The Goal 1984 By Eliyahu Goldratt Pdf Free Download Captured by Plamen T. THE GOAL A Process of Ongoing Improvement THIRD REVISED EDITION By Eliyahu M. Goldratt and Jeff Cox With interviews. 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. Free The Goal: A Process of Ongoing Improvement By Eliyahu M. Goldratt, Jeff Cox EBOOK Product Description 30th Anniversary Edition. Written in a fast-paced thriller style, The Goal, a gripping novel, is transforming management thinking throughout the world.

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“So this is the goal: To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow.”

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Short Summary

The Goal by Eliyahu Goldratt will fundamentally change the way you think about business and operations. A great book to learn how to properly analyze and optimize systems.

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The Goal: Executive Summary

The three areas where you should focus:

• Throughput: the rate at which the system generates money through sales. The money coming in
• Inventory: all the money that the system has invested in purchasing things which it intends to sell. The money inside the system
• Operational Expense: all the money the system spends in order to turn inventory into throughput. The money you pay to make throughput happen

The Goal:increase throughput while simultaneously reducing both inventory and operating expense

The system only moves as fast as the bottleneck.

To increase the capacity is to increase the capacity of ONLY the bottlenecks.

An hour lost on the bottleneck is lost forever.

How to optimize a system:

1. IDENTIFY the system’s constraint
2. Decide how to EXPLOIT the system’s constraint
3. SUBORDINATE everything else to the above decision
4. ELEVATE the system’s constraint
5. 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

The Goal

The goal of any organization is to make money.

Actions that move you towards making money are productive; actions that take away from making money are non-productive.

The Goal: to make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow

To translate the goal of making money to the day-to-day activities, focus on three measurements:

• Throughput: the rate at which the system generates money through sales. The money coming in
• Inventory: all the money that the system has invested in purchasing things which it intends to sell. The money inside the system
• Operational Expense: all the money the system spends in order to turn inventory into throughput. The money you have to pay out to make throughput happen

Reframing the Goal: increase throughput while simultaneously reducing both inventory and operating expense

“The goal is not to improve one measurement in isolation. The goal is to reduce operational expense and reduce inventory while simultaneously increasing throughput.”

The Bottleneck

The closer you are to a balanced plant — where the capacity of each and every resource is balanced exactly with demand from the market — the closer you are to bankruptcy.

If you are working at full capacity, throughput goes down while inventory goes up, which is inefficient. You can’t have a “balanced plant” without doing excess work.

Dependent Events: an event, or a series of events, that must take place before another can begin

Statistical Fluctuations: information we cannot precisely predict, like how long it will take the waiter to bring us our check

When dependent events are in combination statistical fluctuations you’ll develop bottlenecks in your system.

Bottlenecks: any resource whose capacity is equal to or less than the demand placed upon it. In turn, a non-bottleneck is any resource whose capacity is greater than the demand placed on it

The whole system only moves as fast as the bottleneck. To optimize it, you need to increase the bottleneck’s capacity and tie the rest of the system’s rate to the rate of the bottleneck.

How do you know if you have a bottleneck? First, look and see what has a big pile of work in front of it. Then find if the number of available hours for production for the resource is equal to or less than the hours demanded.

“To increase the capacity of the plant is to increase the capacity of only the bottlenecks.’’

Optimizing a System

To optimize the system, make the flow through the bottleneck equal to the demand from the market (or even a bit less).

The actual cost of a bottleneck is the total expense of the system divided by the number of hours the bottleneck produces.

If you lose one hour on the bottleneck, you’ve lost it forever.

Make sure it’s time isn’t wasted on the bottleneck by:

1. Sitting idle during a break
2. Spending time on parts that are or will become defective
3. Making it work on parts you don’t need

There are two ways to increase the capacity of the bottlenecks:

1. Make them work only on what will contribute to throughput today
2. Take some of the load off the bottlenecks and give it to non-bottlenecks

By making bottlenecks more productive, you increase your throughput and inventory declines. But you also put more demand on the other work centers. If the demand in another work center has gone above one hundred percent, then you’ve created a new bottleneck.

“When you make a non-bottleneck do more work than the bottleneck, you are not increasing productivity. On the contrary, you are doing exactly the opposite. You are creating excess inventory, which is against the goal.’’

If you reduce batch sizes, you reduce inventories as well as the amount of cash tied up at any one time, easing the pressure on cash flow. You’ll reduce the time it takes to process a batch, condensing the total lead time.

The Optimizing Process

The rule you need to follow is to balance the flow with demand, not the capacity.

“Everywhere, improvement was interpreted as almost synonymous to cost savings. People are concentrating on reducing operating expenses as if it’s the most important measurement. But the important thing is that we, in our plant, have switched to regard throughput as the most important measurement. Improvement for us is not so much to reduce costs but to increase throughput.’’

The process to optimize a system has five steps:

1. IDENTIFY the system’s constraint
2. Decide how to EXPLOIT the system’s constraint
3. SUBORDINATE everything else to the above decision
4. ELEVATE the system’s constraint
5. 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

“Whenever the constraint is broken it changes conditions to the extent that it is very dangerous to extrapolate from the past.’ Even the things that we put in place in order to elevate the constraint must be reexamined.’’

To become a better manager, use first principles and search for the answers to three questions:

1. What to change?
2. What to change to?
3. How to cause the change?

[Other Options – Major Concepts in The Goal, or The Most Popular Guides to The Goal]

Written in 1984, The Goal lays out Eliyahu Goldratt’s Theory of Constraints (“ToC”) in the format of a novel. ToC was first used into improve production plant manufacturing, but as Goldratt and his co-author Jeff Cox show in The Goal – it has broader applications.

