THE GOAL

Eliyahu Goldratt &

Jeff Cox

Submitted by
Harleen Kaur 08PG307
Prateek Srivastava
08PG328
Sean Collins 08PG343
Introduction
“The Goal” is a very unique book as it
explains management concepts
propounded by Eliyahu Goldratt in the form
of a fiction novel.
The main concept that is briefly described
in the book is the “Theory of Constraints”,
which he explains in detail in his next book
titled “The Theory of Constraints”.
The author uses a simple common sense
approach to explaining the basic
underlining concept of any manufacturing
firm.
The story brings in a lot excitement as
The Story
The story starts off with the main character
Alex Rogo reaching office and finding out
that that his boss, the division head, has
stormed into his plant and is furious over a
late order.
Bill Peach, the division head, warns him
about the plant being neither productive
nor profitable. He gives Alex a 3 month
deadline to show improvement or else the
plant would be shut down.
The particular order gets shipped by using
all hands in the plant on that one order.
The Story (Continued)
Bill Peach calls for a meeting at the division
headquarters where Alex comes to know
through the grapevine that if the division
has one year to improve or else it will be
shut down and sold off.
While at the meeting he remember an
encounter with his old physics professor
Jonah, where Jonah without being told
guesses all the problems being faced by
Alex.
Jonah had asked him a simple question,
“What is the Goal of any
manufacturing firm?”
Alex leaves the meeting and spends time
The Story (Continued)
Alex sits with his accountant Lou to define
what is needed assess an achievement of a
goal, i.e., Net Profit, Return on
Investment, Cash Flow.
Alex decides to stay with the company for
the 3 months and finally talks to Jonah.
Jonah gives him three terms to help him
run his plant – Throughput, Inventory
and Operational Expense.
Alex finds out that the new robots installed
in his plant have increased costs,
operational expenses and were less
productive.
Alex, Lou, Bob and Stacey brainstorm about
The Story (Continued)
Alex goes to meet Jonah in New York where
Jonah gives him some advice
A plant with everyone working all the time is
very inefficient.
The closer you get to a balanced plant the
closer you are to bankruptcy.
The combination of dependent events and
statistical fluctuations work themselves down
the productive line.
Over the weekend Alex volunteers to take
his son and boy scouts on a hiking trip. It is
then that he understands the importance of
dependent events and statistical
The Story (Continued)
Jonah introduces Alex to the concept of
bottlenecks. He tells Alex that to increase
capacity the capacity of bottlenecks need
to be increased.
Jonah, Alex and the team then calculate the
cost for every minute of downtime at the
bottlenecks.
The crew of the plant then find a way of
using red and green tags to keep the
bottlenecks continuously running.
With twelve orders shipped and things
looking up the production managers rounds
up some old machines to do the work of the
The Story (Continued)
Increased efficiencies and lower inventories
suddenly created excess materials in front
of the bottle neck.
After careful reinvestigation by Jonah it was
found that the red and green tags need to
be modified a bit.
Ralf creates a schedule for the bottlenecks
to alleviate any excess inventory in front of
them.
Bill Peach gives a 15% improvement target
for the next month.
Jonah advices Alex to reduce batch sizes by
The Story (Continued)
Alex restructures batch sizes and promises
customers to get the products shipped on
time.
Improvement touches 17% but according to
the old cost accounting model its only
12.8%.
An owner of a company overwhelmed with
the service came and shook every ones
hand personally and upped the contract
from thousand parts to ten thousand.
At a meeting at the division headquarters
Alex tries to convince the executives about
the new growth measurement model but
The Story (Continued)
To his surprise Alex is promoted to Peach’s
job. He now has to manage 3 plants.
In his new job Alex and his team come up
with a process to manage the division.
Identify System Constraints
Decide how to exploit system constraints
Subordinate everything to step 2 decision
Evaluate the system constraints
Warning! If a constraint is broken then go
back to step 1
Alex and the Head of Sales decide to fill
capacity by catering to European markets.
The Story (Continued)
All the new orders create new bottlenecks
and new problems for Alex.
Production asks sales not to promise
delivery for 4 weeks to ease up production.
Finally Alex learns that the key to being a
good manager is to ask questions like
What to change?
What to change to?
How to cause the change?
Production is an on going process and
when new problems arise they need to be
dealt with accordingly.
Learning
The Goal of any manufacturing firm is to
make money.
Any activity that brings us closer to making
money is productive and vice versa.
Achievement of a goal can be determined
by looking at net profits that need to
increase along with return on investment
and cash flows.
Throughput is the rate at which the system
generates money through sales.
Inventory is all the money that the system
has invested in purchasing things it intends
Learning (Continued)
Throughput is money coming in, inventory
is money in the system and operational
expense is the money we have to pay out
to make throughput happen.
Robots don’t always reduce costs and
increase efficiencies.
A plant in which everyone is working all the
time is very inefficient.
A balanced plant is one where each and
every resource is balanced exactly with
the demand from the market and the closer
to this is closer to bankruptcy.

Learning (Continued)
A bottleneck is any resource whose
capacity is equal to or less than the
demand placed on it.
A non bottleneck is any resource whose
capacity is greater than the demand placed
on it.
As changes take place new pseudo
bottlenecks get created which need to be
dealt with.
To be a good manager key questions like
why who where what when and how should
always be asked.