The Goal: A Process of Ongoing Improvement - 30th Anniversary Edition

The Goal, by Eliyahu M. Goldratt and Jeff CoxChapter 1The plant is anchoring down the entire company.Rogo has run the plant for 6 months and has 3 months to turn the plant around.Rogo’s home life is stressful due to his lack of attention towards his family.Bill indicated the plant has many inefficiencies.Bill’s visit resulted in a master machinist quitting during an operation.The master machinist quitting resulted in damage to the crucial NCX-10 machine.Rogo blames Bill’s interference for the numerical control machine, NCX-10, being down.Bill promised order 41427 will ship today, but it requires the NCX-10 to complete.Chapter 2Rogo comes home in the evening for a short dinner before returning to the plant.Rogo forgot he had promised his wife a night in town.Bearington is a decaying factory town losing a plant a year for over a decade.The NCX-10 is repaired. First shift had been held over for overtime, against policy.People are carrying parts one at a time and walking with them.Individuals throughout the plant are being shifted to work on order 41427.41427 shipping cost a machinist, repairs, overtime, and lost productivity.Half the plant has already been laid off.There are work-in-process issues causing inventory to stack up.Rogo has an engineering degree and an MBA.Rogo has become a stranger to his wife and kids.Chapter 3Rogo wakes up the next morning and daydreams on his way to work.He ponders about a company wide meeting Peach is holding and what it's about.Rogo wonders why Peach’s attitude has changed.Rogo reminisces on the fun nights him and Peach had a few years ago.As he walks in the corporate building he’s greeted by Nathan.Nathan tells him about how the whole division is going to the chopping block.He finally makes it to the conference room and sits down as Peach begins talking.Rogo has a hard time paying attention during the meeting. His thoughts are racing.Rogo looks for a pen in his suit jacket pocket but pulls out a cigar.He begins to remember why he has that cigar.Chapter 4Rogo is still sitting in the meeting but still isn’t paying attention.His train of thought goes to two weeks ago when he’s at O’Hare airport.He’s at O’Hare because he’s headed to Houston for a robotics conference.While he’s waiting for his flight, he runs into an old physicist professor, Jonah.He begins chatting with Jonah about the productivity and efficiencies of Rogo’s plant.Jonah is studying the science of manufacturing organizationsAs they talk, Jonah understands Rogo’s plant problems and begins questioning Rogo.Jonah warns Rogo that efficiency measurements are lying to him.Jonah asks Rogo what he thinks productivity really is to define it.Rogo thinks long and hard about the question of productivity.He tells Jonah that it means he’s accomplishing something in terms of goals.Jonah is late for his flight and they both run to the gate as they continue talking.Jonah gives Rogo a cigar.Productivity is the act of bringing a company closer to its goal.Productivity is meaningless without a well defined goal.At the aircraft door, Rogo asks Jonah what every company’s goal really is.Rogo can’t understand the meaning of productivity until he knows what the goal is.Chapter 5Rogo snaps back to reality and remembers he’s still in the company meeting.He still is not paying much attention and only hears a little of what is said.Peach calls for a break and everyone leaves except Rogo.Rogo thinks for a minute, gets up, and ditches the meeting.He gets in his car and just drives for a while, contemplating what Jonah had said to him.He gets hungry and stops off at a pizza joint before heading back to his plant.Across the highway from the plant is a hill where Rogo parks his car and eats.As he sits there he continues to think about what productivity and efficiency really mean.He lists possible goals: quality, efficiency, productivity, technology, and sales.He concludes the goal of a manufacturing organization must be to make money.Chapter 6Rogo walks into the plant and finds workers idle, relaxing and not working.Rogo scolds their supervisor for allowing idle workers and demands they be active.Even if those workers were producing, would they be making the company money?Rogo sits with accountant Lou to discuss the company's goal.Lou explains a relative measurement like ROI helps more than net profit.Lou mentions cash flow is critical to any company's survival.Lou agrees to help Rogo save the plant.Rogo writes down 3 critical measurements: net profit, ROI, and cash flow.Rogo writes down: the goal is to increase net profit, ROI, and cash flow.Rogo calls Julie late at night and realizes he’s missed his postponed night with her.Rogo thinks it difficult to teach connecting the plant’s