Book notes: The Goal by Eliyahu M. Goldratt

The Goal: A Process of Ongoing Improvement by Eliyahu M. Goldratt & Jeff Cox

Synopsis:

“In this intriguing business novel, which illustrates state-of-the-art economic theory, Alex Rogo is a UniCo plant manager whose factory and marriage are failing. To revitalize the plant, he follows piecemeal advice from an elusive former college professor who teaches, for example, that reduction in the efficiency of some plant operations may make the entire operation more productive. Alex’s attempts to find the path to profitability and to engage his employees in the struggle involve the listener; and thankfully the authors’ economic models, including a game with matchsticks and bowls, are easy to understand. Although some characters are as anonymous as the goods manufactured in the factory, others ring true. In addition, the tender story of Alex and his wife’s separation and reconciliation makes a touching contrast to the rest of the book. Recommended for anyone with an interest in the state of the American economy.”

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Opening thoughts:

I actually read this book for work. In my department, we’re all reading books related to our field and sharing what we learned with each other. One of my coworkers had read this book a while ago and recommended it. It’s not usually something I would read, but I figure if my work is paying me to read, might as well post my notes about.

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Key notes:

Productivity

• Productivity is anything that brings you closer towards your goal. In order to do this, we need to know what you goal is
• The goal of the manufacturing company is to make money
  • Things like cutting edge technology, market-share, happy employees, etc. are just a means to the goal, but not the goal itself
• Keeping people working is not productivity but busyness
• You don’t need just net profit, you also need relative terms like how much you invested – such as ROI
  • The third measurement that is critical would be cash flow and staying above the red
• 3 measurements you can use to measure productivity towards sales
  1. Throughput = is the rate at which the system generates money through sales
  2. Inventory = all the money that the system has invested in purchasing things which it intends to sell
  3. Operational expense = all the money the system spends in order to turn inventory into throughput
     • A measurement not clearly defined is useless. That is why these measurements are worded very precisely

Hiking Example

• Dependent events means one operation has to be done before the other can begin
• The lengthening of the line in the hiking group is an accumulation of the statistical fluctuations of each person in the line, and mostly an accumulation of the slowness
  • Example: passing matches through bowls game – the negative deviations keep getting passed down and accumulated further and further down the line
  • Whoever is moving the slowest in the troupe will govern throughput for the whole
    • They optimized the speed of Herby by splitting up the weight in his pack, which increased the speed of the entire group
  • The maximum deviation of a preceding operation will become the starting point of a subsequent operation

Bottlenecks

• Identify your two types of resources:
  • Bottleneck = any resource whose capacity is equal to or less than the demand placed upon in
  • Non-bottleneck = any resource whose capacity is greater than the demand placed upon it
    • Bottlenecks aren’t necessarily bad or good, they are simply a reality
    • Where they exist, you must use them to control the flow through the system and into the market
  • Do not try and balance capacity with demand. Instead, balance the flow of product through the plant with demand from the market
    • Simply: balance flow, not capacity
  • The actual cost of a bottleneck = (total expense of the system) / (# of hours the bottleneck produces)
    • $ Bottleneck cost = ($ system expense) / (# hrs produced by bottleneck)
• How do we optimize the use of bottlenecks?
  1. Make sure the bottleneck’s time is not wasted
     • Ex: a machine sitting idle during a lunch break, processing parts that are already defective, working on parts you don’t need or not within current demand
     • Make bottlenecks only work on parts that contribute to throughput TODAY
  2. Take some of the load off of the bottlenecks and give it to non-bottlenecks

Utilization

• The level of utilization by a non-bottleneck is not determined by its own potential, but by some other constraint in the system
  • When you make a non-bottleneck do more work than a bottleneck, you are not increasing productivity. You are creating excess inventory which is against the goal
• Making an employee work to reduce idle time and profiting from that work are two different things
  • Utilizing a resource means making use of the resource in a way that moves the system towards the goal
    • Activating a resource is like pushing the ON button and making it run whether or not there’s any benefits derived from its work

Purpose / Goal

• He realized that in his marriage, they were missing a goal and a purpose
  • They need to start asking questions and challenge assumptions on why they do things

Batch Sizes & Lead Times

• The next logical step is to cut batch sizes in half on non-bottlenecks
  • This will cut inventories in half and ease the pressure on cash flow
  • Reducing batch sizes results in reduced lead time
• The bottlenecks determine inventory and throughput
  • Usually the queue time and wait time consume the largest amount of time a part spends inside the plant

Process Improvement

• The reason why this process improvement works was because they went through a culture change
• They realized they followed a process to improve the system:
  1. Identify the system bottlenecks
  2. Decide how to exploit the bottlenecks
  3. Subordinate everything else to the above decision
  4. Elevates the systems bottlenecks
  5. If in a previous step a bottleneck has broken, go back to step one. But do not allow inertia to cause a systems constraint
• Any organization should be viewed as a chain of connected parts
  • Since the strength of the chain is determined by the weakest link, the first step to improve an organization must to be identify the weakest link(s)
• Identifying the main constraint is identifying what causes them all
• To solve the core problem, they are asking for the ability to answer 3 questions:
  • What to change?
  • What to change to?
  • How to cause the change?

Flowlines & Lean

• Ford’s flowlines are based on 4 concepts
  1. Improving flow, or equivalently lead time, is a primary objective of operations
  2. This primary objective should be translated into a practical mechanism that guides the operation when not to produce prevents overproduction
  3. Local efficiencies must be abolished
  4. A focusing process to balance flow must be in place
• Lean is now strongly associated with small batches and setup reduction techniques

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Main ideas / Themes:

• Balance flow, not capacity
• Optimize bottlenecks by making sure it’s time isn’t wasted and offloading work to non-bottlenecks
• Making an employee work to reduce idle time and profiting from that work are two different things. Utilization not towards the goal is wasteful
• In any organization, you always need to identify the goal
• Reduce batch sizes in non-bottlenecks to reduce lead time
• Any organization is a chain of individual links. The first step is to identify the weakest link and remove that main constraint that affects all others

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Closing thoughts:

This book was unexpectedly enjoyable. I’m glad it was told in a narrative-type format, similar to The Five Dysfunctions of a Team. It made it easier to digest because I didn’t have to worry about taking notes in every chapters. It’s kind of like being able to watch a story unfold in a movie, but you really only need to pick up the one or two nuggets to get the value of it.

I think the beginning of the book was slow and a bit frustrating how the main character was so resistant to change. But I understand that he’s supposed to represent how we all react when we learn something that challenges our preconceptions. But as the story started to progress and you can see the principles in effect, it started to get really satisfying.

Overall, solid book, especially if you’re interested in the fields of organizational dynamics, structure, project management, agile, lean, and flow. It’s definitely relevant to my department, so I have some good takeaways to implement in my own teams.

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One Takeaway / Putting into practice:

The one takeaway from this book for me is:

• Identify the goal and make sure what you do helps you move toward that goal

It is a simple idea that seems like common sense. But it is a good reminder when we get swept up in all the “busywork” and doing a lot of different things that don’t really take us closer to our goals. Sometimes we think we’re being productive when really we’re just doing low value tasks. It’s a reminder to myself to focus on what’s important and spend less time on the trivial.

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Nutshell:

Identify the goal, balance flow not capacity, identify and optimize bottlenecks, reduce constraints.

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Similar books:

• The Five Dysfunctions of a Team by Patrick Lencioni
• The New One-Minute Manager by Ken Blanchard & Spencer Johnson
• The Effective Executive by Peter Drucker
• Winning by Jack Welch

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Rating:

3.5/5

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