The Goal: A Process of Ongoing Improvement Book Review: Read the book “The Goal:
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Question
The Goal: A Process of Ongoing Improvement Book Review: Read the book “The Goal: The Goal: A Process of Ongoing Improvement by Goldratt, Eliyahu.”.
Write a book report summarizing the below bullet points.
Identify examples of Ten OM Decisions in The Goal. (describe and elaborate on the examples and the impact on the company's performance)
Evaluation of essential operational decisions/strategies / principles exercised in The Goal
Key lessons learned from The Goal
Do not only summarize the content of the book – you will be graded on your analysis of the content.
Deliverable: You should submit a written report. The report should be between 3 and 5 pages long.
Explanation / Answer
Book Report of “The Goal” covering background, dependent events and its summary, the three primary causes, 5 major steps in Theory of Constraints (TOC), Key Principles covered in the book, Key Messages and conclusion.
Let me give you a background of the book The Goal, by Eliyahu Goldratt.
Background:
This is a book about continuous improvement where the Author Goldratt, through a story of a man Alex Rogo, who wants his company to be profitable again.
He is asked by his mentor/consultant to focus on the Goal of the organization and they should focus on the issues of increasing operational expenses, excess inventory, and lower productivity. So, with intense discussions with his teammates, Alex reaches to a conclusion that making money is the ultimate goal of an organization and he should focus on it solely. And he should provide positive results within 3 months.
In order to reach the goal of making money, he comes to know that he would need Increased Net profit, Good Return on Investment and Sufficient Cash Flows. So, he needs to work on achieving an increased rate of sales(throughput), optimum inventory and decreased operational expense. Now he needs to work on these issues to reach the goal he has set for the company and for himself as well.
Dependent Events :
They are a series of events that must take place before another event begins, and this subsequent event is dependent on the previous event.
Statistical Fluctuations: These are the results which are a piece of predictive information which cannot be accurately determined. They act as an indicator of prediction of error percentage, estimates of demand and calibrate productivity.
Smyth explained the above concept with the following analogy :
He notices a Boy Scout Troop and the line of the scout stretch further and further apart, the longer the line is. Further, he notices a scout who is slower than all of the others, which is causing the other scouts to slow down. All the scouts are walking at a different rate of speed, but the overall rate of the whole scout is determined by the slowest of the troop.
So, what happens here is that the fluctuations in the speed of the scouts do not average out but instead get accumulated because of the dependent event i.e. the slowest scout in the troop.
What Alex tries to do is some re-balancing the capacity by placing the slowest scout in the very front of the line, also in order to walk her fast, he decreases her load and distributes amongst other scouts which increases her pace and subsequently of all the remaining scouts.
By this, the summary of the event is :
a). Final throughput can be measured by the rate of slowest and last operation in the whole sequence of operations
b). Inventory is the distance between the first and last boy in the scout, which should be minimized
c). Operational expenses, which is synonymous to Energy spent by the scout, which should be conserved
d). Resources need to be balanced aptly with correct capacity
e). Fluctuations in the speed of operations are causing the increase in inventory and decreasing the throughput.
So, This is the idea behind dependent events and statistical fluctuations demonstrated by Smyth. Hope, you find my answer helpful.
The three primary measures Alex Rogo learned and applied to this plant:
To make more money today and in the future, Alex Rogo decided to go for measures that have to be taken for achieving his goal.
•Throuhput
•Investment
•Operating Expense
Throuput=(Sales-Total Variable Cost)
Net Profit= (Throughput- Operating Expense)
Approaches are very much statistical and close to reality. Every plant has two phenomena. a) dependent events b) Statistical fluctuations
The biggest takeaways from the book:
Through the methodological approach on the measurement of various factors associating with driving business. the book covers various aspects of identifying bottleneck and nonvalue-added activities that incur unwanted cost in business. How to make steady flow of cash and get returns on investment in much better way is clearly explained in statistical and methodological way
5 major steps in Theory of Constraints (TOC):
•Identify the system constraints
•Decide how to exploit the system constraints
•Subordinate/Synchronise everything else to above decisions
•Elevate the system constraints
•If in the previous steps any constraints have been broke, go back to step
Thus measuring the constraints and work on it revise and make it steady and stabilize will create a huge positive impact on the overall business process.
Key Principles covered in the book:
The first principle defines three ways to measure whether or not businesses are achieving the goal of making money. These three measurements are interrelated and easy enough to apply to any process. The three measurements are throughput, or “the rate at which the system generates money through sales;” inventory, or “all the money that the system has invested in purchasing things that it intends to sell;” and operation expense, or “all the money the system spends in order to turn inventory into throughput” (Goldratt & Cox, 1992).
The second principle of Goldratt’s model relates dependent events and statistical fluctuations to the manufacturing process. Dependent events are processes that must first take place before other ones can begin (Goldratt & Cox, 1992)
Key Messages in the Goal:
A Process of Ongoing Improvement by Goldratt, Eliyahu
1. Theory of constraints, bottlenecks
2. How to Elevate them
3. Applications of these concepts in real life for case studies in operations management.
The crew works out a detailed plan to keep the bottlenecks fully utilized. They soon discover that they need a mechanism to inform workers about the priority sequence at non-bottlenecks as well. A system of red and green tags is put into place to map priorities visually: Red for bottleneck parts (to be worked on first) and green for non-bottleneck parts (to be worked on second).Alex is determined to make up for the weekend he owes Julie, so he asks her out for Saturday.
The material is being “released” to the plant just to keep the non-bottleneck machines busy. This improves these machines efficiency measures but does not help the goal.
After studying the problems, Jonah explains that there aren’t any new bottlenecks! Rather, the current practice of prioritizing non-bottlenecks to work first on bottleneck parts inadvertently caused the problem. Non-bottleneck parts are released according to using the same principle but tied to assembly. Another part, which is required for final assembly, does not require any work by the bottleneck. Hence those parts were produced on lowest priority, leading to shortages at final assembly.
The solution might be to rework the tagging system to create an equal supply of the two parts. The focus now expands to include matching the production of bottleneck parts to ensure timely availability of non-bottleneck child parts. If successful, this could also reduce the accumulation of bottleneck parts in WIP inventory at the assembly line.
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