Book Report of the Goal

1.       In The Goal, we define that 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.

I find that the new definitions are definitely useful. For throughput, the new definition reveals its ultimate purpose—turning into sales. Suppose a company have a decent throughput, however, its products are not selling well on market. In this situation, can we say this company is good by measuring the index of throughput? Definitely NO! By the new index, we could measure not only the rate of production but also the rate of sales generated by production. It will be more accurate. For inventory, I think the new definition is broader than the traditional one because all the money that the system has invested in purchasing things including goods, raw materials and business holds for resale. For operational expense, the new definition is clearer because it rules out the capital that not used for turning inventory into sales but for administration.

2.        A bottleneck machine refers to a machine which limits the performance or capacity of an entire system. I would like to define it as a tap. The water velocity is controlled by a tap, just like plant’s capacity determined by bottleneck machines. When I turn down the tap, the water velocity will decrease which means we get less water in a certain period, which means lower capacity; when I turn on the tap, the water velocity will increase which means we get more water in a certain period, in another word, higher capacity.

3.        Firstly, balance the flow of product through the plant with demand from the market, not balance the capacity with demand. The bottleneck is reality and it determines the effective capacity of the plant. We could use the bottleneck to control the flow through the system and into the market.

Secondly, do not waste the bottlenecks’ time. There are three ways to prevent a bottleneck from wasting time. One way is to keep the bottleneck running during a lunch time. Another way is not to make a bottleneck process parts which are already defective—or which will become defective through a careless worker or poor process control. The third way is to make a bottleneck concentrate on essential parts, not work on parts we do not need.

Thirdly, we can increase bottleneck capacity by taking some the load off the bottlenecks and give it to non-bottlenecks. On the one side, we could distinguish the parts which are not have to be processed by the bottlenecks and then shift them to non-bottlenecks so that we could gain more bottleneck capacity. On the other side, we find another machine which could do the same process as bottleneck and then we could offload from the bottleneck.

Finally, we could also reduce batch size by half on non-bottlenecks. If we do so, we reduce queue and wait by half as well. As a result, we could condense total lead time and increase the speed of the flow of parts. We will gain an advantage in the marketplace because we can respond to market faster.