Understanding The GOAL

Understanding THE GOAL:
The best-seller by Eli Goldratt and Jeff Cox
Hugh E. Cole
Managing Par tner
Avraham Y. Goldratt Institute, LP
ASEM Member Benefit www.asem.org/

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.
HOUSEKEEPING
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There will be time at the end for questions
Save all questions until the end
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Over 3 Million copies sold
Translated into more than 21

languages
3
Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved. 3
Alex Rogo Jonah
To ask, inquire Seeks truth
UniCo
Meeting with the boss (Bill Peach)
Late orders
High cost
Low efficiencies
Alex Rogo Two rounds of layoffs
20% cutback
Plant is losing money
You have 3 MONTHS!

Something is wrong
Technology
Computers
Good people
Alex Rogo All materials needed
Have a market!
Why cant we make money?

Alex Rogo Jonah
Chance meeting at the airport
Robots -> Productivity Improvement -> What is productivity?
Not equations! -> Can only be measured in terms of your Goal!
Sowhat is the Goal of your manufacturing organization?
Hint: There is only one Goal, no matter what the company

What is the Goal?
What do we try to do?
Produce products as efficiently
as we can
Buy raw materials in the most
Alex Rogo cost-effective manner
Be a good employer
Produce quality products
Produce quality products
efficiently
Stay on the leading edge of
technology
Meet sales requirements
MAKE MONEY!
UniCo
Actually make more money today
and in the future!
Why is that important to know?
It enables us to answer the question what is
productivity?
An action that moves us toward making money

is productive.
Alex Rogo
An action that takes us away from making
money is non-productive.
But how to measure? There is no shortage of measurements!
Hours worked vs. hours paid to work

Output per hour compared to standard
Cost of products
Direct labor variances
Problem: they dont tell me if I made money!

1. Throughput (T)
2. Investment (I)
3. Operating Expense (OE)
Inventory ($I) Jonah
$Operating
Expense Throughput
(T)
($OE)
System
Investment ($I)
Measurements??
$Budget
1. Throughput (T)
2. Investment (I)
3. Operating Expense (OE)
Inventory ($I) Jonah
$Operating
Expense Throughput
(T)
($OE)
System
Investment ($I)
Throughput = Sales - TVC

$Budget Net Profit = T - OE
Alex Rogo Jonah
Breakfast meeting
Alex: Lets talk about my Robots
Jonah: Forget about the Robots - youve got much more fundamental
things to concern yourself with.
Alex: But what about my efficiencies?

Jonah: Most of the time your struggle for high efficiencies is taking
you in the opposite direction of your Goal!

Two phenomena are found in every plant
1. Dependent Events
2. Statistical Fluctuations

1. Dependent Events
Raw
Material
A B C
C cannot accomplish more than what B provides to it.

B cannot work until it receives parts from A.
A cannot do its job until it receives Raw Material.

2. Statistical Fluctuations
The output of any resource fluctuates over time.
15
Units 10
5 or
10
Time Probability Distribution
On average, this resource will produce 10 units per hour

On average, this resource will deliver in 10 hours
On average, this customer will require 10 units per day
Combine Dependent Events
with Statistical Fluctuations
Raw A B C D E F
Material
15 15 15 15 15 15
10 10 10 10 10 10
or or or or or or
5 5 5 5 5 5
10 10 10 10 10 10
Jonah: Alex, call me when you can tell me what the

combination of the two phenomena mean to your plant.
Boy Scout Hike
Herbie
FG Work-in-Process Raw Material
Spreading troops mean high inventory.

Closely packed troops mean lower inventory.
How can we prevent the troops from spreading without
losing speed/throughput?

What did Alex do?
Herbie
Put Herbie in the lead.

Made sure that those behind could close any gaps.
But the troops became frustrated because it was too slow!

What did Alex do next?
Herbie

What did Alex do next?
Herbie
Lightened Herbies load to enable him to speed up.

Made sure that those behind could close any gaps.

What did Alex learn about Statistical Fluctuations and
Dependent Events?
The maximum deviation of a preceding operation will

become the starting point of a subsequent operation.

UniCo
How could Alex apply this learning to UniCo?

