Captured by Plamen T. THE GOAL A Process of Ongoing Improvement THIRD REVISED EDITION By Eliyahu M. Goldratt and Jeff Cox With interviews by David . Learn the process of ongoing improvement with this book summary of The Goal by Eliyahu Goldratt. Learn the Theory of Constraints and. The Goal Summary by Eliyahu M. Goldratt explains how you can fully exploit management practices and apply them to the process of ongoing.
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The Goal. A Process of Ongoing Improvement. Second Revised Edition by Eliyahu M. Goldratt and Jeff Cox. Croton-on-Hudson, NY: North. Editorial Reviews. Review. "A survey of the reading habits of managers found that though they The Goal: A Process of Ongoing Improvement by [Goldratt, Eliyahu M.,. Audible Sample. Audible Sample. Playing Playing Loading Loading. bestthing.info - Download as PDF File .pdf), Text File .txt) or view presentation slides online.
This will decrease your overall cost per product. Once you identify the bottleneck and improve its capacity, you may find other problems arising that decrease throughput. In The Goal , the team identifies a robot as the bottleneck. They devise a system whereby all parts destined for the bottleneck are always worked on at highest priority at non-bottleneck steps.
This increases throughput temporarily, until they discover that at final assembly, suddenly there are shortages in non-bottleneck parts while there is massive inventory upstream of the bottleneck.
How could this be? They discover that they were running non-bottlenecks at full-speed, and having them crank out bottleneck parts far in excess of what the bottleneck could process. In turn, the non-bottlenecks has insufficient capacity to produce their non-bottleneck parts. To avoid this, you must synchronize the non-bottlenecks with the bottleneck , to prevent massive deviations. Goldratt proposed the Drum-Buffer-Rope method, as follows:. In addition, production requires prioritization — complicated chains require more parts to be worked on in the correct order to avoid queue times.
In The Goal , Goldratt suggests prioritizing batches by time elapsed since its release — the longer parts have been waiting, the higher the priority they get worked on. For parts going through bottlenecks, queue time is dominant. For non-bottlenecks, wait time is dominant. Traditionally, larger batch sizes are seen as more efficient per part.
However, larger batch size decreases agility and increases inventory. As discussed in The Goal , an hour saved at a non-bottleneck is a mirage. When you increase capacity at the bottleneck, you may start seeing shortages in non-bottleneck parts that hold up other parts of the chain. For example, as in plot of the The Goal , a non-bottleneck may produce two parts — part Y that goes through a non-bottleneck chain, and part X that goes through a bottleneck.
If you focus the non-bottleneck entirely on part X, then you create a scarcity of the non-bottleneck parts Y — which creates an artificial bottleneck. Similarly, taking on more orders may reduce spare capacity on non-bottlenecks, depleting inventory in front of the bottleneck and starving it of work.
As the protagonist of The Goal book finds, productive practices can lead to virtuous cycles and increased competitiveness. By adopting lean manufacturing principles like bottleneck alleviation, small batches, and Drum-Buffer-Rope systems:. In contrast, Goldratt points out how poor practices can lead to aggravating policies that cause further problems.
For example, obsessing on cost-accounting and local efficiencies:. But as you improve throughput, traditional accounting measures may make your situation look worse than in reality. However, these are usually temporary adjustments. The positive part of the tradeoff here is lower inventory costs and faster lead times, which improve topline sales. With process improvements and exposed extra capacity, a natural reaction of managers is to downsize the capacity. This punishes workers who just helped the company improve.
The goal : a process of ongoing improvement
Collecting too much information without identifying the underlying intrinsic order leads to false patterns and bad decision making. When it was being built some ten years ago, the building was considered to be a very big deal around here, all fourteen stories of it.
The fire department used it as an excuse to go download a brand new fire en- gine, just so it would have a ladder long enough to reach to the top. Ever since then, I think they've secretly been waiting for a fire to break out in the penthouse just to use the new ladder. Local boosters immediately claimed that the new office tower was some kind of symbol of Bearington's vitality, a sign of re-birth in an old industrial town.
