Ready? Start counting now: The goal of a manufacturing organization is to make money. Jonah poses this as a question: “What is the goal?” and Rogo actually struggles with it for a day or two, but any manager or executive that can’t answer that question without hesitation should be fired without hesitation. But then again, the goal isn’t clear to everyone. One of the characters in the book, an accountant, responds to an offhand comment about the goal with a confused “The goal? You mean our objectives for the month?” That’s sure to strike a chord with a lot of readers.
At an operational level, measure your success toward the goal with these three metrics: Throughput – The rate at which the system generates money through sales. Inventory – The money that the system has invested in purchasing things which it intends to sell. Operational expense – The money the system spends in order to turn inventory into throughput. You could rephrase it this way – and someone does, a bit later in the book: Throughput – Goods out; the money coming in.
Inventory – Materials in; the money currently inside the system. Operational expense – Effort in; the money going out. Obviously, your job is to minimize expense and inventory and maximize throughput. Adjust the flow of product to match demand.
In particular, don’t trim capacity to match demand. It’s a standard cost-cutting procedure, sure. But you’ll need that capacity later, if you’re serious about increasing throughput. Find bottlenecks. If manufacturing is what’s limiting your throughput, then the problem isn’t that people aren’t working hard enough.
You have bottlenecks in your manufacturing processes that are holding up everything else. Find the bottlenecks and do everything you can to fix them. Increase their efficiency, even at the expense of efficiency in non-bottleneck places, because the efficiency of a bottleneck directly determines the efficiency of the entire process, all the way through final payment. In the book, a variety of steps are taken to “elevate” and circumvent the bottlenecks. This is where the results start showing up on the bottom line. Soon the plant can actually use information from the bottleneck to do an effective job of scheduling work and (for the first time) reliably predicting when orders will be ready to ship.
Don’t be afraid to have resources idle. It’s better than putting them to work producing excess inventory that you can’t sell. Decrease the unit of work. If you’ve got people idle, you can afford to have them do their work in smaller chunks. Under a cost-accounting model, this hurts their “efficiency” by removing certain economies of scale. But you have much faster turn-around time.
Everyone’s more flexible. Work flows more smoothly. (Well, this is what the book says. ) jorendorff. com ; Articles ; The Goal The Goal – A Process Engineering Novel I read Eliyahu M. Goldratt’s novel The Goal the other night, instead of sleeping.
The book has two parts. In the first 264 pages, a manufacturing plant manager turns his failing plant into a tremendous success. That part of the book ends with the manager’s promotion to a position with oversight over several failing plants. In the second part of the book (73 pages), the manager prepares for his new job by trying to deduce a repeatable “process of ongoing improvement. ” He’s trying to make sense of what happened in the first part of the book so he’ll have half a chance of repeating that success on a greater scale. For now, I’ll set aside considerations of why The Goal is a novel, how effective it is as a book, whether it succeeds as literature, and so on.
This article is primarily about the ideas behind the book, and why some are valuable while others are probably quite useless. How to Turn Around a Failing Plant The first part of the book is about a manufacturing plant. The protagonist, plant manager Alex Rogo, turns around a failing plant by following the advice of his guru, Jonah, a physicist turned university professor and corporate consultant. The guru is a very busy man, and he casts his pearls sparingly.
Rogo plays the tough role of figuring out what they mean (i. e. explaining them to the reader) and putting them in action (i. e. convincing the reader that they could really work). The essence of this first part of the book is found in the guru’s occasional pronouncements.
I believe The Goal’s success stands mainly on the strength of these insights. Here’s what the guru has to say. (The parts in maroon are direct quotes from the book. ) The goal of a manufacturing organization is to make money.
At an operational level, measure your success toward the goal with these three metrics: Throughput – The rate at which the system generates money through sales. Inventory – The money that the system has invested in purchasing things which it intends to sell. Operational expense – The money the system spends in order to turn inventory into throughput. Adjust the flow of product to match demand.
Find bottlenecks. Don’t be afraid to have resources idle. Decrease the unit of work. That’s it. The Goal in 87 words. (If you prefer to have The Goal in 885 words, read this more expanded summary.
) In just two words, The Goal would be summarized like this: “product flow”. The plant management approach advocated by the book is based on a fundamentally new way of looking at the problem: think of your plant as a machine through which product flows. Your job is to overhaul the machine to maximize its throughput, minimize the buildup of pressure (inventory) within it, and minimize the cost (operational expense) of running it. In short, or so I gather, all of this is a scathing indictment of, and alternative to, the cost accounting method of measuring plant efficiency and success. It sounds dead-on to me, although this isn’t my field. The portrayal of cost accounting given by the book is probably a bit of a straw man.
