The document summarizes the key events and lessons from the book "The Goal" by Eliyahu M. Goldratt. It describes how the main character Alex Rogo is tasked with turning around a struggling manufacturing plant within 3 months. With help from his former professor Jonah, Alex learns that productivity and efficiency don't necessarily achieve the company's true goal of making money. Jonah teaches Alex about throughput, inventory, and constraints to help optimize flow and profitability. Applying these lessons, Alex is able to turn the plant around and meet its financial targets.

1. THE GOAL
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2. The Goal by Eliyahu M. Goldratt is about a man named Alex Rogo and his quest of knowledge to make his
company profitable once again
Alex meets Bill Peach, the division vice president and they dispute about order # 41427
Bill tells him that his plant has been losing money and he gets 3 months to turn it around or else the plant
shuts down
Order # 41427 gets shipped at the end of the day but not very efficiently as they incur a huge overtime cost
Mr. Peach calls a meeting at the headquarters to discuss how badly the division has been performing

3. While in the meeting Alex thinks back on his meeting with his former Physics prof. Jonah at the airport
Alex discusses with Jonah about his recent achievement of introducing robots which has increased the
productivity of the plant
Jonah puzzles Alex with a few questions and changes his ideology of productivity
1. “Are Plant inventories down”?
2. “Has employee expense reduced”?
3. “Are you shipping more product than before”?
Alex replies negatively to all the above questions to which Jonah concludes that his inventories would be
very high and still he won’t be meeting sales target

4. Alex is surprised at this conclusion
Jonah asks Alex to describe “productivity” in his own words
Alex replies that productivity is an act of bringing a company closer to its “GOAL”
Jonah replies in the affirmative and leaves Alex with this puzzle to find what his company’s actual goal is
Jonah’s attention returns to the meeting hall and he stresses himself to identify the goal of the company
After much thinking he realizes what the actual Goal of his company is :
It is to “ TO MAKE MONEY”

5. INITIAL ALEX AND LOU’S THOUGHT
Goal:- To make Money
Making people work & making money are same thing
Needs three things to make money
Net Profit:- What we made minus our expenses
ROI:- Good/Increasing ROI
Cash Flow:- Good cash flow

6. ACCORDING TO JONAH
Work on three things to achieve goal:
Throughput:- Rate at which the system generate money through sales
Inventory:- All the money that system has invested in purchasing things which it intends to sell
Operational Expense:- All the money that system spends in order to turn
inventory into throughput

7. PROBLEMS FOUND
How to use these measurements to evaluate productivity?
• Robots/Machine inefficiency
• Increase in large inventory
• Increase in operational expense
• Not proper planning/strategy
• Wrong accounting practice
• Improper utilization of man force
• Unable to distinguish b/w investment & expense

8. SOLUTION BY JONAH
• Clear the concept of investment, operational expense & inventory and how to categorize it
• Working only on high efficiency is poor decision
• Continuous labor force is not always good when throughput is low
• A Balanced Plant:- Capacity, Resource and demand should be properly balanced
• Dependent events :-a series of events must take place before another begins
• Statistical Fluctuations :-the length of events
and outcomes are not completely deterministic

9. BOY SCOUT HIKE - MANUFACTURING PLANT
Each boy is an operation
Each boy/operation is dependent on the one in front.
A sale is when the last operation/boy reaches the destination
Throughput is the rate at which the last person is walking
Operating expense is the energy of each boy
Inventory is the distance between the first and last boy
Fluctuations in operating speed is causing inventory to increase and causing
throughput to decrease. Attempting to reduce gaps is increasing
operating expense.