Then a couple of years ago, the building management erected an enormous sign on the roof which says in red block letters: From the E. Which isn't too far from the truth. On my way to work each day, I pass another plant along the road to ours. It sits behind a rusty chain-link fence with barbed wire running along the top. In front of the plant is a paved park- ing lot—five acres of concrete with tufts of brown grass poking through the cracks.
Years have gone by since any cars have parked there. The paint has faded on the walls and they've got a chalky look to them. High on the long front wall you can still make out the company name; there's darker paint where the let- ters and logo had once been before they were removed.
The company that owned the plant went south. They built a new plant somewhere in North Carolina. Word has it they were trying to run away from a bad situation with their union. Word also has it that the union probably will catch up with them again in about five years or so. But meanwhile they'll have bought themselves five years of lower wages and maybe fewer hassles from the work force.
And five years seem like eternity as far as modern management planning is concerned. So Bearington got another industrial dinosaur carcass on its outskirts and about 2, people hit the street.
Six months ago, I had occasion to go inside the plant. At the time, we were just looking for some cheap warehouse space nearby. Not that it was my job, but I went over with some other people just to look the place over. Dreamer that I was when I first got here, I thought maybe someday we'd need more space to expand.
What a laugh that is now.
It was the silence that really got to me. Everything was so quiet. Your footsteps echoed. It was weird. All the machines had been removed. It was just a huge empty place. Driving by it now, I can't help thinking, that's going to be us in three months. It gives me a sick feeling. I hate to see this stuff happening. The town has been losing major employers at the rate of about one a year ever since the mids.
They fold completely, or they pull out and go else- where. There doesn't seem to be any end to it.
And now it may be our turn. When I came back to manage this plant, the Bearington Her- ald did a story on me. I know, big deal.
But I was kind of a minor celebrity for a while. The local boy had made it big. It was sort of a high-school fantasy come true. I hate to think that the next time E. I'm starting to feel like a traitor to everybody.
Donovan looks like a nervous gorilla when I get back to the plant. With all the running around he's done today, he must have lost five pounds. Then he paces for a few seconds and stops. Suddenly he darts across the aisle to talk to someone. And then he takes off to check on some- thing. I give him a shrill, two-finger whistle, but he doesn't hear it. I have to follow him through two departments before I can catch up with him—back at the NCX He looks surprised to see me.
Which is a lot to look at. And it's painted a glossy, distinctive lavender. Don't ask me why. On one side is a control board filled with red, green, and amber lights, shiny toggle switches, a jet black keyboard, tape drives, and a computer display. It's a sexy-looking machine. And the focus of it all is the metal-working being done in the middle of it, where a vise holds a piece of steel. Shavings of metal are being sliced away by a cutting tool.
A steady wash of turquoise lubricant splashes over the work and carries away the chips. At least the damn thing is working again. We were lucky today. The damage wasn't as bad as we had first thought. But the service technician didn't start packing his tools until 4: By then, it was already second shift.
We held everybody in assembly on overtime, even though overtime is against current division policy. I don't know where we'll bury the expense, but we've to go get this order shipped tonight. I got four phone calls today just from our marketing manager, Johnny Jons. He too has been getting his ear chewed— from Peach, from his own sales people, and from the customer. We absolutely must ship this order tonight. So I'm hoping nothing else goes wrong. As soon as each part E. And as soon as that happens, the foreman over there is having each subassembly carted down to final assembly.
You want to talk about efficiency? People hand-carrying things one at a time, back and forth.
It's crazy. In fact, I'm wondering, where did Bob get all the people? I take a slow look around. There is hardly anybody working in the departments that don't have something to do with Donovan has stolen every body he could grab and put them all to work on this order. This is not the way it's supposed to be done. But the order ships. I glance at my watch. It's a few minutes past We're on the shipping dock.
The doors on the back of the tractor-trailer are being closed.
The driver is climbing up into his seat. He revs the engine, releases the brakes, and eases out into the night.
