ACADEMY OF ECONOMIC STUDIES

FACULTY OF BUSINESS ADMINISTRATION

THE GOAL
A Process of Ongoing Improvement
By Eliyahu M. Goldratt

THEORETICAL ASPECTS APPLIED TO

MANAGEMENT
Prof. DANIELA ERBAN, Ph.D.
BUSINESS MANAGEMENT
FINAL PROJECT

Bucharest
January 2014

RZVAN FLORINA
FABIZ, group 125

The

book is a management-oriented novel

Author:

Dr. Eliyahu M. Goldratt

(March 31, 1947 June 11, 2011)

Theory

of Constraints
It is written as a piece of fiction

What is a goal?

A goal is something that we want enough that we make an effort to reach

it.

What is the goal of any business?

Cost-effective purchasing?
Employing good people?
Producing products? Producing quality products?
Selling quality products?

High technology?

Capturing market share?

THE GOAL OF ANY COMPANY IS TO MAKE MONEY!!!

Three measurements are needed:

Throughput = the rate at which the system generates
money through sales
Inventory = all the money that the system has invested in
things intended to be sold
Operational expenses = all money spent to convert
inventory into throughput

The goal is to increase throughput

while simultaneously reducing both
inventory and operating expenses.

A bottleneck is any resource whose capacity is equal to or less

than the demand placed upon it.
A non-bottleneck is any resource whose capacity is greater
than the demand placed upon it.
The objective is to maintain capacity at slightly less than demand.

How do we find the bottlenecks?

Market demand > Resource capacity
=> Bottleneck resource

In the UniCos plant the two bottlenecks are:

the

multi-process automation machine, NCX-10

a heat-treating furnace

The steps they proceeded with to solve the bottleneck

issue:
NCX-10:

Two employees to setup the robot

Employees break during machine working time
Use of the older machines
Produce only what is in demand
Cut batches size
Heat

Treatment:
Quality control testing
Hire outside vendors to assist in heat treat.
Cut batches size
Combine batches that require the same temperature.

Step 1: IDENTIFY the system's constraint(s)

Step 2: Decide how to EXPLOIT the system's
constraint(s)
Step 3: SUBORDINATE everything else to the above
decision
Step 4: ELEVATE the system's constraint(s)
Step 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

This is an ongoing process of

improvement.

What to change?
What to change to?
How to cause the change?

Basically what we are asking for is the most

fundamental abilities one would expect from a
manager. Think about it. If a manager doesn't
know how to answer those three questions, is he
or she entitled to be called manager?" (Goldratt,
2004)

This book would be ideal for anyone

interested in simplifying ways to
improving any process - whether it is
manufacturing or service oriented.