April 25, 2011

A Summary and Review of The Goal by Eliyahu M. Goldratt and Jeff Cox: A Guide for Thinking Executives – and Those Who Want to be One

A Summary and Review of The Goal by Eliyahu M. Goldratt and Jeff Cox: A Guide for Thinking Executives – and Those Who Want to be One: "


Cover via Amazon


Executive Summary



This book is about a man, Mr. Alex Rogo, who is a plant manager for UniCo. He is caught in a situation where his plant is loosing money and he only has three months to get it back on track or they will shut it down. Alex does this while battling family issues at home with his wife. In the beginning Alex has no idea where he is going to start or even understand why they are loosing money. Everything that he reads according to the numbers of the company says that he is running a very efficient company.

Alex finally remembers running into his old physics teacher from college, Jonah. He had talked to him about his company and Jonah pinpointed the issues he was having with out much information. So Alex contacts Jonah after he finds out about the possible shutdown of his plant. Jonah gives him leads then makes Alex figure them out and call him back. Jonah first tells Alex to figure out what productivity and the goal of his plant was. Alex contacts him back with answers to those questions.
Next, Jonah gives him three exact measurements with specific definitions. They are throughput, operational expenses, and inventory. Jonah tells Alex to figure out what these measurements are equivalent to in his plant. Alex ponders with others in the plant and then returns yet again with answers to his questions.
Jonah next gives him three quick rules which are the opposite of what anyone else in the business has taught him. He continues to tell him about dependent events and statistical fluctuations. Alex goes on hiking trip with his son and relates these to the line that the boys are in for a better understanding. When he returns from his hiking trip he finds his wife has left him only to worsen the situation.
After Alex has a clear understanding of statistical fluctuations and dependent event he returns to finding Jonah again. Jonah then tells him about bottlenecks and non-bottlenecks in the plant then as usual tells Alex to return once again when he has a better understanding. They experiment with different ways to supply parts to the bottlenecks and do notice an increase in productivity, until they run into another problem at the plant.
Jonah decides this time he needs to come to the plant and see what is going on for himself. Jonah walks through the plant and shows them a few things and asks them questions to figure out for themselves. They eventually get the plant running better than any other plant in the division, maybe even the industry. The plant does not get shut down and Alex and all of the other members of the group that saved the plant get promotions.
Alex is promoted to the division leader and now wants to figure out a way to represent what they have done on paper. The old system they use shows the company not doing so hot when they are actually doing great. They ponder about this and end up figuring out they can expand to other countries for a low cost and be competitive.




The Ten Things Managers Need to Know from The Goal

1. The Goal: Identify the goal of your company. With this you then decide what is productive and what is not. Anything that is working towards the goal is considered productive.

2. Measurements: Measurements are important for keeping record of how your business is doing. Make sure these measurements are accurately defined in terms of the goal of your company.

3. Critical thinking: Be active in your quest for knowledge. Seek out answers, because they do not often find you. Experiment with ideas before putting them into action.

4. Teamwork: Teams are very important to critical thinking. The more heads on the job the better. People have different opinions and different outlooks someone may think of something that you never would have.

5. Never give up: There is always a chance to come back as long as your business in still running. When you give up is when you lose your chance to even try.

  • Five step process for improving constraints.


6. Identify: First identify the constraint in your company. A constraint is a something that limits the amount of output your company can produce.

7. Exploit: Figure out a way to get more products out of the constraint without using any more capacity. There are many different ways to do this, such as in the book they altered lunch breaks so that the constraint machine could be running non-stop.

8. Subordinate: Make adjustments to non-constraint resources. Non- constraint resources can produce at a higher rate than constraint resources. By limiting how much the non-constraint resources produce you lower the carrying cost of the products waiting for the constraint resources to be finished.

9. Elevate: Take some of the workload off of the Constraint. The constraint needs to be able to produce at or close to the level of demand. Using other resources to produce constraint items is a good way to do this.

10. Repeat: Start over again on these five steps. There will always be a constraint in a business that needs attention. The more constraints identified and fixed throughout these steps the better off your business will be.




