The Goal by Eliyahu Goldratt
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The Goal
The Goal is a business management book by Eliyahu Goldratt. It tells the fictional story of Alex Rogo, a plant manager who has only three months to turn around an unprofitable manufacturing plant while trying to fix his marital problems at the same time. He runs into a physicist by the name of Jonah that he used to know, who ends up helping him solve his problems. Through a series of phone calls and short visits, Jonah uses the Socratic method and the Theory of Constraints to help Alex solve his plant’s problems.
After finding out that the division’s Vice president, Bill Peach, may be shutting down the plant if things don’t improve, Alex remembers his meeting with Jonah at the airport. He wonders how Jonah predicted the trouble that the plant is in with its problems of high inventory and late product shipments. Jonah explains that in order to bring a company closer to its goal it is acting productively and any actions that do not bring a company closer to its goal is not acting productively. In addition, he adds that “there is only one goal, no matter what the company.” Jonah had left him with the question of: “What is the goal of your manufacturing organization?”
Alex finally realized that the goal of the plant is to make money. He goes on to realize that all of the things people think of as being goals, such as cost-effective purchasing, employing good people, high technology, producing and selling quality products, and capturing market share are all essential to enabling a company to make money. In other words, they are the means of achieving the goal. This point in the book is very relevant because all companies today exist to make money or they would be out of business if they didn’t.
Another important concept in the book is Goldratt’s Theory of Constraints. It is still used today and helps companies find practical and effective solutions to problems by focusing attention to bottleneck areas of a system and how to manage them. When Alex finally tracks down Jonah and gets him on the phone, Jonah explains that he has developed a different way of measuring the goal that also permits Alex to develop rules for running the plant. He states that there are three of them and their names are throughput, inventory and operational expense. Throughput is the rate at which a system generates money through sales. So, if something is produced, but not sold, then it’s not throughput. Next, inventory is all the money that the system has invested in purchasing things which it intends to sell. Finally, operational expense is all the money the system spends in order to turn inventory into throughput. With these three expenses the goal can be defined for the organization as a whole. Alex thinks back to the airport meeting with Jonah and remembers that Jonah had asked three questions that told him the plant had not increased productivity. He realized the questions had matched