Executive Summary

Alex Rogo, Plant Manager at UniCo, is faced with a difficult proposition placed by his boss,
Mr. Peach, the division Vice President. Alex Rogo is instructed to bring order#41427 for
dispatch by end of day at the expense of other order being delayed. Alex is also given the
ultimatum of removing large number of plant backlogs within three months or witnesses the
plant closing down.
Alex ponders upon the problem at hand and somehow he recollects his interaction with his
physics teacher. Alex had informed Jonah about the new robots installed at his plants and
high efficiencies obtained but Jonah remained unimpressed. Jonah had asked him three
simple questions:

Has the company sold more products?

Has the company decreased inventory?
Has the company reduced expenses?

Jonah leaves Alex with the stimulus, What is the goal of your plant?
Unable to find the answer to the question, Alex seeks out Jonah to assist him with the
problem at hand. Jonah gives him three measures on how to estimate the goal of the plant:

Throughput: Rate of income

Inventory: Money invested in operational components. Components are processed and

in turn sold
Operational Expenses: Money required by the process to convert inventory into
throughput.

Initially, Alex had considered the efficiencies of the plant to be the goal, but now knew the
only thing that mattered was making money, to be precise, increasing net income while
increasing return on assets. And the high tech Robots were not helping him in his cause. This
was because the Robots did not add any value to the plant by increasing throughput, reducing
inventory or the operational expenses. Effective direct labour reduction was zero and the
robots were only leading to large inventories of unnecessary parts. This resulted in an
artificially bloated efficiency metric.
Alex decided to embrace the scientific principle to find the root problem. He calls upon
brainstorming sessions with his core staff members:

Bob from production

Lou from accounting
Stacey from inventory control

With the able guidance of Jonah, Alex is made to consider plant capacities and managing a
balanced plant. However a balanced plant, i.e plant resources capacity to be balanced with
demand from market is deemed to be a recipe for disaster. This is because one also needs to
consider statistical fluctuations for plant capacities and its dependent events. Failure to do so
will result in drastic variability to throughputs. Therefore, it is the flow of the product though
plant process that needs to be balanced. This in turn led to the concept of bottlenecks and its
identification.
Alex implements the teachings in his plant. With a visit from Jonah at the company plant,
Alex recognizes the plant capacity to be entirely dependent on bottleneck capacity. Ralph
Nakamura, Data processing manager is enlisted to the cause. However, bottleneck is
identified by WIP accumulated in front of a particular plant process. In this case, NCX-10
robot and Heater Treater. NCX 10 actually had higher capacity but due to constraints placed,
was running at a low capacity than intended.
Jonah is consulted and options are generated for adoption of alternatives or increase capacity
by redirecting bottleneck work. Quality control checks are put in place before bottleneck to
avoid wastage of valuable time in defective products. The older replaced machines were
brought in effect to aid the NCX 10. Thus, effective capacity of bottleneck was improved.
The Heater Treater was assigned dedicated personals. Cost accounting principles were used
to determine actual costs of bottleneck downtime.
However, resolving capacity at bottleneck led to creation of new bottlenecks. This was due to
requirement of maintaining efficiency quotas, thus non bottleneck components were being
processed at a faster rate than bottleneck components. Red and green tagging systems are
implemented to ensure bottleneck components are processed first and then priority assigned
to non-bottleneck component.
Accumulation of changes implemented leads to zero backlogs; however Alex is now dictated
by Mr. Peach to increase Net Income by 15% or face plant closure.

The next step involved reduction in batch size in order to meet customer demands in time.
This is to enable faster response times and low lead time. With the help of division sales
manager, Alex is able to increase capacity at market and thus increase net income of the plant.
The activites followed by Alex to increase plant throughputs can be summed as per below:
1.
2.
3.
4.
5.

Identification: Identify system constraints

Exploitation: Exploit constraint
Subordination: Align production with that of bottleneck
Elevation: Improve bottleneck constraints
Go Back to Step 1

(Goldratt, 2011)
Comparison with Toyota Production System and performance
improving measures in Goal
Theory of Constraints that was followed by Goal contains five principles
1.
2.
3.
4.
5.

Identify the System Constraint

Exploit the Constraint
Subordinate
Elevate the Constraint
Return to Step One

Whereas the Toyota Production system consists of the following principles

1.
2.
3.
4.
5.

Specify Value from the Perspective of the Customer

Identify the Value Streams
Flow
Pull
Perfection

Similarities

Continuous improvement across process: Toyota has kaizen and goal had
improvements made even after resolving problems across bottlenecks (primarily

creation of new bottlenecks)

Scientific Method: Toyota, under rule four of decoding DNA of success of TPS, states
the implementation of scientific method at all levels in the organization in order to
identify problems. Goal had workers at all level contributing to finding solutions to
problems such as Ralph and Stacy working together to develop a material release
system to equalize rates of bottleneck and non-bottleneck components being worked
upon.

Empowerment of Employees: To take actions to resolve issues encountered

Emphasis on Small Batch Production: Something essential to Just in Time was also
recommended in goal in order to meet customer demands better, i.e Smaller Batch
size.

Differences

Financial v/s operational point of view: Toyota maintained emphasis on a balanced

plant and efficient utilization of raw materials. Goal puts more emphasis on
throughput or the ability to convert inventories into raw material thus resulting higher

net income and therefore focussed more on product flow balancing.

Definition Differences of Inventory: Inventory in TPS is defined as raw material

whereas Goal defines it as all the money stuck in plant.

Flow of Process: Toyota Production System had the option to create a production line
in a stream line fashion in order of dependent events, however plant operation in goal

did not have this luxury

Inventory: Toyota Production System considers inventory to be a waste. Whereas
philosophy embedded in Goal dictated process operation at capacity below market

demand, thus requiring buffer inventory.

Capacity: Toyota Production system envisions utilization of all machines at maximum
capacity. Goal requires plant capacity to be in line with bottleneck capacity and below

market capacity.
Profit Measurement: Goal gave three parameters to attain goal as throughput,
inventory & Operating Expense. Toyota Production System states parameters to attain
goal as Cost, Lead Time & Percentage Value Added.

Bibliography
Goldratt. (2011). The Goal. madras: Productivity & Quality Publishing Private Limited.