. Ohno talked about a boat that is sailing across a sea of inventory. Every waste in the system is like a hidden rock at the bottom of this sea which could potentially sink the boat. When the tide is high, no rocks (problems) are seen, but when the tide lowers (removing inventory) the dangerous rocks are revealed. Removing the visible rocks is a priority.

Just as well Jonah’s coming to the plant again and what he discovers is that working the non-bottlenecks to capacity with bottleneck parts has resulted in there not being enough time to process the parts, the key to resolving the issue is obtaining balance in the processes and developing a signalling process.

This is where the computer expert Ralf shines, using historic data obtained from the bottleneck parts, he is able to come up with an accurate schedule for when they need to be released, the result being that inventory is reduced at the front of the bottlenecks and non-bottlenecks. Jonah wants to be kept in the loop with how things progress.

At the next big corporate meeting Alex details the improvements in results, without detailing how they were achieved, in his opinion he has not received enough praise for the results they’ve obtained, on talking to Bill Peach he wants to know what it will take to keep the plant open, fifteen percent improvement in the next month to guarantee the plants future, so close to the finish line, the backlogs have been all but cleared so where will the orders come from?

As for his relationship with his wife that too is close to being resolved, balance in work and family ratio is required to get things back on track, so similar to the plants balancing requirements.

Chapter 28 and the phone rings, it’s Jonah in Singapore, he’ll be unavailable for the next few weeks, however, he does give Alex the “next logical steps” to progress, cutting the batch sizes in half on non-bottlenecks, thus reducing the amount of cash tied up and easing cash flow, negotiations with the vendors would be required, worth it for the faster response times and reduced order lead times. Now it’s time to put the improvements to the test, ship 250 model 12 units a week for four weeks, achieved by utilising smaller batch sizes model.

The auditors from headquarters have arrived on site and find only a 12.8% improvement, what’s interesting here is the way author describes the reaction of the accountants when they notice the change in way the costs are determined, how it’s very “irregular”, the same kind of response he gets the next day at divisional headquarters meeting. These individuals are making decisions and judgements based on tradition and not critical thinking, they cannot grasp the big picture that “the goal” is to make money not solely reduce costs. All’s not lost as Alex has been promoted to lead the division, luckily some can recognise the great work he has done. Alongside the good news from work it’s a perfect time for Alex and his wife to patch things up between them. By establishing his priorities he has found the balance between work and family that he lacked at the start of the book.

What’s now required is a way to recreate the lessons learned, his team for division is assembled and between them they trash out the rules that can be applied across the board, these are as follows:

Step one – identify the systems constraints;

Step two – decide how to exploit the systems constraints;

Step three – subordinate everything else to step two decisions;

Step four – evaluate the systems constraints;

Step five- If in the previous steps a constraint has been broken, go back to step one, but don’t allow inertia to cause a system constraint.

Alex has come a long way, what are the key points that’s he has learned on his journey, production is an ongoing process of improvement, and when new problems arise they need to be dealt with accordingly. He develops his own questions: What to change? What to change to? How to cause the change? Answering these questions are the keys to management, and the skills needed to answer them sign of a good manager and ultimately the answer to Jonah’s question.

Conclusion: The Goal is about making effective and informed decisions, and in that regard it truly succeeds, it educates the reader by providing focus and direction though the characters described in the book. Clever touches by the author throughout the book facilitate it’s relevance, for example by not going into detail on what is specifically being manufactured in the plant the author has developed a way of encouraging the reader to focus on the process and the decisions being made rather than the product itself.

The fact that it was first published in 1986, is remarkable, for a business book to be still relevant after quarter of a century shows how relevant and true the established rules are, many of the points in the book are mirrored by current trends in the pharmaceutical industry to use lean thinking with regard to methodologies and tools for transforming processes to deliver customer value faster, improve work flow and eliminate waste.