Summary of The Goal submitted to

Prof. Subhamoy Ganguly

In partial fulfillment of the requirements of the course

Operations Management

By
Anand Prakash(1604004)
PGPX 2016-17

On
1st April 2016

The Goal: Summary and Lessons learnt

The young protagonist of the Goal, Mr. Alex Rogo, a plant manager is facing difficult times as
his plant is consistently losing money and not meeting customer delivery deadlines. As a result,
in near future this plant may shut-down, leaving hundreds of people unemployed. Alex Rogo has
3 months of grace period, to show improvements in productivity and profitability thus preventing
the plant from closing. This is when our protagonist finds a mentor in Jonah, who is a physicist
and a management guru. Jonah follows the Socratic way of deductive reasoning, in which he
constantly provokes Mr. Rogo to question the most basics of assumption, to think beyond the
complicated yet conventional methods and to look for simpler and more logical solutions to
problems.
My first learning from the book was that the single and most important goal of any organization
in todays competitive economy is to make money. All other aims and methods should be used to
compliment the above Goal. The three most basic tools for achieving the goal are:
1) Throughput the money coming in
2) Inventory the money stuck inside the system
3) Operational expense the money going out ( to convert inventory into throughput)
An ideal example of the throughput would be the revenue which is being generated in the
Littlefield Simulation Game or the total money that the roommates are able to earn by selling
cookies in the Kristen cookie case.
As per the book, any investments that the company makes for producing goods are referred as
Inventories. A good example for this would be the WIPs or all the piles of custom shirts, waiting
to be worked up at different operational stages such as sewing, cutting, ironing etc in the
executive shirts case.
Operational Expense is all the expenditure required to convert the inventories into throughputs.
Citing an example from our cases, the wages being given to the workers, the overtime charges, or
the cost incurred for colour based segregation of incoming berries at the National Cranberry
Corporation would be an operational expense.

In the executive shirts case Mikes plan involved reducing the batch size, this method actually
focused on reducing the WIP thus the inventory costs. This also simultaneously decreased the
lead time, thus increasing the responsiveness of Executive Shirt Company, which would
probably attract more customers, thus also increasing the throughput. It would be not wrong to
say that single goal for any company should be to increase the Throughput while simultaneously
decreasing the inventory and operational expenses.
Once the importance and definition of goal is elaborated upon, the author introduces us with the
theory of constraints. The five major focusing steps of TOC are:1)
2)
3)
4)
5)

Identify the Bottleneck/constraint

Exploit the bottleneck/constraint
Subordinate everything else as per the above decision
Elevate the systems constraint
If a new constraint surfaces, go back to step 1

Relating the same with the Kristen cookie case- assuming Kristen and the roommate wants to
operate the bake shop throughout the day and assuming the bake shop is currently under steady
state operations with unlimited demand. And assuming Kristen and her roommate want to
maximize their profits, and they decide to go the TOC way

Identifying the bottle neck: The baking process was taking the maximum time out of all
other processes, hence baking had the lowest capacity therefore it was the bottleneck
step. So the Baking process was determining system capacity. Bottleneck can also be
identified by looking at the queues of Work in progress before each station. The station

with the highest inventory queuing before it would most definitely be the bottle neck.
Exploiting the bottleneck: once the bottle neck is identified. Kristen cant afford to lose
time by keeping the baking oven idle. The two roommates must ensure that there is
always enough spooned un-baked cakes before the baking station so as to maximize

utilization of the baking oven.

Subordinate everything else to the above decision: It is not necessary to utilize all
equipment at 100 percent utilization levels, if they are not the bottle neck. As mentioned
in the Goal, an hour lost at the non-bottleneck is just an hour lost but an hour lost at the
bottleneck is an hour lost for the entire system/plant. The one important factor to keep in
mind is that operating a machine or system that is not a bottleneck at 100 percent

utilization levels will only cause increase in WIP (If that particular operation comes
before the bottleneck process) and increase in inventory means incurring unnecessary
costs. Kristen should not worry about utilizing the electric mixer fully as this would only
create ever increasing pile of mixed dough before the baking oven, but then there should
be enough buffer of mixed dough available for baking oven to process all the time for

maximum utilization.
Elevate the systems constraint: Once the above step is followed, Kristen should think
about increasing the bottleneck capacity. This can be done by either buying an extra
baking oven or by investing in a bigger baking over with higher capacity. Elevation of
bottleneck should be focused only after the first three steps are followed. Elevating the
systems constraints or getting rid of the bottleneck is usually a capital intensive step, so
this should be done only after ensuring that there is no more slack capacity left at the

present bottleneck.
Repeat: Now Kristen should repeat the entire process from Step 1 again. There would be
a chance that now the bottle neck would have either shifted from Baking to mixing or
would have stayed the same. In either case, this cycle can be repeated again and again
multiple times to increase productivity of any system/organization.

Apart from the above two concepts Eli Goldratt also explained many other interesting ,
logical yet intuitively challenging facts through this book :

A company where everyone works all the time is not an efficient company This
statement; however counter-intuitive it may sound is absolutely correct. Tracking
productivity measurement for individual machines in a dependent system is a wrong
strategy to follow. If all the workers work at all times and all the work stations run at full
utilization at all the times, it only means that there would be a continuous rise in the

inventory levels between the workstations especially before the constrained systems.
The sole goal of any economic organization is to make money For most of the
companies in todays world the goal is to make money. For many non-profit
organizations, making money would be the path leading them towards their goal. In any
case whether making money is a goal or a path, company strategies should be developed
based on Throughput, inventory costs and operational expenses.

Bottlenecks are good evils Knowing about the bottleneck helps the company focus
more on its productivity and devise the necessary operational strategies. Decisions like
positioning the quality control station before the Bottleneck, and deciding upon the
economical batch sizes can be done only after knowing about the position and nature of

the bottleneck systems.

Batch sizes at Non bottlenecks: in cases when there is setup time involved in certain
work stations or machines, we generally try to minimize the setup time by deducing an
economical batch size. Yet again this book beautifully refutes this generally held notion.
The book says that setup time is a trap that managers should avoid if the system is not a
bottleneck. Managers should try to keep the batch sizes shorter and smaller at the non-

bottlenecks and bigger at the bottlenecks.

Importance of information: Gathering data may seem like an unnecessary and
unproductive task but, it is an extremely important tool when it comes to decision
making. Data about inventory between workstations can help identify the bottleneck and
then exploit it. Similarly information sharing between different teams such as operations,

marketing, accounts etc. can also help in improving overall company performance.
Thinking logically: this may sound like a trivial point, but this is the most valuable
lessons that one can learn from The goal. We humans have tendency to complicate
things and look for complicated solutions, while the solution for most complicated of
problems are actually very simple.

Conclusion
At the end, Alex Rogo was able to bring about a horde of changes in his plant, with the help of
his mentor and his team members. His personal life also improved a lot. With a Socratic mentor
like Jonah and an inquisitive protg like Alex and with a hardworking, innovative team like the
one mentioned in the book, it was not at all amazing that they did wonders in just 3 months. The
book focuses on challenging the commonly held beliefs and questioning the accepted ways, to
constantly strive for a better way of doing things. Theory of constraint was merely a tool to
spread this larger underlying message.