But that’s par for the course. How to Solve Problems in Management After the plant becomes tremendously profitable and there are promotions all around, something a bit extraordinary happens. Rogo and his crew decide to look back over the successes of the first part of the book and see if they can figure out why it succeeded?and whether it can be repeated. Eventually they distill it down to this (written on a whiteboard): Identify the system’s constraint(s). Decide how to exploit the system’s constraint(s). Subordinate everything else to the above decision.
Elevate the system’s constraint(s). Warning!!!! If in the previous steps a constraint has been broken, go back to step 1, but do not allow inertia to cause a system’s constraint. A constraint is the generalization of a bottleneck. It might not always be a manufacturing bottleneck.
Sometimes the constraint is weak demand, or some other unrelated problem. I’m an engineer by training, and this reminds me of something. I hope you don’t mind if I go off on a huge tangent, because that’s what I’m about to do. The Scientific Method In grade school, I was taught that there’s a single scientific method that is followed in all scientific research.
I had quizzes where I had to write down the scientific method verbatim, as it was in the textbook. It was as though it mattered that the scientific method was exactly six steps, although in a few years the school would get new textbooks and suddenly there would be only four steps. Different formulations of the scientific method would emphasize different parts of the process. Here’s one formulation I just grabbed from a Web site: Observe a phenomenon. Hypothesize an explanation for the phenomenon.
Predict some measurable consequence that your hypothesis would have, if it turned out to be true. Test your predictions experimentally. Here’s another one: Purpose – Determine what you want to learn. Research – Find out as much as you can about the subject.
Hypothesis – Make an educated guess at the answer to the problem. Experiment – Test your hypothesis. Analysis – Record and consider the results of the experiment. Conclusion – Determine whether your hypothesis is correct.
Report your results so that others can benefit from your work. The first formulation seems to be written from a scientist’s rather abstract point of view. The second is more oriented toward grade school or high school students. But the essence of the scientific method is one step: experiment.
People are always observing weird phenomena and then speculating about what causes them, coming up with new off-the-wall explanations. It comes naturally. What doesn’t come naturally is finding ways to rigorously test those explanations to see if they’re actually worth anything. That’s what the scientific method does. By experiment alone, science ruthlessly divides the wheat from the chaff, the potentially true from the provably false.
No other step of the processes listed above is really fundamental. Experiment is the scientific method. The Seven-Step Problem-Solving Paradigm Once I got out of grade school, I thought I had left behind the rather pedantic insistence on specific steps of the scientific method. Then, at university, I took a class from the dean of the physics department. He insisted that every problem on every test be solved according to the seven-step problem-solving paradigm.
I want to and I can. Define the situation. State the objective. Explore the options. Plan your method of attack. Solve the problem.
Look back. The irony of a problem-solving process in which one of the steps is “Solve the problem” was not lost on me. But that’s not why the seven-step problem-solving paradigm is stupid. Over the course of my college career, there was not one problem that I solved because I applied the seven-step paradigm. It therefore had no value to me. I had my own paradigm, which was much more direct.
Here it is, with the benefit of hindsight. For easy problems: Read the problem. Write down the answer. For harder problems: Understand the problem.
Figure out the solution. After I manage to crack the problem in my head, finish writing down whatever is needed to get credit for it. This worked fine. There are two problems with the seven-step paradigm. First, it’s largely unnecessary.
In most cases, most of the steps can be dropped. So Occam’s Razor hacks it to bits. Second, and more damning, is that the paradigm doesn’t model the way people really think. Figuring things out is an unstructured activity.
You bring all your experience and knowledge to bear, you look at the problem from several angles, you draw some diagrams, and you think you see an approach. So you try it. And it doesn’t work. Or it starts to get really involved and you think, “Surely this isn’t what the professor intended me to do.
” So you start over. In my experience, this is the most effective way to attack small problems. iD5? I graduated and got a job as an engineer with a software consulting company. Astoundingly, this company had a five-step project paradigm.
In this case, however, it served a purpose: to separate our clients from their money. (Arguably, the company had its eyes on the goal. ) The paradigm was called the iD5 methodology. I don’t remember what the i stood for?probably the name of the company?but here are the 5 D’s. Discover Define Design Develop Deploy This was purely a marketing tool. There was nothing behind these five words.
But unfortunately, they did have an impact. The problem is that the real process of software engineering is iterative by nature. You must deploy something simple very early, or you risk spending too much effort on something your customer doesn’t want. But by the time any engineer came in contact with a client, the client had already been sold on our company’s magical iD5 methodology. So the engineers’ hands were tied. Today, the successor to that company has a new methodology, called by a different name, with three phases: Conceive, Architect, Engineer.