I turn to Donovan. He turns to me. What do you say we find ourselves some dinner? Way off in the distance, the truck shifts gears. We take Donovan's car because it's closer. The first two places we try are closed. So then I tell Donovan just to follow my directions. We cross the river at 16th Street and drive down Bes- semer into South Flat until we get to the mill.
Then I tell Dono- van to hang a right and we snake our way through the side streets. The houses back in there are built wall to wall, no yards, no grass, no trees.
The streets are narrow and everyone parks in the streets, so it makes for some tedious maneuvering. But finally we pull up in front of Sednikk's Bar and Grill. Donovan takes a look at the place and says, "You sure this is where we want to be? Come on. They've got the best burgers in town," I tell him. Inside, we take a booth toward the rear. Maxine recognizes me and comes over to make a fuss. We talk for a minute and then Donovan and I order some burgers and fries and beer. Donovan looks around and says, "How'd you know about this place?
I think it was the third stool on the left, but it's been a while. My father owned a corner grocery store. My brother runs it today. The beers arrive. Maxine says, "These two are on Joe. Dono- van and I wave out thanks to him. Donovan raises his glass, and says, "Here's to getting out the door. After a few swallows, Donovan looks much more relaxed. But I'm still thinking about what went on tonight. There's the repair bill on the NCX Plus the overtime.
Then he says, "But you got to admit that once we got rolling, we really moved. I wish we could do that every day. I don't need days like this one. But we did ship the order," says Donovan. But it was the way that it happened that we can't allow. The economies of scale would disappear. Our costs would go—well, they'd be even worse than they are now. We can't run the plant just by the seat- of-the-pants. Finally he says, "Maybe I learned too many of the wrong things back when I was an expediter.
I mean that. But we set policy for a purpose. You should know that. And let me tell you that Bill Peach, for all the trouble he caused to get one order shipped, would be back here pounding on our heads at the end of the month if we didn't manage the plant for efficiency. Then I turn and say, "Maxine, give us two more here, please.
No, on second thought, we're going to save you a lot of walking. Make it a pitcher. We won. Just barely. And now that Donovan is gone and the effects of the alcohol are wearing off, I can't see what there was to celebrate. We managed to ship one very late order today.
The real issue is I've got a manufacturing plant on the criti- cal list. Peach has given it three months to live before he pulls the plug. That means I have two, maybe three more monthly reports in which to change his mind. After that, the sequence of events will be that he'll go to corporate management and present the numbers. Everybody around the table will look at Granby. Granby will ask a couple of questions, look at the numbers one more time, and nod his head. And that will be it. Once the execu- tive decision has been made, there will be no changing it.
They'll give us time to finish our backlog. And then peo- ple will head for the unemployment lines—where they will join their friends and former co-workers, the other people whom we have already laid off. And so the UniWare Division will drop out of yet another market in which it can't compete. Which means the world will no longer be able to download any more of the fine products we can't make cheap enough or fast enough or good enough or some- thing enough to beat the Japanese.
Or most anybody else out there for that matter. That's what makes us another fine division in the UniCo "family" of businesses which has a record of earn- ings growth that looks like Kansas , and that's why we'll be just E. That seems to be the essence of the company's strategic plan these days. What's the matter with us? Every six months it seems like some group from corporate is coming out with some new program that's the latest panacea to all our problems.
Some of them seem to work, but none of them does any good. We limp along month after month, and it never gets any better. Mostly it gets worse. Enough of the bitching, Rogo. Try to calm down. Try to think about this rationally. There's nobody around.
It's late. I am alone finally. No interruptions. The phone is not ringing. So let's try to analyze the situation. Why can't we consistently get a quality product out the door on time at the cost that can beat the competition?
Something is wrong. I don't know what it is, but something basic is very wrong. I must be missing something. I'm running what should be a good plant. Hell, it is a good plant. We've got the technology. We've got robots. We've got a com- puter system that's supposed to do everything but make coffee. We've got good people. For the most part we do. Okay, we're short in a couple of areas, but the people we have are good for the most part, even though we sure could use more of them.
