The Goal

BUAD 311
Leon Zhang
September 19th 2016
In Eliyahu M. Goldratts The Goal, narrator Alex Rogo encounters
operations problems far bigger than he anticipates. Throughout the story,
physicist Jonah mentors him and guides him to successfully save the plant from
shutting down. The first time Alex runs into Jonah, they meet in the airport
lounge. Alex begins the conversation, bragging about how he was chosen by
Unico for the panel because his plant was the most experience with robots. Jonah
is unimpressed and questions the actual results from using robots. Alex states
that they had improved a department by 36 percent, increased their efficiencies,
and lowered costs - thinking that the robots had increased productivity. Jonah
however, realizes that Alexs plant is actually inefficient, and predicts that they
are having problems such as shipping on time. Alex learns that productivity can
only be determined when you understand what your true goal is. In this case, the
goal of his plant is simply to make money. No actions can be called productive
unless they bring the company closer to their goal.
Now realizing what the goal is, Alex talks to Lou and understands that the
amount of money made must consider a relative measurement. As such, he
realizes that net profit, return on investment, and cash flow must all increase to
ultimately make money. Alex calls Jonah, worrying that such measurements are
not effective at a plant level. Jonah then teaches Alex about three measurements
he developed, and used when asking Alex about his plant for the first time.
Throughput, inventory, and operational expense can also be measured, and are
all covered by the plants activities. Alex learns that the goal can be expressed
through increasing throughput, while reducing inventory and operational
expenses.
Still lacking answers, Alex flies to New York City to meet Jonah. Although
Jonah doesnt have the time to tell Alex exactly what to do, Jonah tells him to
disregard issues concerning the robots, and that a balanced plant is crucial balancing capacity with market demand. The problem that Alexs plant and many
others are suffering from is the assumption that idle employees are detrimental,
and the need to trim capacity. He realizes that parts are always dependent on
one another, and that there are always statistical fluctuations. A balanced plant
is essential to face these issues. After Alex starts the hiking trip with his sons
scout group, he begins to make connections with what Jonah was saying. When
Herbie was at the front, he set the pace, as no one could pass him. Even if he
was that back, the group would have to slow down, or stop to let Herbie catch
up. Basically, the hike, like the plant, is a set of dependent events with
fluctuations. As their inventory increases, operational expenses also rise,
spending more energy to catch up.
Alex, Bob, Stacey, Lou and Ralph hold a short conference call with Jonah.
They learn that they must look at their resources and distinguish the bottleneck
and non-bottleneck. By identifying the bottleneck, they can then balance flow to
equal market demand (or ideally, be a little less than demand). The plant doesnt
know if they have any bottlenecks - they learn that they must first look at their
resources and see which one has a demand greater than the capacity to find the
bottleneck.

Jonah flies in and visits the plant. Jonah finds that the NCX-10 is not
running at times because workers are taking a break after every 4 hours. Jonah
states that this is counterproductive, as the machine is only available for so
many hours, yet the demand is much greater. Losing any time on it means that
the throughput is immediately lowered. Break times must be changed and
negotiated with the union, so that the NCX-10 is consistently running. Jonah then
assesses the heat-treat department and tells Alex that the stack of parts
indicates inefficiency, as they only eventually become throughput, while the
plant suffers from overdue orders. Jonah proceeds to look at the quality
inspection on rejected bottleneck parts, concluding that these parts are lost time
and throughput from the bottleneck. As such, Alex realizes that the bottleneck
works most effectively with quality control at the front to filter out parts that are
defective, and recover the time they were losing. To not waste this time,
bottlenecks should only run on parts that can directly contribute to the
throughput that day, increasing the capacity. Alex understands that certain parts
should be processed on other, non-bottlenecks. Alex then learns and implements
a new system - red, and green tags to show priority for processing. Along with
numbers of the tags, everyone now knows what to work on.
Jonah visits the plant again, and corrects Stacys claim of a new
bottleneck. Jonah points out that the plant is creating excess inventory when
non-bottlenecks do extra work. Utilizing a resource should move the system
towards the goal. The true bottleneck is still the NCX-10, and the plant has
turned other machines into the new bottleneck after increasing throughput and
their utilization to full potential. Alex learns that they must not let the work-inprogress exceed the bottleneck capacity.
Alex receives a call from Jonah, informing him that additional
improvements must be made to save the plant. Alex learns that he must split
batch sizes in half, to ultimately achieve the goal of making more money. Doing
so will half the work-in-progress, and subsequently smooth the production
process and expedite orders.
Alex calls Jonah one last time, informing him that he has been promoted
and must manage three plants. Though he calls to ask for advice, Alex learns
that as he progresses in his career he must become more independent and not
rely on Jonahs help. Subsequently, Alex understands this mentorship and takes
these lessons to use in his own endeavours and to teach others.