operations to company evaluation.Chapter 7Rogo returns home late. His daughter gets all A's in her report card.Rogo considers calling a headhunter but feels a responsibility to stay at the plant.Rogo decides to find Jonah, the manufacturing scientist.Chapter 8Rogo gets swamped with meetings all day and forgets to find Jonah.Rogo goes to his mother's to contact Jonah.Jonah returns his call and agrees that The Goal of an organization is to make money.How can Rogo know if his plant's internal evaluations really measure productivity?Jonah has developed measurements which express The Goal for manufacturing.Jonah's measurements are throughput, inventory, and operational expense.Throughput is the rate at which the system generates money through sales.Inventory is all the money 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.The Goal must be expressed in terms of these measurements.Jonah hangs up and Rogo sleeps at his mother’s house.Chapter 9Rogo awakes at 11 a.m. and calls his secretary for plant updates.The CEO is coming to the plant next month to record a video.Rogo leaves his mother’s house for his home to clean up.Throughput, did the plant sell more products?Inventory, did the plant’s inventories go down?Operational Expense, did the plant layoff employees after adding robots?The Goal: Increase Throughput while decreasing Inventory and Operational Expense.At the plant, Rogo studies the effect adding robots has had on sales with the accountant.Sales for the plant’s products are either flat or declining.Requiring robots to operate at high efficency is causing inventory to pile up.Inventory of unused parts is piling causing an increase in carrying costs.Chapter 10Throughput is the money coming in. Inventory is the money currently inside the system.Operational Expense is the money we have to payout to make Throughput happen.Rogo realizes that every part of the plant can be placed in the three measurements.Rogo understands the robots have been counterproductive with respect to The Goal.Rogo needs to create a plan to be productive towards The Goal so he calls Jonah again.Rogo plans to leave for New York to meet Jonah at his hotel in the morning for breakfast.Chapter 11At home, Rogo’s wife is deeply upset by his recent behavior. He leaves for the airport.Rogo and the manufacturing scientist meet, but he is too busy to be a consultant.Rogo asks Jonah how much he is going to need to pay for Jonah’s help.Jonah wants no pay if the plant folds. His compensation is to be part of the new profits.Jonah says often pushing for high efficiencies can take us away from The Goal.Jonah says a plant where everyone is always working is highly inefficient.A balanced plant is where capacity of each resource is balanced with market demand.The closer you come to a balanced plant, the closer you are to bankruptcy.Jonah claims it is wrong to assume trimming capacity to balance with market demand will have no effect on throughput or inventory. Jonah has a mathematical proof showing when capacity is trimmed to market demand that throughput goes down and inventory goes up. More inventory increases carrying costs, an operational expense.Dependent Events and Statistical Fluctuations when considered together explain this.Rogo flies back home.Chapter 12Rogo questions his wife about where she stayed last night and who the kids stayed with.Julie is lonely, feeling abandoned, and left for a night to vent to a friend.Rogo explains he is always away from home because he is trying to support the family.Rogo promises to spend more time with the family including the whole weekend.Chapter 13Rogo’s and son start off the weekend on a trail hike with a Boy Scouts troop.He connects hiking to Jonah’s Dependent Events and Statistical Fluctuations.The troop formed a line that is lengthening due to an accumulation of the fluctuations.The troop’s line dependency limits higher fluctuations in regard to shortening the line.Rogo conceptualizes a model of the troop’s line analogous to a manufacturing plant.Throughput is Rogo’s walking rate since he is trailing the line.Inventory is the distance between the line leader and Rogo at the rear.Operational Expense is the energy the whole troop expends to progress down the trial.Rogo’s throughput is influenced by the line’s slow statistical fluctuations accumulating.Chapter 14On the trial, on lunch break, Rogo conceptualizes a new model with bowls and matches.Bowls are lined up and die rolls move matches from bowl to bowl until a final bowl.Throughput is the speed matches come out the last bowl. Bowls: stages of production.Inventory total matches in all the bowls at a given time.Operational Expense is a hypothetical carrying cost for the total matches in bowls.Input bowls had no issues. Bowls near outputs became swamped