10. MATCHES GAME
5 players, 5 bowls, matches, 1 die
First player will roll a die and pass that many matches from his
bowl to the next person down the line
Pass die to next player who rolls die and moves that number of
matches from their bowl to next player
This will continue for each player, with last player handing die back
to first player

11. TESTING BOY SCOUT THEORY IN THE PLANT
Hilton Smyth’s order : Needs 100 parts by end of day
Parts require 2 operations:
 Fabrication
 Welding
Each department averages 25 units per hour
Welding is done by robot working at exactly 25 unit per hour
Fabrication is started at 12 o’clock, transferring parts every hour to welding
team
Fabrication
(25/hour)
Welding
(25/hour)
Transfer
(once/hour)

12. As per Jonah :
Bottleneck – any resource whose capacity is equal to or less than the demand
placed upon it.
Non-bottleneck – any resource whose capacity is greater than the demand placed
upon it.
Not try to balance capacity with demand, but instead balance the flow of product
through the plant .
Slow kid Herbie on the hike
Bottleneck resources determines the flow of product through the plant
Finding Bottleneck :
Go out on the floor and find the operation with the most inventory sitting in front of it.
Once the bottleneck is identified, can not simply move the machines/operations around
like Herbie was moved to the front of the line
Reason : Reorganizing production steps very expensive
Solution : Find more capacity for the bottleneck, don’t try to move them. Have enough
capacity to meet demand.

13. 2 Bottlenecks :NCX-10 and Heat Treat
Find more Capacity :
Make sure it is never idle (focus your attention on it).
Increase cycle time on the machine
Add another duplicate machine
Outsource to another vendor
Reduce the demand (process change)
Inspect part quality before bottleneck (make sure bottleneck only works on good
parts)
Ensure process controls on bottleneck are good so bad parts aren’t produced
Don’t let it work on parts that aren’t needed.

14. RESULTS OF THE NEW BOTTLENECK TACTICS
Made new monthly shipping record of 3 million
Customer orders shipped increased from 31 to 57
WIP inventories reduced 12%

15. JONAH FOUND AFTER VISITING THE PLANT THATMATERIAL
IS BEING “RELEASED” TO THE PLANT JUST TO KEEP THE
NON-BOTTLENECK MACHINES BUSY. THIS IMPROVES THESE
MACHINES EFFICIENCY MEASURES, BUT DOES NOT HELP
THE GOAL.

16. RESULTS AFTER RELEASE OF NEW SYSTEM
WIP is down.
Revenues are up.
Efficiencies dropped initially, but have come back up.
The backlog of orders is completely gone (satisfied customers).

17. FINAL MEETING
 Whether the plant is to remain open or shut down
 the figures and states that they have hit the 15% mark plus a little more
 It give Rogo a little hope to convince Peaches
 Peach had already made up his mind that it was going to stay. Also, Rogo was going to
get a promotion to Peaches position and Peach was moving up also.
 The group once again gets together. This time it is different though now they are talking
about how they are going to take action toward the whole division instead of one plant.

18. Change in Focus
from the “cost world” to the “throughput world”
The Theory of Constraints
The Theory of Constraints
Step 1: Identify the system’s constraints (NCX10 and oven)
Step 2: Decide how to exploit the system’s constraint (don’t take lunch break on
bottleneck machines)
Step 3: Subordinate everything else to the above decision (red tags and green
tags)
Step 4: Elevate the systems constraint (bring back old Zmegma machine,
outsource heat treat)
Step 5: Warning!! If in a previous step, a bottleneck has been broken, go back to
step 1 (material release system, marketing), but do not allow inertia to
cause a system’s constraint (red and green tags eventually caused
problems).
experiences a problem at the plant. It seems all the new orders have created
new bottlenecks. After analyzing the problem, they agreed to increase
inventory in front of the bottlenecks an tell sales to not promise new order
PREFERENCE PAST NEW
1 COST THROUGHPUT
2 THROUGHPUT INVENTORY
3 INVENTORY OPERATING
EXPENSES

19. OUTPUT OF THROUGHPUT WORLD :
Quality improved
More responsive
Quick and reliable
Never missed any order
Problem : accepted more orders than they can process. Bottlenecks were moving all
over the floor.
keys to management :
what to change
what to change to
how to cause the change

20. THANK YOU