Alexs system (Big Picture)
FG
Inventory
Conversion Discreet
(Production)
UniCo Orders
Raw Materials
The Goal: Make more money now and in the future.
The Metrics: Throughput, Investment, Operating Expense
But how does the system achieve the Goal? (Details)

How Alexs System achieves its Goal
(Details)
Resources / Routing / BOM
FG
Inventory
Raw
Materials
Orders
Material Release Flow

What you have to do next, Alex, is to
distinguish between two types of
resources in your plant. One type is
what I call a bottleneck resource. The
other is, very simply, a non-bottleneck
resource.
FG
Inventory
Raw
Materials
Orders
Bottleneck: Any resource whose capacity is equal to or

less than the demand placed on it.
resource.
FG
NCX-10 Inventory
Raw
Materials
Orders

resource.
HeatFGTreat
NCX-10 Inventory
Raw
Materials
Orders

Yes, it is possible to have two bottlenecks, but first
make sure they are really bottlenecks.
HeatFGTreat
NCX-10 Inventory
Raw
Materials
Orders

In the case of the furnaces, they were bottlenecks
because of the way they were operated - and Alex
learned that they did not need to heat treat some
parts that they processed.
HeatFGTreat
NCX-10 Inventory
Raw
Materials
Orders

In the case of the furnaces, they were bottlenecks
because of the way they were operated - and Alex
learned that they did not need to heat treat some
parts that they processed.
FG
NCX-10 Inventory
Raw
Materials
Orders

Applying the Boy Scout Hike to UniCo
Unlike the Boy Scout hike, Alexs slowest

resource was not first in line!
So he had to take another approach

Applying the Boy Scout Hike to UniCo
FG Work-in-Process Raw Material
Alex tied a rope from the first operation to the constraining

operation, limiting the distance (time) between them, and
limiting the work-in-process.
He also exploited the use of Herbie by changing certain policies.

In the plant, the tied Ropes looked like this.
They controlled entry points for material release of
routings that led to the NCX-10. The ropes
effectively choked off release of materials to the rate
and quantity required by the NCX-10 to make
demands for both inventory and discreet orders.
FG
NCX-10 Inventory
Raw
Materials
Orders
He also changed work rules for breaks, QA, and maintenance.

Operating in this manner
WIP decreased
FG inventory decreased
Lead time decreased
Due date performance improved
Operating Expense Decreased
Plant began making money!
FG
NCX-10 Inventory
Raw
Materials
Orders
He also changed work rules for breaks, QA, and maintenance.

Until the CONSTRAINT moved to
The MARKET!
At which time Alex used his new-found
capacity and decreased lead-time to acquire
significantly more business!
FG
NCX-10 Inventory
Raw
Materials
Orders
Alex followed what is known as the Five Focusing Steps of TOC

The Five Focusing Steps of TOC
1. Identify the systems constraint(s).

2. Decide how to Exploit the systems constraint(s).
3. Subordinate/Synchronize everything else to the
above decision.
4. Elevate the systems constraint(s).
5. If in the previous steps a constraint has been
broken, go back to Step 1.
WARNING
Do not allow inertia to become the systems constraint!

QUESTIONS?
Hugh E. Cole
AGI-Goldratt Institute
hugh.cole@goldratt.com
www.goldratt.com

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Formati disponibili

Understanding THE GOAL:

The best-seller by Eli Goldratt and Jeff Cox

ASEM Member Benefit www.asem.org/

Presentation will last 45 minutes

There will be time at the end for questions

Save all questions until the end

Please turn your phone on mute

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

Translated into more than 21

You have 3 MONTHS!

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

Why cant we make money?

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

Chance meeting at the airport

Robots -> Productivity Improvement -> What is productivity?

Not equations! -> Can only be measured in terms of your Goal!

Sowhat is the Goal of your manufacturing organization?

Hint: There is only one Goal, no matter what the company

An action that moves us toward making money

But how to measure? There is no shortage of measurements!

Hours worked vs. hours paid to work

Problem: they dont tell me if I made money!

Inventory ($I) Jonah

Inventory ($I) Jonah

Throughput = Sales - TVC

Alex: But what about my efficiencies?

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

C cannot accomplish more than what B provides to it.

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

The output of any resource fluctuates over time.

On average, this resource will produce 10 units per hour

with Statistical Fluctuations

Jonah: Alex, call me when you can tell me what the

FG Work-in-Process Raw Material

Spreading troops mean high inventory.

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

Put Herbie in the lead.

But the troops became frustrated because it was too slow!

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

Lightened Herbies load to enable him to speed up.

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

The maximum deviation of a preceding operation will

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

How could Alex apply this learning to UniCo?

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

The Goal: Make more money now and in the future.

The Metrics: Throughput, Investment, Operating Expense

But how does the system achieve the Goal? (Details)

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

Resources / Routing / BOM

Material Release Flow

Resources / Routing / BOM

Bottleneck: Any resource whose capacity is equal to or

Resources / Routing / BOM

Bottleneck: Any resource whose capacity is equal to or

Resources / Routing / BOM

Bottleneck: Any resource whose capacity is equal to or

Resources / Routing / BOM

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

Resources / Routing / BOM

Copyright 1995-2013. Avraham Y. Goldratt Institute, LP. All Rights Reserved.

Resources / Routing / BOM