with inventory.Chapter 15Lunch ends and the hike resumes. The kid’s lineup with the fastest first.Fat Herbie is in front of Rogo. Herbie constrains Rogo’s throughput.Rogo stops the troop and flips it around so Herbie leads. The troop stays together.Herbie is slowed by his heavy bag. The troop redistributes his load so he can go faster.No longer burdened, Herbie speeds up. Throughput soars and inventory stays low.Chapter 16Rogo returns home finding his wife has left. She wrote him a short explanatory note.Rogo calls Jane and Julie’s parents, but no one knows where she has gone.Chapter 17Rogo struggles to take care of the kids in the morning and get them to school.Mr. Smyth is now Rogo’s boss and he demands 100 sub-assemblies by the end of day.Rogo has a conference with his staff trying to explain his ideas from the hiking trip.Rogo draws out a schedule plan for 100 sub-assemblies by day’s end using robots.He’s confident Dependent Events and Statistical Fluctuations will prevent shipment.The setup crew is late thus delaying the robot’s throughput. Rogo was right.Chapter 18Rogo returns home from work. Julie called their son, and she will be away for a while.Rogo awakes to an easier morning with his mother’s assistance.At work his team is ready to work towards The Goal after seeing it in-person yesterday.A resource’s capacity cannot be measured in isolation, but where it is in the plant.Rogo calls Jonah again. The whole staff gathers around the phone to listen.Jonah tells Rogo he must differentiate between bottleneck and nonbottleneck resources.Bottlenecks are resources whose capacity is less than or equal to demand placed on it.Non-Bottlenecks are resources whose capacity is greater than demand placed on it.Jonah insists they not balance capacity with demand, but flow of product with demand.Bottlenecks should produce just under market demand in case the market drops.The staff begins to group parts of the plant as work centers and look for bottlenecks.It should be easy to spot a Bottleneck by looking for where inventory is piling up.The NCX-10 is a bottleneck. It does the combined work of 3 old machines it replaced.Another bottleneck is the Heat-treat that never runs full due to expeditors trying to ship.The company lacks the funds to alleviate the bottlenecks by increasing their capacity.Chapter 19At home, Rogo eats and prepares to head to the airport to pick up Jonah.Rogo gives Jonah the background on the plant as they leave the airport.Jonah arrives insisting they must increase bottleneck capacity with hidden capacity.They find the NCX-10 machine idle as its workers are on break.Jonah tells them to negotiate with the union so that the NCX-10 is never idle.They tell Jonah they lack the necessary old machines the NCX-10 replaced.At the heat-treat, Jonah asks if there are vendors who can do the heat-treat work.Jonah asks why the heat-treat is working on parts that don’t contribute to throughput.Put Q.C. in front of bottlenecks so bottleneck time isn’t wasted working on bad parts.Jonah stated it is more critical to check assumptions than calculations.He also stated the capacity of the plant is equal to the capacity of the bottleneck.“The actual cost per hour of a bottleneck resource is the total expense of the system divided by the number of hours the bottleneck produces.”Bottleneck time is wasted if it is idle, working on defective parts, and working on unnecessary parts.Bottleneck capacity can be increased by shifting processing to non-bottleneck resources or paying a vendor for processing.Rogo goes home. He wakes up to eat breakfast. His wife had called the kids again.Chapter 20Jonah takes a cab to the airport. Rogo calls Julie's parents to discover she is there.Julie doesn't want to come to the phone due to years of neglect.The accountant determined only 80% of the products flow through the bottlenecks.The staff agrees to follow through with Jonah's suggested changes.QC moved in front of bottlenecks.Bottlenecks processing now prioritizes the latest orders first.Rogo goes to Julie's parents house and goes on a walk with Julie.Chapter 21Rogo asks Julie on a date.90% of late orders have parts that flow through the bottleneck.Rogo explains the situation to the union representative, but he isn't fully convinced.Not all parts are available for the NCX-10. They make a system to prevent future issues.Rogo explains to the plant Red tagged parts with lowest numbers are top priorities.The union representative is understanding and agrees to the new policies.Rogo picks Julie up at her parent’s home.Chapter 22The system modifications appear to have been successful, but they are insufficient.Rogo wants to offload bottlenecks to other work units or an outside company.Yellow tags are now to be used for post-bottleneck parts.Bob