And I don't have too many problems with the union. They're a pain in the ass sometimes, but the competition has unions too. And, hell, the workers made some concessions last time—not as many as we'd have liked, but we have a livable contract.
I've got the machines. I've got the people. I've got all the materials I need. I know there's a market out there, because the competitors' stuff is selling. So what the hell is it? It's the damn competition.
That's what's killing us. Ever since the Japanese entered our markets, the competition has been incredible. Three years ago, they were beating us on quality and product design. We've just about matched them on those. But now they're beating us on price and deliveries. I wish I knew their secret. What can I possibly do to be more competitive?
No other manager in this division has cut costs to the degree I have. There is nothing left to trim. And, despite what Peach says, my efficiencies are pretty damn good. He's got other plants with worse, I know that. But the better ones don't have the competition I do. Maybe I could push efficiencies some more, but I don't know.
It's like whipping a horse that's already running as fast as it can. We've just got to do something about late orders. Nothing in this plant ships until it's expedited.
We've got stacks and stacks of inventory out there. We release the materials on schedule, but nothing comes out the far end when it's supposed to. That's not uncommon. Just about every plant I know of has expeditors. And you walk through just about any plant in Amer- ica about our size and you'll find work-in-process inventory on the same scale as what we have.
I don't know what it is. On the one hand, this plant is no worse than most of the ones I've seen— and, in fact, it's better than many. But we're losing money. If we could just get our backlog out the door.
Sometimes it's like little gremlins out there. Every time we start to get it right, they sneak around between shifts when nobody is looking and they change things just enough so everything gets screwed up.
I swear it's got to be gremlins. Or maybe I just don't know enough. But, hell, I've got an engineering degree. I've got an MBA. Peach wouldn't have named me to the job if he hadn't thought I was qualified. So it can't be me. Can it? Man, how long has it been since I started out down there in industrial engineering as a smart kid who knew everything— fourteen, fifteen years?
How many long days have there been since then? I used to think if I worked hard I could do anything. Since the day I turned twelve I've worked. I worked after school in my old man's grocery store. I worked through high school. When I was old enough, I spent my summers working in the mills around here.
The Book in Three Sentences
I was always told that if I worked hard enough it would pay off in the end. That's true, isn't it? Look at my brother; he took the easy way out by being the first born. Now he owns a grocery store in a bad neighborhood across town. But look at me. I worked hard. I sweated my way through engineering school. I got a job with a big company. I made myself a stranger to my wife and kids. I took all the crap that UniCo could give me and said, E.
Give me more! Here I am, thirty-eight years old, and I'm a crummy plant manager! Isn't that wonderful? I'm really having fun now. Time to get the hell out of here. I've had enough fun for one day. Unfortunately, Julie is not being amorous- she is reaching for the night table where the digi- tal alarm clock says 6: The alarm buzzer has been droning for three minutes. Julie smashes the button to kill it. With a sigh, she rolls off of me. Moments later, I hear her breathing resume a steady pace; she is asleep again.
Welcome to a brand new day. About forty-five minutes later, I'm backing the Mazda out of the garage. It's still dark outside. But a few miles down the road the sky lightens. Halfway to the city, the sun rises.
By then, I'm too busy thinking to notice it at first. I glance to the side and it's floating out there beyond the trees. What makes me mad some- times is that I'm always running so hard that—like most other people, I guess—I don't have time to pay attention to all the daily miracles going on around me. Instead of letting me eyes drink in the dawn, I'm watching the road and worrying about Peach.
He's called a meeting at headquarters for all the people who directly report to him—in essence, his plant managers and his staff. The meeting, we are told, is to begin promptly at 8: The funny thing is that Peach is not saying what the meeting is about. It's a big secret—you know: He has instructed us to be there at eight and to bring with us reports and other data that'll let us go through a thor- ough assessment of all the division's operations.
Of course, all of us have found out what the meeting is about. At least we have a fairly good idea. According to the grapevine, Peach is going to use the meeting to lay some news on us about how badly the division performed in the first quarter. Then he's going to hit us with a mandate for a new productivity drive, with targeted goals for each plant and commitments and all that great stuff. I suppose that's the reason for the commandment to be there at eight o'clock on the button with numbers in hand; Peach must've thought it would lend a proper note of discipline and urgency to the proceedings.
