The Goal by Eliyahu M. Goldratt, is the story of a man who at his crossroads,
and what direction he decides to take. The story is about a plant manager named
Alex Rogo. We find Alex six months into his first plant managers position at
UniCo, in the UniWare Division. The plant is located in Bearington
Massachusetts, where Alex grew up. UniCo is definitely a manufacturing plant,
what they manufacture, I still do not know. The story begins when Alex’s
supervisor, Bill Peach, comes into the plant and nearly turns everything upside
down. After Alex puts out all of the fires that Bill had set, they sit down in
Alex’s office and talk. Bill tells Alex that production has gone down in the
six months that Alex has been at the helms, and an irate customer, Bucky
Burnside, has an order that is fifty-six days overdue, and Alex must get that
order shipped before anything else. Bill also says that if the plant does not
turn around in the next three months, he will make a recommendation to close the
plant. A few days later, Alex hears more of the same at a corporate meeting and
figures out why Bill was upset. After the meeting Alex reaches for something and
comes across a cigar he received from a chance encounter from and old physicist
he knew from his college days. While waiting for in between flights at O’Hare,
Alex wandered into an airport and found himself sitting next to the physicist
named Jonah who worked on mathematical models while he was an undergraduate
engineering student. Alex and Jonah start talking, and Alex mentions he is going
to speak at a seminar. His topic is “Robotics: Solution for the 80’s to
America’s Productivity Crisis.” Alex tells Jonah that his plant has more
robots than any other plant in the division. Jonah is not very impressed. Jonah
asks how much productivity has improved because of the use of the robots. Alex
answers that there is a 36% improvement in one area. Jonah then asks if the
plant is making 36% more money because the plant is using robots? Well, of
course not is the response. Just the one department is producing 36% more. Jonah
continues the conversation and admits that he has been studying manufacturing
processes. He asks Alex what productivity is and ends up explaining true
productivity is accomplishing something in terms of your goal. Alex cannot even
determine the goal of his company at this point. Jonah tells him to think about
it and leaves. Back at the meeting, Alex hears talk about measurements of
efficiencies, productivity, and cost per price, etc. He is not even sure what
productivity is, so he decides to bail out at lunch to head back to the plant.
His trip to the plant is interrupted by a pizza pie and a six pack of beer. Alex
goes to a hill overlooking the plant and spends the rest of the afternoon
contemplating what he is going to do over the next three months, and what
exactly productivity is. He spends the entire afternoon thinking about “the
goal” and finally comes up with the answer: The goal of the company is to make
money, and everything else they do is a means of achieving the goal. Once Alex
figures out what the goal of the company is, he decides to get a hold of Jonah
to learn more about productivity. Alex spends the night at his mother’s house
trying to contact Jonah, until he finally does at 2 a.m., with Jonah in London.
Jonah explains to Alex that an action towards the goal is productive, and an
action away from the goal is unproductive. He also gives Alex three new
measurements: Throughput, the rate at which the system generates money through
sales. Inventory, all the money that the system invested in purchasing things
which it intends to sell. And finally, Operational Expense, all the money that
the system spends in order to turn input into throughput. To make money, Alex
must increase throughput while simultaneously reducing the inventory and
operating expense. Alex goes back to the plant and realizes he needs a lot more
of Jonah’s advice. Jonah agrees to meet Alex in New York over breakfast for an
hour. They start to discuss the idea of a balanced plant. Traditional
manufacturing goals are always to run a balanced plant, where the capacity of
each and every resource is balanced exactly with the demand from the market.
But, Jonah points out, the closer you come to the perfectly balanced plant, the
closer you are to bankruptcy. At home, Alex’s wife, Julie, complains again
that Al is never home. Al explains again, that it is because of the plant. After
arguing about why he needs to work as much as he does the two reach a
compromise. Alex tells Julie that he will bring his paperwork home, and take
care of the fires at the office while he is there, in order to spend more time
with Julie and the kids. The next morning, Alex is woken by his son who reminds
him that he promised to help lead the scout hike overnight. Alex leaves without
waking Julie, and finds himself to be the only parent “helping” on the hike.
Throughout the course of the hike, Alex realizes that an overweight boy, Herbie,
slows down the middle and the end of the line. Alex does not understand why the
line separates so greatly if all the boys are walking at two miles per hour.
Eventually it dawns on him that Herbie is the statistical fluctuation and the
rest of the line of kids are dependent events. When Alex returns home the next
day from the hike, Julie has left. Alex realizes that he needs to work on his
marriage as much, if not more than his work, because both are in trouble. In my
estimation this is the turning point of the story, this is where Alex
reevaluates the way he has been looking at things for the past few months,
years, maybe his entire life. Julie moves in with her parents, and Alex’s
mother moves into the house to look after the kids until the end of the school
year. Alex calls Jonah to explain what he has learned from the hike, and how it
relates to the factory. Jonah explains that Alex has two kinds of resources;
bottlenecks, and non-bottlenecks. A bottleneck resource is one in which capacity
is equal to or less than the demand placed on it. A non-bottleneck is where
capacity is greater than demand placed on it. Alex must determine which
processes are bottlenecks. Alex and his staff search the plant to find
bottlenecks. At first, they go through statistical data, then physically walk
the plant to see workstations with work-in-progress piled up. The processes that
have a lot of work backed up in front of them are bottlenecks. Jonah tells Alex
that he should start balancing the flow of production with the flow of demand.
The bottleneck’s flow , which determines the rest of the flow down the line,
should then be balance with the markets demand. Alex and his staff determine
that the plant’s bottlenecks are heat-treat and the NCX-10. Jonah explains
that they must increase the capacity through the bottlenecks in order to
increase throughput and improve cash flow. At this point Jonah introduces some
new ways for Alex and his staff to look at machine hours and costing. The NCX-10
is a machine that must be running as many hours a month as humanly possible,
Jonah explains. However, it is often idle during break times and this costs the
plant thousands of dollars in expenses every month and they do not even know it.
Over a period of a few weeks, with many trial and errors, Alex and his staff
finally turn out the first month of profit along with lowering inventory, and
improving cash flow. Alex starts to think about his marriage more at this point.
School is out and the kids are living with Julie and her parents. Alex talks
with Julie again and they even go on a few dates together. He sees her now more
than when he was living with her. Alex begins to include Julie in his process of
growth, by explaining to her the changes that are going on in the plant, and
finds that she is very interested. The next step for Alex is too cut his batch
sizes to cut his inventories down and improve overall efficiency of the plant.
With shortened lead time, the whole production process is able to respond to
market demand faster. Alex starts promising sales that orders that used to take
five months, now will only take four weeks due to the shorter lead times. The
three months is up, and Bill Peach still is not completely sure about whether or
not this current success is not just a flash in the pan. Bill tells Alex that if
he does not see a 15% improvement the plant will close. Business is great and
with the help of Alex’s accountant Lou, the plant show an increase of 17%,
however according to traditional accounting methods the increase is only 12.8%.
On the day of the performance review, Bill Peach does not show up. Hilton Smythe,
the productivity manager, and a rival of Alex’s takes notes and makes his
recommendation for the plant to be closed because of the awkward style of
productivity. Alex immediately hunts down Bill Peach to see what he has to say
about this. Bill calms Alex down by congratulating him on his new position as
division manager. Evidently Bill wanted to see who would be able to see beyond
conventional methods, in order to compete in the new marketplace. Alex is
successful at home just as much at work. Julie decides to move back in after
rekindling their relationship. In her time away Julie read about Socrates and
found out that Jonah had been using the Socratic method all along. She shows
Alex that giving the answer is not always the key, but helping one ask the
questions is the true answer.