brings in a machine to help support the NCX-10 bottleneck.Chapter 23Rogo reminisces about his date a few days ago that went well enough.Heat-treat workers are reducing plant productivity by not understanding the plan.Permanent workers are assigned to the bottleneck to prevent machine idle time.Recalling laid-off workers isn’t an option. The best workers are placed on bottlenecks.Non-bottleneck workers are transferred to the bottlenecks as needed.A company across town takes on the plant’s remaining heat-treat work.Rogo meets with the night shift foreman to review his innovations for heat-treatment.Rogo decreases efficiency of some work groups to increase plant productivity.Chapter 24The staff celebrate a record productivity month. Rogo’s boss calls and does the same.The staff get drunk and party all night. Stacy drops a drunk Rogo off at his home.Julie has come back home to stay, but assumes the worst with Stacy so she drives off.Increasing bottleneck throughput has led to new bottlenecks in the plant.Stacy calls Julie to explain matters. Julie plans to return by Wednesday.Chapter 25Jonah again arrives at the plant from the airport. He and staff tour the issues in the plant.Bottleneck feeders are prioritizing bottleneck Red parts and largely ignoring others.Jonah explains keeping non-bottlenecks active creates excess inventory.Constant use of non-bottlenecks is inefficient since they don’t contribute to throughput.Jonah presents linear combinations of non-bottlenecks, Y, and bottlenecks, X.X into Y, Y into X, X and Y into assembly, and X into A and Y into B.In combination, these four building blocks can represent any manufacturing situation.Activating non-bottlenecks beyond bottleneck capacity creates inventory, not throughput.Activating a resource and utilizing a resource are not synonymous.Utilizing a resource occurs when it moves the system towards The Goal.We must not seek to optimize every resource in the system.Chapter 26Rogo brainstorms with his kids how to tie the bottlenecks to inventory releases.The data analysts reviewed data suggesting two weeks is the bottleneck lead time.The bottlenecks will determine the release of materials in the plant.Payroll costs are the same for active and idle workers. Inventory ties up money.Rogo and staff agree lower efficiencies are fine if productivity increases.Chapter 27May’s meeting of the plant managers begins. Rogo’s plant is the only one showing profit.Peach tells Rogo good job. Rogo gets more praise from others.Rogo doesn’t want to inform Peach of drastic changes for fear of a decision reversal.Peach says he’ll keep the plant open if Rogo can deliver a fantastic month again.Rogo leaves the meeting to spend time with Julie at her parents.Rogo and Julie go for a walk. She has felt ignored because Rogo is obsessive.Rogo tries to apply The Goal to his marriage with Julie, but she brushes it off.Chapter 28Rogo makes it home at sunset when Jonah calls. They discuss plant improvements.Jonah suggests cutting batch sizes in half for non-bottleneck processes.Queue Time, time a part waits on a resource to finish working on another part.Setup, time a part spends waiting on a resource to prepare itself to work on the part.Process Time, time the resource spends modifying the part making it more valuable.Wait Time, time spent waiting on another part so they can be assembled together.Queue and Wait times are high in the plant.The Economical Batch Quantity (EBQ) formula has several flawed assumptions.Half-sized batches reduce inventory’s cash flow pressure and speeds up flow of parts.An hour saved at a non-bottleneck is a mirage.Rogo meets with the marketing director to get additional orders made with customers.Chapter 29Rogo and Julie spend a night together, but Rogo wakes up very early.The plant has mostly turned around due to the various implemented changes.Measuring cost per part is artificially inflated due to direct labor with half-sized batches.Rogo and the accountant decide to skew the numbers to reflect the last two months.Marketing calls Rogo about a possible thousand units completed in two weeks.Control modules are the unit’s constraint. Staff ponders cutting batches in half again.The thousand unit job is purchased at 250 units per week for four weeks.Chapter 30The plant achieved 17% percent, ahead of the 15% agreed to with Peach.Peach sets up a meeting at headquarters for Rogo’s plant to be evaluated.The productivity manager came to the plant to shoot a video, but the robots were too idle.The productivity manager sends an audit team to review the plant’s accounting.The thousand unit order customer arrives by helicopter to shake everyone’s hand.Helicopter customer increases his order from 1,000 to 10,000.Rogo and Julie decide to set goals for their continued marriage.

