The Goal by Eliyahu M. Goldratt, is the story of a man who at his crossroads,and what direction he decides to take. The story is about a plant manager namedAlex Rogo. We find Alex six months into his first plant managers position atUniCo, in the UniWare Division.
The plant is located in BearingtonMassachusetts, where Alex grew up. UniCo is definitely a manufacturing plant,what they manufacture, I still do not know. The story begins when Alexssupervisor, Bill Peach, comes into the plant and nearly turns everything upsidedown. After Alex puts out all of the fires that Bill had set, they sit down inAlexs office and talk.
Bill tells Alex that production has gone down in thesix months that Alex has been at the helms, and an irate customer, BuckyBurnside, has an order that is fifty-six days overdue, and Alex must get thatorder shipped before anything else. Bill also says that if the plant does notturn around in the next three months, he will make a recommendation to close theplant. A few days later, Alex hears more of the same at a corporate meeting andfigures out why Bill was upset. After the meeting Alex reaches for something andcomes across a cigar he received from a chance encounter from and old physicisthe knew from his college days. While waiting for in between flights at OHare,Alex wandered into an airport and found himself sitting next to the physicistnamed Jonah who worked on mathematical models while he was an undergraduateengineering student.
Alex and Jonah start talking, and Alex mentions he is goingto speak at a seminar. His topic is “Robotics: Solution for the 80s toAmericas Productivity Crisis. ” Alex tells Jonah that his plant has morerobots than any other plant in the division. Jonah is not very impressed. Jonahasks how much productivity has improved because of the use of the robots. Alexanswers that there is a 36% improvement in one area.
Jonah then asks if theplant is making 36% more money because the plant is using robots? Well, ofcourse not is the response. Just the one department is producing 36% more. Jonahcontinues the conversation and admits that he has been studying manufacturingprocesses. He asks Alex what productivity is and ends up explaining trueproductivity is accomplishing something in terms of your goal.
Alex cannot evendetermine the goal of his company at this point. Jonah tells him to think aboutit and leaves. Back at the meeting, Alex hears talk about measurements ofefficiencies, productivity, and cost per price, etc. He is not even sure whatproductivity is, so he decides to bail out at lunch to head back to the plant. His trip to the plant is interrupted by a pizza pie and a six pack of beer.
Alexgoes to a hill overlooking the plant and spends the rest of the afternooncontemplating what he is going to do over the next three months, and whatexactly productivity is. He spends the entire afternoon thinking about “thegoal” and finally comes up with the answer: The goal of the company is to makemoney, and everything else they do is a means of achieving the goal. Once Alexfigures out what the goal of the company is, he decides to get a hold of Jonahto learn more about productivity. Alex spends the night at his mothers housetrying to contact Jonah, until he finally does at 2 a.
m. , with Jonah in London. Jonah explains to Alex that an action towards the goal is productive, and anaction away from the goal is unproductive. He also gives Alex three newmeasurements: Throughput, the rate at which the system generates money throughsales. Inventory, all the money that the system invested in purchasing thingswhich it intends to sell. And finally, Operational Expense, all the money thatthe system spends in order to turn input into throughput.
To make money, Alexmust increase throughput while simultaneously reducing the inventory andoperating expense. Alex goes back to the plant and realizes he needs a lot moreof Jonahs advice. Jonah agrees to meet Alex in New York over breakfast for anhour. They start to discuss the idea of a balanced plant. Traditionalmanufacturing goals are always to run a balanced plant, where the capacity ofeach and every resource is balanced exactly with the demand from the market.But, Jonah points out, the