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The Goal Chapters 1-12. A Process of Ongoing Improvement Eliyahu M. Goldratt and Jeff Cox. The Goal. Plant Manager Physicist/Production Consultant Division VP of Manufacturing

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the goal chapters 1 12

The GoalChapters 1-12

A Process of Ongoing Improvement

Eliyahu M. Goldratt and Jeff Cox

the goal
The Goal

Plant Manager

Physicist/Production Consultant

Division VP of Manufacturing

Plant Production Manager

Plant Controller

Production Control Manager

IT Manager

Characters:

Alex Rogo –

Jonah –

Bill Peach –

Bob Donovan –

Lou ____ -

Stacey Potazenik –

Ralph Nakamura –

the goal3
The Goal

Setting:

City of Bearington – location?

UniCo Corporation Manufacturing Plant –

Pennsylvania, Ohio, Indiana manufacturing town

  • probably 15 years old
  • other impressions?
the goal4
The Goal

Introduction: What’s your first impression of the manufacturing plant?

  • Plant out of control
  • VP of manufacturing expediting an order
  • New robots
  • Controlled chaos
  • Good at “fighting fires”
  • Excellent at getting order filled when pressed
  • Lots of inventory
the goal5
The Goal

Alex travels to corporate meeting with a bunch of “corporate speak”.

Alex begins daydreaming.

the goal6
The Goal

Alex/Jonah Chance Meeting in Airport

Alex – “Robots increased productivity by 36% in one department”

Jonah – “Are plant inventories down?” : No

“Is employee expense less?” : No

“Shipping more product?”: No

Alex – “Must keep robots running to maintain efficiencies”.

Jonah – Then “Inventories must be sky high and orders must be late.”

the goal7
The Goal

Alex/Jonah Chance Meeting in Airport – cont.

Jonah – “In your own words, what is productivity.”

Alex – “ Accomplishing your goals”.

Jonah – “Correct, then what is the goal of your company?”

Alex – “To be more productive?” : No

“To produce products?” : No

“To increase market share?”: No

Jonah – “How can you be productive? You don’t know the goal.”

the goal8
The Goal

What does Alex determine “The Goal” is?

How do you know you are making money (Alex and Lou)?

To make money!!

  • Net profit (Income-Expenses)
  • Return on Investment
  • Cash Flow

Why are each of these important?

the goal9
The Goal

How do the “making money” measures translate to the production environment?

(Jonah’s translation)

  • Throughput – Is the rate at which the system generates money through “Sales”
  • Inventory – all the money that the system has invested in purchasing things which it intends to sell.
  • Operational Expenses – all the money the system spends in order to turn inventory into throughput.
the goal10
The Goal

What is the common word in all three measurement definitions?

  • Money going into the system (Op. Exp.)
  • Money stuck inside the system (Inv.)
  • Money flowing out of the system (Throughput)

Money !!

the goal11
The Goal
  • Throughput – Is the rate at which the system generates money through “Sales”
  • Inventory – all the money that the system has invested in purchasing things which it intends to sell.
  • Operational Expenses – all the money the system spends in order to turn inventory into throughput.

Where do the following fit?

  • Raw materials
  • Direct labor
  • Indirect labor
  • Tooling, machines, building
  • Knowledge gained by employees
the goal12
The Goal

Alex meets Jonah in New York seeking help to determine steps to take in achieving the goal:

Jonah – “Do you run a balanced plant? Do you have any idle workers and is it good or not?”

Alex – “We try to keep all our employees productive”

the goal13
The Goal

Jonah – “Impossible to perfectly balance capacity to demand, there even exists a mathematical proof showing if you did, inventories go through the roof?”

Alex – “How’s this possible”

Jonah – “Due to two phenomenon:

  • Dependent events – a series of events must take place before another begins.
  • Statistical Fluctuations – the length of events and outcomes are not completely deterministic.

The combination of these phenomenon are the issue.”