This book was very informative and I plan to implement a very large amount of the idea s that I learned from it.

What could be a very boring subject is bought to life in the Audiobook version. I highly recommend it. If you are involved in the supply chain, this is a great read.

The book may be 30 years old, might tell a story of manufacturing but it is still relevant today. Optimize for the flow and the global goals. Don't make local optimization. And identify and slay bottlenecks one at a time.It is also a bit counter intuitive that you don't optimize for full utilization of capacity at every sub team.

I haven't read that many business books. The ones I have are usually more poorly written than the economics books I read. I know that there is often a dedicated course in business writing in the academy, but in my experience, it isn't a focus of the program. So when I was assigned a long business book as additional reading for my operations management class, I wasn't too jazzed. I was pleasantly surprised though, the Goal isn't that bad. To talk about the Goal, I have to talk about the structure. It is a 330-page business novel. I had no sense on going in what a business novel would be like, and it is basically that, a novel with plot and characters. The problem is that it is a didactic novel. That means it is teaching you something. And in that role, it is often very heavy handed. The plot is that Alex, the main character who we get to enjoy present tense first person narration though, has been promoted to be the plant manager of his hometown plant. It is not producing the profits that corporate would like to see. On top of that, the orders are late and they're always in a rush. So corporate comes down and gives Alex an ultimatum that you have three months to turn around the plant or we will look into closing it. So what does Alex do? Thankfully, Alex meets an old physics teacher friend of his named Jonah, who happens to be an internationally famous business consultant. The problem here is that Jonah is always busy, so he can't handhold Alex to improve the plant. This device is here so that you as the reader and the character of Alex isn't told straight up what changes to make. You/Alex need to find from the stated principles to improve the plant. The whole thing is based on the idea of the Socratic dialogue where the teacher doesn't tell you anything but the educate is a coming to knowledge of the student. It's really heavy-handed, since the author mentions it in the introduction and also has a subplot where Alex's wife starts reading philosophy and they have a couple dialogue exposition-dump conversations. Ultimately, Alex does come up with a process of improvement where he takes some of the old rules off the board and looks at defining the ultimate goal of the plant vis a vis the company and what he can do to help the plant meet those goals. He and his team identify bottlenecks in the plant, reimagine them, and the plant is a success. He is promoted to district manager at the end, and he and his team start to see how they could apply the more general principles they had determined to processes that are harder to define than movement of material in a plant. For me, the end was the weakest part because I work in service and I kept trying to figure out how this could apply to me in my job. I still haven't and I hope there was a sequel or something that applies the goal to a larger organization. The general processes that Alex worked out by way of Jonah (who is a total stand-in for the author) are: 1) Identify the system's constraints 2) Decide how to exploit the system's constraints. 3) Subordinate everything else to the above decisions 4) Elevate the system's constraints 5) 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. They sound like good general principles, and they work in the book. I do have some issues with the book and the idea though. First of all, the structure of the book feels entirely unnecessary. We as the reader have very little context for what the company Alex works for even makes. It is just some generalized manufacturing plant in a nameless town. That means the process described in the book cannot be fully trusted to have worked. I would like to see evidence-based material to prove that the process works. As it, it might as well be like the mystery writer who cannot really solve mysteries but just knows what he wants at the end so he can work backwards.Second, the novel approach is just weird. It makes the book longer by three times than it could be to convey the same information. For example, there is a part in the book where the main character takes his son on a walk in the woods with the rest of the Boy Scout troop. The whole thing is just in there to illustrate that any process is only as strong as its weakest link or as fast as its slowest part. And it takes a long time to do so. The characters never really develop a secondary consideration. There's a whole subplot where Alex and his wife are fighting and she ends up moving out for a while and it is just ridiculous. As a reader of fiction, it is horrible. You don't know why these characters are in love in the first place and their reconciliation is unbelievable. It is also completely unnecessary for what Goldratt is trying to teach in his book. It just adds pages and I still never really cared about the characters.Smaller things nagged as well. For example, what is it about the impetus to restructure the company? Do you need to be close to failure to rethink your processes? Alex only went ahead with it because he had nothing to lose. That gave him reason to change. If things are working well enough at work, why change, even if efficiencies can be found? Another is that this book has been around a while now. Are efficiencies still possible? Or does every generation of managers have to relearn the same general principle here? Further with the decline of manufacturing in the states to more labor-intensive countries, did the companies that embraced the goal succeed? There's no indication in the book of the real world, so that bugged me.One last thing. Alex always refers to the cars he and his wife owns by their make. He has a Mazda, and she has an Accord. If he works in domestic manufacturing, why the heck does his family have two foreign cars?

