The Goal
Summary
The core theme of this book is Goldratt’s Theory of Constraints, otherwise referred to as TOC. Goldratt argues that manufacturing has for too long focused on producing, ignoring what is demanded by the market place, i.e. demand and capacity. Goldratt believes that one should balance flow through a system to meet the demand of the market.
Why is it worth reading?
The Goal, first published in 1984, is regarded as a masterpiece and while this book concentrates on a manufacturing model, the principles outlined in the text can be applied to many businesses and life in general.
The book is written in the style of a thriller. A factory manager, Alex Rogo, has 90 days to transform a loss-making manufacturing plant and avoid its closure by company HQ. Rogo’s life is in tatters, his wife leaves him and all seems lost. He then bumps into Jonah – an old school friend – who begins to offer insight, not solutions, into how the situation can be changed.
The idea of incorporating serious management principles into an exciting novel really works. The style makes the learning process enjoyable for the reader. Quite simply, this book is enthralling.
Talking points
The main talking point of this book is the TOC principle. This states that any system, any type of production environment, suffers from a bottleneck – a part that limits the flow throughout the rest of the system. Rather like a chain only being as strong as its weakest link. This bottleneck could be a machine, person or department.
Goldratt uses the example of a Cub Scout hike, with a child who cannot walk as fast as everyone else does. As a result half the line goes speeding off and the rest lag behind,
The book identifies nine rules that govern the relationship between bottleneck and non-bottleneck parts of a system. One of these, for example, is the capacity and demand issue – it is all very well identifying the weakest link or bottleneck in a system, but if you make everything work at that speed you may not meet demand. You may need to pull the bottleneck or weak link up to the speed of demand, not vice versa.
In order to measure performance and therefore any improvements, Goldratt identifies three measures: ‘Increase throughput while simultaneously reducing both inventory and operational expense’.
Another key point is the move away from economies of scale. ‘If we cut our batch sizes in half, then I guess that at any one time we’d have half the work in process on the floor. I guess that means we’d only need half the investment in work-in-process to keep the plant working,’ Rogo reasons at one point.
‘If we could work it out with vendors, we could conceivably cut all our inventories in half, and by cutting our inventories in half, we reduce the amount of cash tied up at any one time, which eases the pressure on cash flow.’
Quotes
The book begins with Rogo arriving at work:
‘I come through the gate this morning at 7.30 and I can see it from across the lot: the crimson Mercedes. It’s parked beside the plant, next to the offices. And it’s in my space. Who else would do that except Bill Peach? Never mind that the whole lot is practically empty at that hour. Never mind that there are spaces marked “visitor”.’
‘No, Bill’s got to park in the space with my title on it. Bill likes to make subtle statements. So, okay, he’s the division vice-president, and I’m just a mere plant manager. I guess he can park his damn Mercedes wherever he wants.’
Jonah’s explanation of the relationship between demand and capacity:
‘… you should not balance capacity with demand. What you need to do instead is balance the flow of product through the plant with demand from the market. This, in fact, is the first of nine rules that express the relationships between bottlenecks and non-bottlenecks and how you should manage your plant. So let me repeat it for you: balance flow, not capacity.’
Authors
Goldratt has published three books: The Goal, It’s Not Luck and Critical Chain. To date, his titles have sold more than three million copies and been translated into 23 languages.
His Theory of Constraints has earned him praise around the world and is taught in hundreds of colleges, universities and business schools as well as being used by thousands of companies.
Fortune magazine described Goldratt as a ‘guru to industry’ and Business Week describe him as a ‘genius’. Companies that have adopted Goldratt’s TOC include 3M, Goodyear, Hewlett Packard, Intel and Lucent.
Jeff Cox, the co-author of The Goal, is known for his ability to incorporate complex management principles into fictional adaptations. He provided the thriller story line for The Goal. His storytelling ability has been successfully used in two other management novels, Zapp and Heroz.
What others say
Punch magazine: ‘As a thriller, it is pretty gripping. As a management book, it is absolutely fascinating. As both combined, The Goal is simply amazing.’
Process Engineering: ‘…nail-biting.’
Accountancy Age:’A most extraordinary book … Essential reading.’
Details
The Goal, by Eliyahu M Goldratt and Jeff Cox, is published by Gower. ISBN 0 566 07418 4.