This document summarizes key concepts from the book "The Goal" by Goldratt and Cox. It defines important terms like throughput, inventory, operational expense, and bottlenecks. It discusses how the goal of any manufacturing organization is to increase throughput while reducing inventory and operating expenses. It provides strategies for optimizing bottlenecks, such as ensuring good quality input, maximizing bottleneck utilization, and balancing non-bottleneck capacities.

1. Arnold Labares
15 May 2015
Book Review:
THE GOAL
by Goldratt & Cox

2. 15 May 2015Page 2
 “the goal of any manufacturing organization is to make
money.”
 Driving mechanisms (among others):
INTRODUCTORY WISDOM:
 Cost-effective purchasing
 employing good people
 high technology
 producing quality products
 selling quality products
 capturing market share
 Communications
 customer satisfaction
 “any action that contributes to making money is productive”

3. 15 May 2015Page 3
 BALANCED PLANT – a plant where the capacity of each & every
resource is balanced exactly with market demand
 BOTTLENECK – any resource whose capacity is equal to or less
than the demand placed upon it
 THROUGHPUT – the rate at which the system generates money
thru Sales
 INVENTORY – All the money that the system has invested in
purchasing things which it intends to sell
 OPERATIONAL EXPENSE – All the money that the system spends
in order to turn INVENTORY into THROUGHPUT
DEFINITIONS:

4. 15 May 2015Page 4
“Increase the THROUGHPUT (“Incoming money”)
THE GOAL (IN A NUTSHELL):
while simultaneously reducing
both INVENTORY (“money still stuck inside”)
and OPERATING EXPENSE (“money going out”).”

5. 15 May 2015Page 5
 Offload bottleneck workload to other processes if possible (i.e. other
internal modules, subcons)
 Ensure ONLY good quality materials input on bottlenecks (i.e. high
inspection rate of upstream process)
 Maximize utilization of bottleneck processes (i.e. machines running even
during operators breaks)
 Find enough capacity for the bottlenecks to become more equal to demand
(i.e. re-commission obsolete machines for bottleneck parts, subcons)
 “If you scrap a part before it reaches the bottleneck, all you have lost is
a scrapped part. If you scrap the part after it’s passed the bottleneck
you have lost time that cannot be recovered.”
 Ensure process controls on bottleneck parts are very good, so these parts
don’t become defective in later processing (i.e. use of “express lanes” [i.e.
color-code prioritization] for bottleneck parts)
 Communicate to everybody in the plant which parts are critical
OPTIMIZING BOTTLENECKS:

6. 15 May 2015Page 6
Non-bottleneck process (i.e.
more capacity)
 “When you make a non-bottleneck do more work than the bottleneck,
you are not increasing productivity but the exact opposite – making excess
inventory”
Bottleneck process (i.e. flow-
determining capacity)
 Typical ways a bottleneck time is wasted:
1. Bottleneck process sitting idle during breaks.
2. Processing parts which are already defective.
3. Working on parts that are not on current demand.
 How excess inventory (see THE GOAL Rule # 2) is typically generated
(example):
Bottleneck process (i.e. flow-
determining capacity)
 How to better control/prevent excess inventory (see THE GOAL Rule # 2)
(example):
 There’s wisdom on designing bottlenecks (if identified early) at upstream
processes
OPTIMIZING BOTTLENECKS (Continued):
 Put best human resource on bottleneck processes
 ‘Stealing’ people from non-bottleneck to bottleneck process is fine for
as long as overall plant flow is maintained
Non-bottleneck process (i.e.
more capacity)

7. 15 May 2015Page 7
 Utilizing & Activating a resource are not synonymous.
 “Utilizing” means making use of the resource in a way that moves the
system toward the goal
 “Activating” a resource is like pressing the ON switch of a machine; it
runs whether or not there is any benefit to be derived from the work
it’s done
 WISDOM: “Activating non-bottlenecks to their maximum operating
capacities is an act of maximum stupidity”
OPTIMIZING BOTTLENECKS (Continued):
 Find ways to release material at which bottlenecks need them – and only
strictly at that rate . . . typically achieved by:
 Minimizing feed batch sizes
 Timing feed batch issuances

8. 15 May 2015Page 8
 Time characteristics a material spends inside a plant:
1. Setup time – time the parts spends waiting for a resource, while
the resource is preparing itself to work on the part (i.e. typical for
machine shops)
2. Process time – the amount of time the part spends being
modified into a new, more valuable form
3. Queue time – time part spends in line for a resource while the
resource is busy working on something else ahead of it
4. Wait time – time the part waits, not for a resource, but for
another part so they can be assembled together
 Setup time & Process time are a small portion of total elapsed time
for any part
 Queue time & Wait time often consume large amounts of time
 Queue time is the dominant portion for parts going thru bottlenecks
 Wait time is dominant portion for parts going thru non-bottlenecks
OPTIMIZING BOTTLENECKS (Continued):

9. 15 May 2015Page 9
OPTIMIZING BOTTLENECKS (Continued):
 Clash of objectives/measurements:

10. 15 May 2015Page 10
 “The key is to make the flow through the bottleneck equal to or
slightly less than demand from the market.”
 “Bottlenecks are not necessarily bad – or good. They simply are a
reality.”
 “Adjust capacity so the bottleneck is at the front of production.”
 The capacity of any plant is equal to the capacity of its bottlenecks.
 “Lost time on bottlenecks is lost throughput (mortal sin).”
 “To increase capacity of the plant is to increase the capacity of only
the bottlenecks.”
 “Entire bottleneck concept is not geared to decrease operating
expense; it’s focused on increasing throughput.”
 “Every organization should be viewed as a chain. Since the strength
of the chain is determined by the weakest link, then the first step to
improve an organization must be to identify the weakest link; or
links.”
WISDOMS ON BOTTLENECKS:
 Lost time on non-bottleneck processes do not hurt
 More idle time actually are expected on non-bottlenecks

11. 15 May 2015Page 11
1. IDENTIFY the system’s bottleneck(s)
2. Decide how to EXPLOIT the bottleneck(s)
3. SUBORDINATE everything else to the above
decision
4. ELEVATE the system’s bottleneck(s)
5. WARNING! If, in a previous step, a
bottleneck has been broken go back to step
1.
constraint(s)
constraint(s)
constraint(s)
constraint
But do not allow INERTIA to cause a
___system’s constraint.
THE GOAL METHODOLOGY:THEORY OF CONSTRAINTS:

12. 15 May 2015Page 12
 “Common sense is not common at all.” – Mark Twain
 “We refer to something as common sense only if it’s
in line with our intuition.”
 “There is so often a need for an external trigger
to help us realize something that we already
know intuitively.”
 “These intuitive conclusions are masked
by something else, not common sense but,
typically common practice.”
GENERAL DAY-TO-DAY WISDOMS:
 “Rome was not built in one day.”
 for some companies THE GOAL improvement process
takes at least 6 months.

13. 15 May 2015Page 13
Q & A / OPEN FORUM:

14. 15 May 2015Page 14