Wednesday, March 26, 2014

The Goal, by Eliyahu Goldratt

Dr. Goldratt introduces the theory of constraints (TOC) through a very long narrative.  The hero of this story, Al Rogo, is a plant manager with big work problems (and big personal problems too).   His mentor, Jonah, guides him towards an understanding of how to make his plant successful via a measured explanation of TOC so that Rogo (and the reader) can internalize each step as he moves forward.

This is very much lean production or Toyota Production System thinking.  As such, it can apply to virtually any throughput system.

Using a narrative to explain the methodology is a good news / bad news approach.  The good news is that for readers who would find a traditional text on lean manufacturing too dry, or who have trouble mapping the information to their own problems, this probably is a great alternative.   The bad news is that folks who just want to get to the meat of the system have to instead plod through the story line and have no way to just get to the approach directly.

Still, there are good, common sense nuggets in this book.  For example:

  • It takes a while, but Rogo finally realizes how to articulate the goal of his plant.  It is not the internal metrics of pseudo-efficiency, that allow him to take credit for a robot system's high performance even as inventory piles up and deliveries are delayed!  Rather it is:  "To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow." [p48]  You might say "doh!" but the story explains how easy it is to miss the big picture.
  • Understanding to goal allows Rogo (12 pages later) to find out that the measurements associated with his goals are throughput, inventory and operational expense.  "Throughput ... is the rate at which the system generates money through sales." [p60]  "Inventory is all the money that the system has invested in purchasing things which it intends to sell." [p60]  "Operational expense... is all the money the system spends in order to turn inventory into throughput." [p61]
  • Eventually (another 26 pages), Rogo learns that he can't get these three measurements into balance without understanding the impact of statistical fluctuations on dependent events. [p88]
  • And so it goes.  For 377 pages.  

The Goal: A Process of Ongoing Improvement

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