The Goal Book Report

INTRODUCTION

‘THE GOAL´, Eliyahu Goldratt describes a new method to optimize production environments. The book talks on how organizations should achieve its goal and how to make money in contrast to the traditional efficiency theories on maximizing machine outputs. In this novel, Alex Rogo, a production manager is mentored by Jonah, a management guru to optimize his Plant and prevent it from closing down.

GENERATING MONEY

In our current economic system, one only type of asset to be able to exist is money. The Goal of every company or plant should therefore be to keep generating money, to make sure the plant can still be there tomorrow to generate jobs and welfare.

Goldratt proposes three measures on how the generation of money can be measured.

When a product is not sold directly after producing it to generate turnover, production only leads to unnecessary inventories and operational expenses. The Theory of constraints, is method of production Jonah suggested, which will help a company to generate money in a more efficient way. It is based on the theory that the output of different machines in a production process can differ from one another.

The slowest machine will always determine the speed in which products can be produced and therefore also the speed in which sales can be realized, the turnover. This slowest machine is called the bottleneck. The costs of one lost production hour on the bottleneck machine can calculated by determining the output of the machine (number of products) and multiply it with the sales price of the end product.

The DRUM-BUFFER-ROPE

Goldratt describes the drum-buffer-rope concept to optimize efficiencies of bottlenecks and put theory of constraints into

one hour of not producing costs the company one hour of sales which can be produced in one hour.

• The ROPE represents a maximum amount of Work in Process (WIP) in the line. During a hiking trip, Alex discovers that the difference in speed in which the kids walk lead to growing distance between the first and the last kid in line. This distance represents the Inventory in a factory. By binding the boys together with a rope, the faster boys are forced to walk slower and the maximum distance between the first and the last boy is managed. By determining the length of the rope, the so called WIP-cap, one can prevent different workstations from overproducing.

The concept of Throughput

The Drum-buffer-rope principle helps the organization to maximize production throughput. A possible measure for throughput of a factory is the Lead time, which is the total time a product spends in the factory, from raw materials to end product. Goldratt describes four types of time:

1. Change-over times, the time a product(part) has to wait before it can continue being produced

2. Process time, the time necessary to alter the products and add value to