The Goal Report

The Goal, written by Eliyahu M. Goldrattt and Jeff Cox, is based around the life of Alex Rogo, plant manager for Uniware, a division of Unico. Right in the beginning of the novel, he is given an ultimatum to turn the plant around in three months. This is because a very upset customer approaches Alex's boss, Bill Peach, about a very late order. This was not unusual seeing as though most orders were late or missing, but the main reason was due to the fact that the plant's bottom line was continuously slipping. Due to the limited amount of time available to turn the place around, there were not many outside tools available such as consultants, surveys, etc. It was going to take a miracle to pull such a feat off.

With very few hopes, Alex foresees the inevitable until he remembers his conversation with Jonah, a physicist Alex knew from when he was a student, that he had had a couple months ago when they ran into each other at the airport. During the conversation, Jonah asked him several questions to analyze his company's situation, which at the time seemed in good condition. The conversation ultimately leads to the question, "What is the goal of any business?" After rethinking his conversation, Alex realizes that the goal of any business is to make money. Furthermore, if the goal is to make money any action toward this goal is considered productive and any action not moving towards the goal is nonproductive. Alex unsure of such a simple answer decides to contact Jonah to continue the search for more answers. This is when Jonah gives him the most powerful combination of definitions.

The first measurement that would define the success of the plant's production was throughput, which is the rate at which the system generates money through sales. This measurement would consist of what a product would be worth when sold at market value after deducting operational expense and inventory. Inventory is the next important definition. This is all the money that the system has invested in purchasing things that it intends to sell. Finally, the last measurement is operational expense, which is all the money the system spends in order to turn inventory into throughput. This includes the depreciation of machines, lubricating oil, scraps, etc. When looking at the traditional definitions, the meanings are a little different. Throughput is the amount of material or items passing through a system or process. Inventory is the complete list of items such as property, goods in stock, or the contents of a building; and operational expense is expenses arising in the normal course of running a business.

As anyone can see, the definitions given in The Goal are much more operational and production based. This is important because the measurements are much more focused and allow for a process to be set into place. They are based on an equation where the effect of one has an impact on the others. What Alex needs to do is to reduce operational expense and reduce inventory while simultaneously increasing throughput. Improving one measurement in isolation has no long-term impact on the goal.

The process capacity is determined by the slowest series task in the process; that is, having the slowest throughput rate or longest cycle time. This slowest task is known as the bottleneck. Identification of the bottleneck is a critical aspect of process analysis since it not only determines the process capacity, but also provides the opportunity to increase that capacity. Saving time in the bottleneck activity saves time for the entire process. An important principle to remember is that an hour lost