Full Summary of The Goal


Chapter 1

The Goal by Eliyahu M. Goldratt is about a man named Alex Rogo and his quest of knowledge to make his company once again profitable. The first chapter begins with Alex coming into work only to notice someone is parked in his spot. He then realizes that the only person who would do this is Bill Peach who is the division’s vice president. Once he is in the office he finds out that Peach is there to figure out the status of the order number 41427 which is seven weeks late. Then once Rogo and Peach start talking; Peach informs Rogo that his company is loosing money. Next Peach states that he only has three months to turn the company around. Rogo then goes back to the issue at hand number 41427.

Chapter 2

Rogo then heads home that afternoon to get something to eat. He meets his wife in the living room. She wants to go out to get something to eat with him, but he tells her he can’t because his problems at the plant he has to get right back. They get into an argument and she cries then he consoles her and tells her he will be back later that night. Once he gets back to the machine that he learned was down before he left he talks to someone in the plant asking if they are going to make the order and the plant worker said “maybe.” At 11 pm the order leaves the dock to be shipped they sigh in relief. He leaves work to get a bite to eat with a plant worker to celebrate. Then Rogo remembers that his plant is loosing money and contemplates why. His efficiencies are good but he can not put his finger on what is causing the problem.

Chapter 3

He wakes up the next morning and has to go to a meeting that Peach has called, but will not tell anyone what it is about. On his way to the elevator he begins to talk to Nathan Selwin a co-worker. Nathan begins to tell him quietly that the whole division is going to go down if Peach doesn’t do something about it. During the meeting Rogo decides he should start paying attention so he reaches for a pen, but instead he pulls out a cigar. He doesn’t smoke anymore so he wonders where it came from, and then he remembers!

Chapter 4

It was two weeks ago at the airport he recognized his old friend who was a physicist, Jonah. They begin to talk and catch up with what each other are doing these days. Rogo tells Jonah that he is a plant manager for UniCo and Jonah seems to be more interested in that. They begin to talk about the robots that were recently installed in the plant. Rogo tells Jonah that the robots have increased plant productivity, but after Jonah asks a few questions Jonah disagrees. Jonah tells Rogo he is not running as efficient of a plant as he thinks he is. Jonah tells him to think about what the goal of his plant is before he leaves.

Chapter 5

Rogo is still in the meeting thinking it is a waste of time and wonders why he is still there. Rogo bails on the meeting during the break to go back to the plant, but passes it up. He instead gets food and goes sit on a hill and thinks about what Jonah told him two weeks ago. After pondering a few different things he comes to the conclusion that making money is the goal of the company.

Chapter 6

Rogo finally returns to the plant at 4:30 that evening. In his office he inquires Lou the plant’s controller about the goal of the plant. Lou agrees that it is to make money. They continue to talk about the measurements that are used to tell if a company is making money. He finally realizes how late it is at work and calls his wife and they get into an argument again. Rogo finishes talking to his night time manager then heads to the house.

Chapter 7

He gets home to meet his daughter still up to show him her report card which was all A’s. He puts her to bed then begins to think about the business again. He knows he only has a little time to turn things around, but he needs to know so much more. This is when he decides he needs to talk to Jonah again.

Chapter 8

Once he gets to work in the morning he finds out Peach is on the phone. Peach chews him out for walking out on the meeting then continues to keep him in meetings on the phone for the rest of the day. He decides to go to his mother’s house to look for his old contact book to try and track down Jonah. He finally gets a hold of Jonah after talking to many other people. Jonah then gives Rogo 3 measurements with specific definitions to calculate the goal. The conversation gets cut short again and he leaves Rogo to figure out how to define the measurements in terms of his plant.

Chapter 9

The next morning he gets to work late and goes straight to Lou’s office to discuss about the new figures Jonah has given him. They then bring in the Inventory manager Stacy and Bob the supervisor in the plant to discuss more about the figures. They figure out a few things are wrong according to the goal and then Rogo decides to discuss what he has been talking to Jonah about.

