The Goal A Process of Ongoing Improvement by Goldratt and Cox Book Report

      

The Goal is an industrial novel approaching the production world and presenting a very different view of cost accounting. The entire book refers to a single goal: making money.

The Goal presents a plant manager, Mr. Alex Rogo, who must confront and resolve a thousand and one pitfalls to keep its plant open. The divisional Vice President, Mr. Peach, gave him three months to rectify the situation. Over chapters, Mr Rogo has to face to resistance to change, but not from employees neither from supervisors but from management people. To my point of view, The Goal could be divided into three stages: the despair, the hope and first results, the successful battle. |

 ½hen Alex͛s supervisor came to the plant to resolve an overdue order problem, he also warned Mr. Rogo that without any improvement within three month the plant will be closed. Alex is shocked and has to debate whether to abandon or to fight and stay with the company and to try to make the necessary changes to show productivity in his plant. This leads to the introduction of another character, Jonah, an old physic professor. Jonah will predict the problems Alex has to face, and he introduces three key concepts: throughput, inventory, and operational expense. |
 
  
  After Alex decided to fight for his plant, he has to confront his employees and convince the team to work on the three terms given by Jonah: throughput, inventory, and operational expense. It is not an easy task because the concepts are new, but the team will accept the change in order to improve the efficiency of the plant. Alex, will meet Jonah several times and learn other concepts which will help him to reach his objective. Supported by its managers and supervisors, Alex will implement common sense concepts such as: the subordination of activities of non-bottleneck to bottlenecks; the reduction of the

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size of batches; to balance flow, and not the capacity of departments based on the demand; the creation of an inventory for products not sold. Intuitively Alex feels it is the right path. Fortunately the first results of the team will appear. The plant realized the following improvements: dramatic reduction of the actual waiting orders and diminution of the overall inventory (raw materials, goods in process and finished goods) of 60% compare to the preceding month; decrease of the time of delivery, moving from an average of 10 weeks to 3 weeks; reduction of the cycle of fabrication generating a rapid increase of sales; return to profitability. Shortly after, the sales director of the division recognizes the plant to be very useful. In fact, sales incense the factory. The new strategy enables the division to regain an important customer. This regaining enables the company to be profitable for the current quarter. @


 



 The last part of the book presents the difficulties Alex has to convince people in management. Even if the results improved, the Controller of the division discovered that the cost of products prices has increased. To him, it means more cost and does not understand that it could lead to a better productivity. Mr. Rogo tried to explain its strategy during the corporate meeting, but they stay skeptical. Nevertheless, the division vice-president, Mr. Peach recognizes its efforts by rewarding him with a promotion. Alex has now to deal with three plants. He continues to work with his team and come up with a strategy in five steps which follow the theory of constraints: first step ʹ identifying the constraint, second step - deciding how to exploit the constraint, third step - subordinating all other processes to the preceding step, fourth step - increasing the constraint, fifth step - repeating the process if new constraints are identified. At the end of the book, Alex finds the key questions to management: ½ ½

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Throughout The Goal we have a new way to look at cost accounting. How to make money is the unique objective of the novel. ½e learn that to earn money organization is needed in order to increase the throughput, while decreasing the value of inventories and operating expenses. The objective is not reducing expenses anymore, but to change the process. The Theory of Constraints is an approach that increases the capacity of a process by identifying the bottlenecks. The aim is to maximize resources at the bottleneck. Therefore bottlenecks should not be neglected as they are the weak part of a process. It also shows us the importance of balancing the flow of product through a plant instead of balancing capacity based on demand. ½e also learn that process should be view as a journey. To achieve the journey it is important to have a common sense approach, a general overview of where to go. ½hen something is not working it is better to have an outside perspective in order to find a solution to the problem. As seen in the book, different modification can lead to improvement as reducing the size of batches; reorganizing the process, or the place of each employee in the process, pay attention to the size of inventory, etc. These modification could help reducing the costs and improving production capacity. ½hat is important to keep in mind is to try to change one of the three key concepts given at the beginning of the book: throughput, inventory, and operational expense, which is possible by asking ourselves these three questions: ½hat to change? ½hat to change to? How to cause the change? These elements are the basics of management and lead to profitability. The last thing the book teaches us is to not focus on the costs but on the results.

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The Goal teaches us many concepts and lessons through the story of Mr. Alex Rogo. It gives us the direct application of theories and therefore allows us to do the same in the real life. It also let us to read between the lines to understand key elements in life as to have an open mind and to keep a common sense approach whatever the situation is. Reading this book will allow me to apply the lessons I learned when it will be necessary. I will therefore try as much as possible to keep a common sense approach to each situation, and to apply the key concept of management I discovered by reading The Goal, as asking myself: ½hat to change? ½hat to change to? How to cause the change? if changes are needed to improve profitability. I will also use the Theory of constraints and its five steps if the company I am working for needs to implement a new strategy to make more money.

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