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THE GOAL

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THE GOAL Powered By Docstoc
					THE GOAL
Eliyahu Goldratt & Jeff Cox


Submitted by
Harleen Kaur 08PG307
Prateek Srivastava 08PG328
Sean Collins 08PG343
Introduction
 “The Goal” is a very unique book as it explains management
  concepts propounded by Eliyahu Goldratt in the form of a
  fiction novel.
 The main concept that is briefly described in the book is the
  “Theory of Constraints”, which he explains in detail in his
  next book titled “The Theory of Constraints”.
 The author uses a simple common sense approach to
  explaining the basic underlining concept of any
  manufacturing firm.
 The story brings in a lot excitement as there is a lot of
  personal drama elements.
The Story
 The story starts off with the main character Alex Rogo
  reaching office and finding out that that his boss, the division
  head, has stormed into his plant and is furious over a late
  order.
 Bill Peach, the division head, warns him about the plant being
  neither productive nor profitable. He gives Alex a 3 month
  deadline to show improvement or else the plant would be
  shut down.
 The particular order gets shipped by using all hands in the
  plant on that one order.
The Story (Continued)
 Bill Peach calls for a meeting at the division headquarters
  where Alex comes to know through the grapevine that if the
  division has one year to improve or else it will be shut down
  and sold off.
 While at the meeting he remember an encounter with his old
  physics professor Jonah, where Jonah without being told
  guesses all the problems being faced by Alex.
 Jonah had asked him a simple question, “What is the Goal
  of any manufacturing firm?”
 Alex leaves the meeting and spends time alone to figure out
  that the goal is to make money.
The Story (Continued)
 Alex sits with his accountant Lou to define what is needed
    assess an achievement of a goal, i.e., Net Profit, Return
    on Investment, Cash Flow.
   Alex decides to stay with the company for the 3 months and
    finally talks to Jonah.
   Jonah gives him three terms to help him run his plant –
    Throughput, Inventory and Operational Expense.
   Alex finds out that the new robots installed in his plant have
    increased costs, operational expenses and were less
    productive.
   Alex, Lou, Bob and Stacey brainstorm about the actual
    meaning of the three terms given by Jonah.
The Story (Continued)
 Alex goes to meet Jonah in New York where Jonah gives him
  some advice
   A plant with everyone working all the time is very inefficient.
   The closer you get to a balanced plant the closer you are to
    bankruptcy.
   The combination of dependent events and statistical
    fluctuations work themselves down the productive line.
 Over the weekend Alex volunteers to take his son and boy
  scouts on a hiking trip. It is then that he understands the
  importance of dependent events and statistical fluctuations.
The Story (Continued)
 Jonah introduces Alex to the concept of bottlenecks. He tells
  Alex that to increase capacity the capacity of bottlenecks
  need to be increased.
 Jonah, Alex and the team then calculate the cost for every
  minute of downtime at the bottlenecks.
 The crew of the plant then find a way of using red and green
  tags to keep the bottlenecks continuously running.
 With twelve orders shipped and things looking up the
  production managers rounds up some old machines to do the
  work of the bottlenecks.
The Story (Continued)
 Increased efficiencies and lower inventories suddenly created
    excess materials in front of the bottle neck.
   After careful reinvestigation by Jonah it was found that the
    red and green tags need to be modified a bit.
   Ralf creates a schedule for the bottlenecks to alleviate any
    excess inventory in front of them.
   Bill Peach gives a 15% improvement target for the next
    month.
   Jonah advices Alex to reduce batch sizes by half. This cuts
    costs in half and reduces lead times.
The Story (Continued)
 Alex restructures batch sizes and promises customers to get
  the products shipped on time.
 Improvement touches 17% but according to the old cost
  accounting model its only 12.8%.
 An owner of a company overwhelmed with the service came
  and shook every ones hand personally and upped the contract
  from thousand parts to ten thousand.
 At a meeting at the division headquarters Alex tries to
  convince the executives about the new growth measurement
  model but did not succeed.
The Story (Continued)
 To his surprise Alex is promoted to Peach’s job. He now has
  to manage 3 plants.
 In his new job Alex and his team come up with a process to
  manage the division.
     Identify System Constraints
     Decide how to exploit system constraints
     Subordinate everything to step 2 decision
     Evaluate the system constraints
     Warning! If a constraint is broken then go back to step 1
 Alex and the Head of Sales decide to fill capacity by catering
  to European markets.
The Story (Continued)
 All the new orders create new bottlenecks and new problems
  for Alex.
 Production asks sales not to promise delivery for 4 weeks to
  ease up production.
 Finally Alex learns that the key to being a good manager is to
  ask questions like
   What to change?
   What to change to?
   How to cause the change?
 Production is an on going process and when new problems
  arise they need to be dealt with accordingly.
Learning
 The Goal of any manufacturing firm is to make money.
 Any activity that brings us closer to making money is
    productive and vice versa.
   Achievement of a goal can be determined by looking at net
    profits that need to increase along with return on investment
    and cash flows.
   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 it intends to sell.
   Operational expense is all the money the system spends in
    order to turn inventory into throughput.
Learning (Continued)
 Throughput is money coming in, inventory is money in the
    system and operational expense is the money we have to pay
    out to make throughput happen.
   Robots don’t always reduce costs and increase efficiencies.
   A plant in which everyone is working all the time is very
    inefficient.
   A balanced plant is one where each and every resource is
    balanced exactly with the demand from the market and the
    closer to this is closer to bankruptcy.
   Dependent events and statistical fluctuations are very
    important and work themselves through a line.
Learning (Continued)
 A bottleneck is any resource whose capacity is equal to or
  less than the demand placed on it.
 A non bottleneck is any resource whose capacity is greater
  than the demand placed on it.
 As changes take place new pseudo bottlenecks get created
  which need to be dealt with.
 To be a good manager key questions like why who where
  what when and how should always be asked.

				
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