The irony is that in order to be there at such an early hour, half the people attending will have had to fly in the night before. Which means hotel bills and extra meals. So in order to an- E. I think that Peach may be starting to lose it. Not that I sus- pect him of drifting toward a breakdown or anything. It's just that everything seems to be an over-reaction on his part these days. He's like a general who knows he is losing the battle, but forgets his strategy in his desperation to win. He was different a couple of years ago.
He was confident. He wasn't afraid to delegate responsibility. He'd let you run your own show—as long as you brought in a respectable bottom line. He tried to be the "enlightened" manager. He wanted to be open to new ideas. If some consultant came in and said, "Employees have to feel good about their work in order to be productive," Peach would try to listen.
But that was when sales were better and budgets were flush. What does he say now? Peach practically threw him out of his office. And now he's walking into my plant and wreaking havoc in the name of improving customer service. That wasn't even the first fight I've had with Peach. There have been a couple of oth- ers, although none as serious as yesterday's. What really bugs me is I used to get along very well with Peach. There was a time when I thought we were friends. Back when I was on his staff, we'd sit in his office at the end of the day sometimes and just talk for hours.
Once in a while, we'd go out and get a couple of drinks together. Everybody thought I was brown-nosing the guy. But I think he liked me precisely because I wasn't. I just did good work for him. We hit it off together. Once upon a time, there was a crazy night in Atlanta at the annual sales meeting, when Peach and I and a bunch of wackos from marketing stole the piano from the hotel bar and had a sing-along in the elevator.
Other hotel guests who were waiting for an elevator would see the doors open, and there we'd be, midway through the chorus of some Irish drinking song with E. He's a pretty good piano player, too. After an hour, the hotel manager finally caught up with us. By then, the crowd had grown too big for the elevator, and we were up on the roof singing to the entire city.
I had to pull Bill out of this fight with the two bouncers whorn the manager had enlisted to kill the party. What a night that was. Bill and I ended up toasting each other with orange juice at dawn in some greasy-spoon diner on the wrong end of town.
Peach was the one who let me know that I really had a future with this company. He was the guy who pulled me into the pic- ture when I was just a project engineer, when all I knew was how to try hard.
He was the one who picked me to go to headquarters. Now we're screaming at each other. I can't believe it. Peach and his division staff occupy three floors of the building. I get out of the car and get my briefcase from the trunk. It weighs about ten pounds today, because it's full of reports and computer printouts. I'm not expecting to have a nice day.
With a frown on my face, I start to walk to the elevator. I turn; it's Nathan Selwin coming toward me. I wait for him. Good to see you again," I tell him.
We start walking together. Bill keeping you working nights?
Then he pauses and looks at me. There is nobody else around us. I shrug; I don't know what he's talking about.
Everybody on Fifteen is crapping in their pants. Peach got the word from Granby a week ago. He's got till the end of the year to E. And I don't know if it's true, but I heard Granby specifically say that if the division goes, Peach goes with it. My first reaction is that it's no wonder Peach has been acting like a madman lately. Everything he's worked for is in jeopardy.
If some other corporation downloads the division, Peach won't even have a job. The new owners will want to clean house and they're sure to start at the top. All boys are producing just enough to match the pace of the first slow boy. Letting both X and Y run continuously will build up inventory in front of bottleneck X.
This is totally fine, even if Y is idling at times. Working Y out of pace with X produces inventory in front of assembly. The constraint for product A is bottleneck X, by definition.
The constraint for product B is not Y — it is market demand. In all these blocks, Y never determines throughput for the system. Throughput instead is determined by bottleneck X, or market demand. An hour lost at the bottleneck causes a loss in total throughput equal to the hourly capacity of that bottleneck. If the total throughput is a thousand dollars per hour, then the bottleneck is processing at a thousand dollars per hour, even if the literal operational costs or the parts going through it cost much less.
