Book Review — The Goal
I have to confess that I was skeptical with business fables. I thought about it as a theory presented behind a poor story. And this story was only there to make the theory more easy to comprehend. Even so, I have to admit that this book changed what I thought. This book doesn’t treat the concepts as a given, but makes the characters develop it step by step. This development also does not happens on a perfect world, but on a place with problems and unhelpful metrics, just like the real world.
The story unfolds on Alex Rogo, the plant manager. After his boss tells him that he has 3 months to deliver best results, otherwise his plant will be closed. Also, the current situation is anywhere but good: plenty of late orders and a poor financial status. And then, he remembers a random encounter with a past physics professor, Jonah. Talking about his plant, he bragged about how he improved productivity, through the automation of some tasks. The professor then starts asking some provoking questions which makes Alex wonder about productivity.
Alex then starts to figure out what productivity means. It does not means producing more, it means going towards the company goal. And what is the company goal? After some thought, he figures out that the plant exists for a reason: to make money. And every step towards making money is productive, every step that does not helps it, it is not.
So, what is the goal ? After some thought alongside his staff, he states the goal as “to increase throughput (the rate which the system generates money through sales) reducing both inventory (the money the system invested to purchase thing it intends to sell) and operating expenses (all the money the systems spends to turn inventory into throughput)”.
Were the automation of those tasks productive ? Indeed, the cost of some parts dropped, but did sales go up because of that ? No. Did the operational expense go down ? No. So, even though the cost of producing some parts decreased, the system did not generated more money because of that. So, in fact it wasn’t productive whatsoever.
Alex and his staff then start to improve their plant. Jonah tells them to look at the bottlenecks, which are parts of the chain that reduces the throughput. So, no matter how you optimize some parts of the system: the throughput will always be limited by this bottlenecks.
On this book, Eliyahu M. Goldratt presents the Theory of Constraints. So, to improve any chain of process, you must:
- Find the constraint limiting the throughput;
- Decide how to exploit the constraint.
- Subordinate everything else to the above decisions.
- Elevate the system’s constraint
- If in previous step, a constraint has been broken, go back to step 1, but do not allow inertia to cause a system constraint.
On the book, they discover that a specific machine was the constraint. How they discovered it ? First, they found a way to make that machine work all the available time. Second, they also added a quality control station to the front of that machine, for it to not process problematic parts. And third, they limited the input of materials to the system to what only was necessary to deliver the orders. In summary, they found ways for the bottleneck to not waste time.
What happened then? They reduced the inventory batch size being added do the system. And doing so they not only reduced inventory, but also reduced operational expense, as it costs less to keep the plant working.
Based on this review, you may think that I have told you the whole story. But I think that the greatest teaching this book bring is not what they did, but how and why they did each step to save their plant. So, I would recommend this book to anyone that wants to take a look not only to optimising their work, but to optimize the whole system.