Chapter 10

Once he has cleared the air about Jonah and explained to him everything that they have talked about they start again. They begin to compare the figures that Jonah gave him to their own company. He tells the workers about how he only has three months to get the plant to make money. They then decide to call Jonah again. Rogo and Jonah decide to meet in New York.

Chapter 11

The next morning he meets up with Jonah in the hotel in New York. They begin to talk about the goal and the problems at the plant again. The next two figures that Jonah tells him about are statistical fluctuations and dependent events. He explains how these affect his plant the runs out of time again and has to leave.

Chapter 12

He returns home from New York to find his wife at home who he has been calling like crazy with no answer. They once again get into a heated argument to once again resolve it. Rogo promises to spend the weekend with his wife, but has to return to the plant for the time being.

Chapter 13

Saturday morning he wakes up to see his son dress in a Boy Scout uniform. He remembered that he had promised to go on an overnight hike with him. The troop leader was sick so Rogo had to lead the troops. During the hike he notices the line spreading and closing and relates that to statistical fluctuations and then states that the dependent events of each scout cause them.

Chapter 14

The troops decide it is time to stop for lunch. During lunch Rogo makes a game up to experiment with statistical fluctuations. He has the boys play it and he keeps record. He uses this to simulate the assembly line in his plant.

Chapter 15

They continue the hike Rogo still comparing it to the plant. He decides to then change the leader to Herbie who is the slowest kid in the group. He thinks this will cut down the fluctuations in the group. Then they finally get to the campsite and set up camp.

Chapter 16

Rogo and his son get home about 4:30 Sunday evening only to find an empty house and a letter from his wife that she had left him. He goes to pick up his daughter from his mothers house where his wife left her and then calls around to find where his wife is, but can not find her.

Chapter 17

Rogo starts work on Monday morning to find out that Hilton has left a message. He needs his 100 parts by the evening, but Rogo doesn’t think he can do it. Then Rogo gets the crew together and starts talking about what he has learned during the Boy Scout trip. They are hesitant to believe him, but he ends up proving himself using the process of the Hilton order as an example.

Chapter 18

The next day everyone is already in his office when he gets to work. They are ready to discuss the next step, but they do not know where to go from here. So they naturally decide to call Jonah. Jonah then tells them about bottlenecks and non-bottle necks. The conversation is quickly ended again then their only choice is to find these in their plant. They find out that their newest machine the NCX-10 is a bottle neck for the plant and also the furnace.

Chapter 19

Rogo talks to Jonah yet again, but this time Jonah decides to come to Rogo’s plant. They tour the plant with Jonah and look at all the bottlenecks of the plant. Jonah gives suggestions on how to fix their bottlenecks to keep up with demand. He also shows them how they were calculating the cost per part of the bottlenecks wrong.

Chapter 20

The group meets again in the morning. They have a discussion about what actions are going to be taken with the bottlenecks. They decide on a few things to start implementing in the plant. While these things are happening Rogo goes to talk to his wife which he found out is at her parent’s house.

Chapter 21

Rogo gets home and decides to call his wife a make a date for Saturday and she is very happy to agree. He then returns to the plant and meets back up with the regular group. They then decide to implement a tagging system which will let the employees which parts have priority. Then Saturday he takes his wife on a date.

Chapter 22

Rogo returns to work to find out that their plan is slowly improving their production. They are catching up on their late work orders. But, it’s not enough so he asks for more suggestions by the Wednesday meeting. On Wednesday Bob shows up to the plant with an old machine used to do what the NCX-10 does to take some of the load off.

Chapter 23

Rogo is going on many dates with his wife these days and they are getting along a lot better. In the plant he finds out more about hold ups on the bottlenecks and solutions for them. They keep implementing these new solutions which improve the plants productivity.

Chapter 24

The group decides to celebrate due to the new record they have set in orders delivered for the month. They go out and Stacey drives him home only to find his wife who thinks he is cheating on her, she takes off again. The next day at the plant Rogo is informed that new bottlenecks are forming throughout the plant. Rogo and his wife make up and he calls Jonah to get advise again only for him to say he needs another look.