In other words, a loss in the bottleneck means a loss to the entire operation, and should be viewed with such gravity Other losses in effective throughput are also similarly costly. For example, feeding low-quality parts through the bottleneck will cause rejection later, leading to effectively lower throughput. While time lost from the bottleneck can be made up for by hurrying non-bottlenecks, any extra effort here typically adds to operational expense eg overtime pay.
Ideally, the bottleneck is simply maintained at peak capacity. If in the previous steps a constraint has been broken, go back to step 1, but do not allow inertia to cause a system constraint.
Different constraints can require very different optimizations. Overcorrection can be counterproductive, eg obsessing about preventing the bottleneck from idling causes it to produce surplus goods above market demand. Identify the bottleneck by seeing where you have the greatest upstream inventory piling up, with low inventory at the next step.
Alternatively, see which downstream steps are most in demand of upstream parts and are idling. If you decrease inventory sizes, you will see which work center, if stopped, halts the whole line. Analogy of rocks and water: the water level corresponds to inventory, while rocks are problems disturbing the flow.
Lower the water level until a rock sticks out. Solve that problem, then lower the water level further. Alternatively, in a more brute-force comprehensive way, define your market demand by sales , then compare the productivity of each step of the chain to this demand. Increase Capacity at the Bottleneck The protagonist of The Goal book undergoes multiple iterations of increasing capacity as his bottleneck to increase overall throughput.
This is a good point to consider your own work or life in this context, and to construct effective ways to relieve your personal bottlenecks. Machines run idle because people are redistributed to work on non-bottlenecks. Eg Eliminate lunch breaks and downtime. Redistribute capacity from non-bottlenecks to the bottleneck eg more workers. Outsource the bottleneck outside the organization.
Take some load on the bottleneck and redistribute to non-bottlenecks, if the same function can be performed. Do quality control upstream of the bottleneck to prevent time processing substandard parts.
Order the work in terms of first in, first out — clear the backlog first to guarantee important work is being done. Make sure there is extra inventory ahead of the bottleneck so it can always be running at full capacity. Tag parts that will go to the bottleneck as higher priority, so they get processed first and you guarantee inventory in front of the bottleneck.
The bottleneck gets an express lane. Announce the importance of bottleneck to the entire team, so they understand the priority of processing for the bottleneck.
Collect accurate statistics on bottleneck operations to make better decisions. Permanently staff people at bottlenecks to decrease idle time. Eg have people waiting by dishwasher to prepare loads and unload immediately. Remember that the cost of a lost hour at this bottleneck is very expensive, and possibly well worth people idling on standby.
Check upstream steps to see if adjustments can be made that decrease load on bottleneck. In The Goal book, the team discovers that running an upstream milling step more efficiently leads to requiring heat treatment. If this is slowed down, then the parts can skip heat treatment. In this case, lowering efficiency at one step actually increases throughput. Again, take some time to consider how to apply these to your own life.
Train others to take over your lower level responsibilities. Allow workers to bypass you for permission for smaller decisions. Prevent idle time by enforcing meetings starting on time with everyone present. Track your backlog so that more important items are worked on first, then process in first-in first-out order.
To prevent idling, you may ask upstream workers to do busy work. However, this is especially counterproductive if this busy work leads to a larger backlog inventory on your plate. Market Demand and Throughput Ideally, the flow through the bottleneck should match market demand. Producing more than this will increase inventory of finished product. Instead, when you have surplus capacity, push to increase sales to make use of this capacity.
This will decrease your overall cost per product. They devise a system whereby all parts destined for the bottleneck are always worked on at highest priority at non-bottleneck steps.
This increases throughput temporarily, until they discover that at final assembly, suddenly there are shortages in non-bottleneck parts while there is massive inventory upstream of the bottleneck. How could this be?I like her work, too. We held everybody in assembly on overtime, even though overtime is against current division policy. I lean back, looking at him.
Can't you tell me? Any effort in non-mitigating processes did not produce results. You can find the answer with your own mind," he says.
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