To me, it seems this is better, inasmuch as it’s even more vague and therefore less constraining. The Point of It All My point with all these examples is that general problem-solving paradigms are 90% fraud. It’s great to have an organized mind, but following some kind of vague process by rote doesn’t help anyone keep things straight. Still, in some cases there’s a kernel of something important at the heart of the process. Let’s return to the whiteboard in The Goal: Identify the system’s constraint(s). Decide how to exploit the system’s constraint(s).
Subordinate everything else to the above decision. Elevate the system’s constraint(s). Warning!!!! If in the previous steps a constraint has been broken, go back to step 1, but do not allow inertia to cause a system’s constraint. Is there anything important here? What’s the bottom line? This boils down to: Find the problems. Fix the problems.
Make sure you don’t create other problems. It seems to me there’s no special insight here after all. But that doesn’t mean there aren’t broader lessons to be learned from the first half of The Goal. It’s just that Rogo and his team didn’t find the lessons that most readers really need to learn. And since I’m so smart, here’s what I think those lessons are.
Keep the goal in mind. In The Goal, starting over from the first principle yielded a lot of surprising results. Question your systems and your metrics. If your metrics look great but you’re not profitable, you’re measuring the wrong things. Aggressively hunt down and identify your problems.
Stay focused. If you have a lot of problems, maybe there’s a common root cause. Don’t settle for treating the symptoms: cure the disease. In the book, Rogo doesn’t really understand the problems at all until Jonah points them out, and several times during the book the team at first fails to make some key distinction about what the problem really is. Once you’ve found the real problem, aggressively pursue every solution possible. The idea is that you’ve found a block that’s preventing you from reaching your goal.
Have the courage of your convictions. Question everything again after you’ve fixed it. You have a chance to foresee the next problem. Rogo’s team misses this chance once or twice, and Rogo kicks himself for it later. (Something else remarkable happened in The Goal.
Success bred on success. Rogo’s courage in re-evaluating everything, discarding the old rules, and taking action empowered the rest of his team. It started them thinking. Each time one problem was solved, it gave somebody on the team an idea for how things could be improved further. They started showing the initiative to pursue ideas that they would otherwise have dropped and forgotten.
I think this really happens in business. Leadership makes a difference. ) The general lessons of The Goal are about coping with new ideas, staying focused, questioning everything, and boldly addressing problems. By the end of the book, Rogo has internalized these lessons. But they are never presented as a whole to the reader.
The Goal as a Book I’ll add a few last comments about The Goal as a novel and why it was framed this way. The Goal is extremely readable. It’s all written in the present tense, using small words and a conversational tone. There’s a harmless little subplot involving Rogo’s disintegrating family life, which provides a nice change of pace once in a while.
(Goldratt vaguely implies that the theory of constraints can be effectively used in one’s home life, but the book doesn’t really pursue it. ) The characters are bland but likeable. Goldratt mentions in a preface to the second edition of The Goal that he believes a person’s own thought processes are the best teacher. To that end, he uses something like the Socratic method in his novel.
But unlike Plato’s Socratic dialogues, in which the hapless victim is overwhelmed by the dizzying force and speed of Socrates’ penetrating lines of questioning, Goldratt has Jonah ask a question and then abandon Rogo to struggle through to the answer on his own. Rogo puts the pieces together very slowly, so an astute reader will suspect many of the answers before Rogo discovers them. This is an interesting teaching method. I think it is probably quite effective. Nonetheless, I would have preferred The Goal as an 18-page white paper. So why was The Goal a novel? Bottom line: it’s easy to sell ideas in novel form.
There were already a dozen essays or articles on manufacturing management paradigms; you couldn’t sell those. Novels sell better than essays. They’re more readable. Once you realize that managers will buy thousands of copies of a “business novel” and make it required reading for their subordinates, a novel is the only way to go. (Also, The Goal was originally intended as marketing for Goldratt’s plant management software company.
) My main objection to The Goal is that it’s fiction. Rogo makes a few changes, and his problems miraculously go away. It just works. Granted, the policies seem like good sense. But the unrealistic points are glossed over. Maybe plant managers in real life have the authority to adopt dramatic changes in the way they operate, the way Rogo did.
Maybe it’s easy to convince your top accountant that all his models are wrong, even though you have no accounting experience yourself. Maybe the average plant has an IT department that can create new scheduling software out of thin air in a few days. Maybe not. Goldratt claims a lot of real-life plant managers say they’ve turned The Goal into a documentary.
That’s a book I haven’t read yet.