Chapter 25

Rogo picks up Jonah again from the airport for him to investigate yet another problem that the company is having with the bottlenecks. They suspect that there is another bottleneck forming in the plant, but Jonah thinks otherwise. Jonah explains how bottlenecks feed non-bottlenecks and vice versa and that is where their problem lies.

Chapter 26

At home again Rogo is thinking about how to apply what he has learned from Jonah. His children asked if they can help and they do in fact more than they think. The group got together with Jonah and devised a new schedule that would predict when items would be finished and when some needed to be released. Then Rogo brings Jonah back to the airport.

Chapter 27

Rogo is in a meeting with Bill Peach and others from UniCo when they say that his division is the only one profiting now. He meets with Bill in the office one on one and they decide that if Rogo raises his bottom line 15% more than Bill will not shut him down next month. He decides to go to visit his wife and kids since he has not seen them in a while. They get in another argument about their marriage and then make up.

Chapter 28

He gets home only to the phone ringing, its Jonah; he says that he will not be able to talk to Rogo for a few weeks so he needs to talk to him now. Jonah suggests cutting the batch sizes in half. They discuss this suggestion over a nice meal. Rogo then has a meeting with Johnny johns telling him how much faster he can produce products and he needs more contracts.

Chapter 29

Rogo wakes up in the middle of the night after a nightmare all he can think about it the plant and how the figures make it look like cost is going up when actually they are doing the opposite. Lou comes in his office the next morning saying he can solve the cost problem to buy them a few months, but it’s not valid according to the accounting department so it would be a risk. Jons calls him back with an offer to do 1000 model 12’s in 2 weeks, but Rogo decides that it is impossible, but they could do 250 a week for 4 weeks and they get the account.

Chapter 30

At the beginning of the new month they are having their meeting and Lou comes in with the figures and states that they have hit the 15% mark plus a little more. Rogo goes away for two days and comes back to find they are shooting a TV program about their robots. He slips up about the new batch sizes and the figures to Hilton and begins to get audited by the company. During the meeting a helicopter shows up its Mr. Burnside who had the big order he wanted to congratulate everyone in the plan for doing such a great job. After all this he decides to go visit his wife and they decide to get back together.

Chapter 31

The meeting is held to determine whether or not Rogo’s plant was going to be shut down. In the meeting Hilton does not listen to what Rogo has to say and condemns his plant. Rogo out of a last hope goes to Peaches office and tries to convince him when Peach had already made up his mind that it was going to stay. Also, Rogo was going to get a promotion to Peaches position and Peach was moving up also.

Chapter 32

Rogo and his wife sit down at dinner to celebrate his promotion. They talk about how he worked hard with Jonah’s help, but they couldn’t help but wonder why he couldn’t do it on his own; it all seemed like common sense.

Chapter 33

Rogo goes back to his old plant in his new position. He first talks to Lou, then Bob, next Stacey, and last Ralph. One by one he is giving them promotions.

Chapter 34

The group once again gets together. This time it is different though now they are talking about how they are going to take action toward the whole division instead of one plant.

Chapter 35

They continue to discuss the topic at hand this time comparing it to the scientist from history, Mendeleev. Then the goes home to talk to his wife who has been reading Socrates.

Chapter 36

They meet once again trying to put what they did in the plant to rules they can follow. They develop a five step process of evaluating and fixing problems in the divisions.

Chapter 37

They continue to make changes and developments to the rules that they have made getting them ready for action.

Chapter 38

Rogo is asking Johnny for more sales for his plant to see if everything they implemented is working correctly. They now decide to expand their market to Europe at a cost lower than they are selling here.

Chapter 39

Rogo gets a call from Peach to discuss his new actions and to discuss the fact that he knew Hilton’s plant was going to lose its bottom line. He also can not understand how Rogo’s system works so he has him come down to teach him.

Chapter 40

They all go to head quarters to tackle the issue at hand. Rogo figures out he is on his own now. He can’t ask for Jonah’s help or else he would never be able to go through the thinking process for himself.



