Roll No: PGP02.

093 Name: Mithilesh Pathak Summary The GOAL ` This book is very good for the learning of Operations management. It gives very nice insight of various processes and issues faced by Plant manager. In the opening section of the book the author discusses about the purpose of the book. The book attempts to show that small assumptions can be used to explain a very large spectrum of industrial phenomena. Goldratt has attempted to show with his book that "no exceptional brain power is needed for any innovation or expansion". Finally, Goldratt attempts to show that the way we are educated and learn is not by being given the answers but by being given the right questions that allow us to find our own answers through logical thought processes. Book discusses about Alex Rogo, a plant manager for Unico Manufacturing whose plant is struggling to survive. Alex's work life consists of a high stress environment where orders are consistently behind schedule and upper management is constantly breathing down his neck to get orders shipped. The plant is a train wreck that is losing money and facing a shut down. Alex is constantly fielding calls from his boss Bill Peach about problems with his plant's efficiency measures in terms of cost per unit. Under the pressure of losing his job, Alex is forced to think about how he can avoid disaster and revive the struggling plant. In a dilemma to how to save the plant, Alex approaches his old college physics professor, Jonah, who is able to provide a mental spark that kick start Alex's efforts by getting him to think about what the goal of the company is. After meeting with Jonah, Alex thinks long and hard about what the goal of the company is and is able to determine that the ultimate goal is to make money. After realization of Goal of the company Alex tried to use various ways to achieve it. Alex comes up with three measurements that will allow him to know if his plant is making money: net profit, ROI and cash flow. After this Alex again talks to Jonah who gives him definitions of throughput, inventory and operating expense. Jonah tells Alex that these three things are what should be used to measure the productivity and profitability of his plant and that they will also permit him to develop operational rules for running the plant. Alex again revises what the goal is and states that the goal is to "increase throughput while simultaneously reducing both inventory and operating expense". After further revision of the Goal, He assigned specialized tasks to experts. Alex's team consists of the production manager, inventory manager, head accountant and marketing manager. Alex quickly learns that the newly purchased robots that were supposed to increase productivity and plant efficiencies are not doing what they were believed to be able to do when they were purchased. He again consults with Jonah for the issue of Robot; Jonah introduces the concepts of dependent events and statistical fluctuations to Alex as being the reason that the robots are not as productive as they could be. Alex comes up with a way to improve productivity in the plant while on a hike with his son's Boy Scout troop. Alex led a troop of boy scouts on a hike through the woods. The troop is not moving at a fast enough pace and is getting too spread out on the trail because of one kid, Herbie. Alex realizes that the spacing problem (statistical fluctuations) is because Herbie cannot walk as fast as the others and anyone behind him in line is limited in their speed by him, therefore gaps form and may end up getting some of the kids lost. To keep the line moving at a constant pace and to avoid any gaps forming in the line, Alex places Herbie at the head

of the line. Since Herbie dictates the pace of everyone else behind him (dependent events), he is the constraint on the system. The illustration proves that capacity of a system is limited by the bottlenecks in the system. Alex and the team learn that the bottlenecks are costing the company much more money than they had originally thought. Since they cannot increase the capacity of the bottleneck machine, they must optimize its use by making sure that time isn't wasted at these machines and by making these machines work only on what will contribute to throughput today while offloading excess to other machines in the plant or outside vendors capable of performing the function of the bottleneck machine. They move quality control to a point in the system that occurs before the parts reach the bottleneck machines so that parts that don't meet their quality standards can be scrapped before take up capacity in these machines. This effectively increases the capacity of good quality products that are running through the bottlenecks of the system. As a result, the plant begins to experience positive effects of the changes. Alex and his team have turned their plant into a cash cow by restructuring the order of operations to take advantage of their system's capacity. Alex and everyone on his team has received a promotion and saved the plant. However, some problems do occur. The problem is that non-bottleneck machines have excess capacity which is creating excess inventory and finished goods because materials are being released faster than the bottlenecks can process it, which eats into profits through increases in inventory and operating expenses. Alex and his team develop a signaling system to figure out when materials should be released to bottleneck machines so that inventory doesn't pile up. In the end of the book Alex and his team develop a five-step process for solving throughput problems and Jonah asks Alex what are the techniques for effective management. The five-step process consists of: 1. IDENTIFY the system's constraint(s). 2. Decide how to EXPLOIT the system's constraint(s). 3. SUBORDINATE everything else to the above decision. 4. ELEVATE the system's constraint(s). 5. WARNING!!!! If in the previous steps a constraint has been broken, go back to step 1, but do not allow INERTIA to cause a system's constraint. Alex concludes that the purpose of the organization requires the synchronized efforts of more than one person and the performance of the organization is largely dependent upon the performance of individuals. Organizations should be regarded as chains, not just a pile of different links. The process of effective management in short form that Alex and his team decide on is: what to change, what to change to, and how to cause the change. For a manager to be effective they must learn these three thinking processes.