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summary of The Goal

summary of The Goal Alex Rogo is manager for one of UniCo's production plants. Recently Alex's plant, as well as the others in his division, have been having major problems shipping orders on time. The company has considered closing the plant and has given Alex only three months to make a significant improvement or the plant will be closed and he as well as all of his employees will be without a job. At this point everything seems to be crashing down around him while at a meeting, discussing the future of the division, he recalls a chance encounter with an old acquaintance, a physicist named Jonah. During their discussion Alex discovers that Jonah is currently involved in the science of manufacturing organizations. Intrigued Alex describes the problems he has encountered at his plant, hoping that Jonah may be able to help. Jonah goes on to question Alex as to what the goal of the company is. The process begins. The first order of business was to determine what the goal of the company was. Different ideas get tossed around such as: cost effective purchasing, high technology, producing quality products, etc. Quickly Alex and his team realize that these are not the goals but only a means of achieving the goal. After careful consideration the team comes up with this as the goal: To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow. Satisfied with their goal the team must move on to the next step after more help from Jonah. The team must now find a way to increase the throughput while simultaneously decreasing inventory and operational expense. Alex realizes that the huge stockpiles of inventory have built up because they have been running every machine at it's highest possible level. When in actuality the only way to keep inventory low and throughput high is to move materials at a rate no faster than rate at which the bottlenecks can operate. The bottlenecks are the areas (machines) in the plant that are constantly holding back the production of the finished product. The philosophy behind this will become clear in a moment. Since the beginning of the industrial revolution manufacturing organizations have followed the rules that idle time is lost time. That the only way to make money is to keep everyone and everything operating at 100 percent. When in fact a plant that runs it's resources at 100 percent all the time is actually a very inefficient plant. Most of the time the struggle to meet efficiencies is taking the organization further away from it's goal. Excess production creates excess inventories that in turn ties up money and slows down or impedes cash flows. The key to balancing production is to search out those places in the plant that slows down all the processes behind it, essentially a bottleneck. Obviously the bottleneck can't just be removed so the rest of the process must be governed by the speed at which the bottlenecks can operate. Release of materials must be staggered so that just as a batch is sent through the bottleneck another batch is waiting in front of it to be processed. No other non-bottleneck area can be allowed to operate faster than the bottlenecks can handle otherwise the inventories will begin to climb again. In order for the system to work there must be a way of measuring when materials should be released for processing by the bottlenecks and also a way to predict when the finished product will leave the plant. This system will therefore allow the inventory controllers to release materials only as needed maximizing the savings in reduced work-in-process costs. The bottlenecks should not be looked at as a hindrance but rather as a means of controlling the whole process. By maximizing the outputs of the bottlenecks the facility can operate at the highest possible speed and still be moving towards the goal. From traditional points of view efficiencies may appear to go down and cost per unit may go up but these are not the goal. The goal is to make money. If the products are getting shipped on time and the inventories are kept at a minimum the cash flows will be positive and the plant will make money. Most western organizations cannot begin to understand how letting some resources sit idle for any period of time can make operations more efficient. Yet as in this case the proof lies in the bottom line. The products are getting out the door on time, inventories remain low and throughput has increased. Traditional ways of measuring productivity don't work in this kind of operation and this is the reason why it has met so much resistance from corporations. People have become so accustomed to doing business the old fashioned way that they have forgotten the one driving force in business; making money. When a process increases cost per unit and allows idle time on expensive resources this often clouds the picture and causes so many to take actions that drive the company further away from the goal and closer to bankruptcy. Beneath all of the buzzwords, graphs and charts common sense still reigns supreme. Sometimes it just takes a different point of view to get us to take a step back and look at how wrong we are doing things. Go, Go , Go has always been the motto in the business realm. Reaching the goal should be every organization's objective. It is unfortunate that so many are confused by meeting efficiency standards and never truly grasp the goal, which is to make money. 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Word Count: 951