The Video Lounge





This video is an interview with Eli Goldratt in which he explains the first part of the Theory of Constraints. He states in this video that you first need to find the problem at hand. Next gain knowledge from the person who knows most about it. Then from that you begin the other steps in the Theory of Constraints.



Personal Insights

Why I think:


  • With business conditions today, what the author wrote is – or is no longer true – because:

With business conditions today, in the past, and in the future I believe what this author has written will always hold true. No matter where you go or what company you’re in there will always be constraints. There will always be that something that holds you back to what you could possibly produce. But, holding you back is not always a bad thing because you don’t want to over produce. There will always be a demand, but knowing how big or small it is and controlling it is the key.

Then, all of the following bullet-items are mandatory to write about:

  • If I were the author of the book, I would have done these three things differently:

1. I would cut down on the unnecessary dialogue. I know that it does help to keep the attention of the reader, but most of the people who read this book are looking for business help.

2. Make some of the information more clear. It was not too bad, something were hard to keep up with so I had to reread those sentences/sections.

3. I would list a page at the end of the book with all the strategies, formulas, and definitions. That way after someone is finished reading the book they could look there for the information they needed instead of searching the whole book.

  • Reading this book made me think differently about the topic in these ways:

1. Reading this book makes me think about where I work. It makes me think of what constraints are there and what can I do to improve them.

2. It also makes me think about work and family life. I never want to end up taking all my time on work and not be able to be with my family when I am older such as the main character in the book.

3. It makes me feel that if I work hard at something I believe in good things will happen to me too. That also gives you the feeling of accomplishment.

  • I’ll apply what I’ve learned in this book in my career by:

1. I will try to notice more at work. See what is affected by what and what we can do to fix it.

2. I will be more outgoing and work harder. Hard work pays off in the end and you can not get anything done sitting around waiting for the work to come to you.

3. When I finish a project in work I will only think about what is next. There is always something next and it will never stop.

  • Here is a sampling of what others have said about the book and its author:

“What others have said about the book and its author?”

A person on writing.com said that he liked the book because it was informative and easy to read. He believed that the book had a good concept of being competitive and keeping your customers happy or else your will lose them. He believes that this book is good for anyone who is trying to get into management or owning a business.


Another person on smallbusinessarena.com also states that this book is easy reading. He says that the author is a business genius and that anyone who is in production, accounting, or operations must read this book. He is in aw about how the author can take simple logic and make it into advanced tools that can help save a business from crisis.




Bibliography


Goldratt, E, & Cox, J. (2004). The goal. Great Barrington, MA: The North River Press.

Kirtok, A. (2005, May 12). The goal by eliyahu m. goldratt review. Retrieved from http://www.smallbusinessarena.com/the-goal-by-eliyahu-m-goldratt-review/

Lui, J. (1997). The goal by eliyahu m. goldratt. Retrieved from http://www.angelfire.com/ca2/jlui/thegoal.html

Richdett, Initials. (n.d.). The goal. Retrieved from http://www.writing.com/main/handler/item_id/397742-The-Goal


Sullivan, T. (1998, January). Implementing the theory of constraints (toc) in production. Retrieved from http://www.ciras.iastate.edu/publications/CIRASNews/winter98/toc.htm

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Contact Info

To contact the author of this article, “A Summary and Review of The Goal by Garett Templet for Thinking Executives – and Those Who Want to be One,” please email w0358012@selu.edu.



Biography

David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (http://reverseauctionresearch.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of works he has helped his students to turn into editorially-reviewed publications at the following sites:




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44 comments:

  1. great job on this, very thorough -thank you for sharing your insights. i recently read The Goal for my business class and it has changed how i do my work and encouraged me to look for ways to be more efficient and encourage people to do the same. where i work, i find it challenging to convince people that there are OTHER ways of doing things and that we need to be open to doing things differently.

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  2. This is a terrible novel and a great business book. That's a little unfair, it's better to think of it as a novel which exists only to illustrate Goldratt's Theory of Constraints which sounds a little dry. So for my third attempt I'll say this is a book about a man fighting to turn a factory around from being overwhelmed with uncompleted orders and quality problems to a successful, thriving business. It's good fun and a great little read.

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