I have worked as an operations manager/Director for most of my career. This book introduced me to the theory of constraints. Although the plot is centered around a manufacturing plant, I have been able to implement many ideas into the behavioral health industry/mental health treatment. Introducing the concepts through a storyline was unique and overall I found it to be beneficial.

I originally bought this book in the 1990s by chance at an airport in the US. It is Goldratt's utterly compelling, though occasionally rather clunky, introduction to his Theory of Constraints in the unusual form of a business novel, in which the hero is given the (apparently) impossible task of turning around his loss-making production plant or face closure. At the heart of the solution is the need to step back from conventional business wisdom - cost-accounting and local optima - and analyse/manage any organisation as one interconnected and inter-dependent system. Sounds obvious, but a quick look at how an individual's performance is measured in your own company will very likely show it's still not happening. The lessons of The Goal are applicable not just in production but in all kinds of business (my own at the time being cultural non-profits), and Goldratt's theory of constraints was fleshed out in subsequent novels to include the disciplines of marketing and project management. If TOC is unfamiliar, this book is a must-read.

This book is an insightful and enjoyable read. The story will ring true to anyone working in a process that encourages starting an overwhelming quantity of work as deadlines become ever harder to hit.This third edition finishes with an essay by Eli Goldratt that compares Lean, TPS and "Drum Buffer Rope" as different applications of the same core Lean concepts.I read the Goal from the perspective of leading change in a service delivery department, where I've used the Kanban Method to guide improvements to our delivery. The goal was the initial inspiration for David Anderson's book Kanban for Successful Evolutionary Change, and it was interesting to read from that perspective.

It’s a great fable and helps you get the big point of managing flow and throughout end to end.I think the book would benefit from a refresh with more illustrations to get the points across more clearly to make it an easier read.

Putting the information into readable story is great, and to see the improvements and the difficulties as they unfold aids the understanding greatly. The improvements when they came seemed unbelievable, and while the well know Toyota improvements is a great example I'd like to see more modern day examples in new industries.

I found this to be a very enjoyable and accessible way to learn about Lean Principles and the Theory of Constraints. If only such things were taught in this way and not the dry, technical, monotonous why they usually are.