Readers of The Goal experience a unique combination of styles:

• This is a first person novel told from the point of view of Alex Rogo, the narrator.
• The author explains complex topics about manufacturing through the characters’ dialog and activities.
• The manufacturing topics are introduced through the tutelage of Jonah, a consultant and former professor to the main character, Alex Rogo.
• As a novel, it includes family and parenting plot arcs that are also framed within ToC.
• If written in 2018 – nearly 25 years later – a shorter book would be expected. Goldratt’s treatment of the components of ToC are very thorough and are demonstrated to the reader in many ways.

Books may pursue one of these styles, a few may pursue two of them, but even fewer pursue all of these methods at once. The Goal stands out because it did all of them and was successful in the pursuit. In my re-reading, what stood out was that Goldratt really put forward just a few limited topics, but showed all of the arguments around them in several ways.

The Goal’s persuasion around the usefulness of the Theory of Constraints is built on a thorough discussion of a limited number of topics, but each is debated in rich detail and in many scenarios.

First 10 Chapters

Chapter 01 (Video Summary)

The book drops us in to the life of Alex Rogo, our narrator, who is over-whelmed with issues as he begins his day as a plant manager at UniCo’s Bearington Plant. Rogo is flustered. The plant is not performing well. Three of his team members are looking for guidance, and at the same time Rogo’s boss, Bill Peach, is on site from corporate complaining about a late order for a big customer, Bucky Burnside. Rogo’s newest tool – the NCX-10 robot, should be having a more positive impact than it is. Rogo expresses a desire to have a shot at being a CEO someday, but that is difficult to envision given his current position.

Goldratt’s tone is set right away – he focuses on the sensations of being in a plant and his writing devices, including character names can be transparent. The story and cadence of the book are established.

Chapter 02 – Process (Video Summary)

The Goal By Eliyahu Goldratt Pdf Free

Rogo’s wife, Julie, is unhappy. Rogo is nervous because other nearby plants have closed down. Rogo visits home for a late dinner, returns to the plant where his team, led by Bob Donovan, has managed to get the Burnside order out, and then closes out the chapter pondering their daily chaos at a diner with Bob. Rogo is reflecting on their daily struggle to get things done.

“Why can’t we consistently get a quality product out the door on time at the cost that can beat the competition?” Rogo, pg 18

Chapter 03 (Video Summary)

Goldratt opens the third chapter with Rogo in a stereotypical corporate meeting – where Rogo learns that the clock is ticking on his plant. We learn the backstory of his and Peach’s relationship – what was once good rapport has soured as Peach feels the stress of his role managing the division. The whole of UniCo is in trouble, and the daily challenges that Rogo feels are part of poor overall corporate performance. The chapter closes with Rogo finding a cigar that leads to a flashback introduction of his former professor and soon-to-be-mentor, Jonah.

Chapter 04 (Video Summary)

Two weeks earlier, Rogo had bumped into Jonah at an airport. Rogo provides Jonah with a career update – Jonah plays it straight and asks common sense questions to Alex which he finds awkward and difficult to respond to.

“Alex, I have come to the conclusion that productivity is the act of bringing a company closer to its goal. Every action that brings a company closer to its goal is productive. Every action that does not bring a company closer to its goal is not productive.” Jonah, pg 32

Jonah asks common sense questions about the NCX-10 robot – and Alex fumbles through the answers. Jonah is established as the professor, the guide, the Yoda, the instructor very quickly.

“Alex, you cannot understand the meaning of productivity unless you know what the goal is. Until then, you’re just playing a lot of games with numbers and words.” Jonah, pg 33

Chapter 05 (Video Summary)

Rogo begins this chapter enacting an employee’s fantasy – he excuses himself from a corporate meeting that he realizes is a waste of time. Emerging out of his flashback with Jonah, Rogo knows that he must find a new way to evaluate his plant. He ducks out, grabs food and beer, and returns to his hometown and a scenic overview that looks down on his plant. Rogo literally takes a high level view of his plant. Goldratt’s writing techniques are simple and effective. Rogo debates himself – serving up strawmen to help the reader see that technology is not a goal into itself, endless production of inventory is wasteful, and that many of the actions suggested by corporate are fruitless.

“Our tribe is dying and we’re dancing in our ceremonial smoke to exorcise the devil that’s ailing us.” Rogo pg 34

Chapter 06 (Video Summary)

Rogo debates plant accounting with his controller, Lou. Rogo has been pencil-whipped and smothered in vanity metrics at his corporate meetings. He is internalizing Jonah’s insistence on pursuing a clear goal and realizes that his accounting and financial numbers must support that effort.

“Would you say the goal of the company is to make money?” Rogo to Lou, pg 45

Rogo can’t just optimize one metric – he has to optimize at least three – 1/ net profit (aka net income), 2/ ROI, and 3/ cash flow. If you improve just net profit, you may be wasteful with money and have low ROI and cash flow. If you harvest cash flow, you may damage your ROI by selling off assets and not generate net income. All three measures must be considered together – it is not acceptable to optimize just one.

The chapter wraps up with Rogo calling home to a disappointed wife, and then taking his anger out on a second shift supervisor. The anger at Eddie is a nice point – it is out of line with management best practices, but it shows the degree of frustration that Rogo is dealing with.

Chapter 07 (Video Summary)

In this four page chapter, Rogo debates simply leaving UniCo or committing and staying. Goldratt takes a job search off of the table and sets the stage that Rogo won’t create different results by following the same old methods.

Chapter 08 (Video Summary)

Rogo takes flack from Peach for bailing out of the meeting in Chapter 4 and realizes that he must track down Jonah. Rogo heads to his childhood home, upsetting his wife, Julie, once again, and finds a number for Jonah. Finally, they speak late in the morning, and Jonah confirms Rogo’s musings with Lou about balancing at least three metrics to measure plant performance.

“Their names are throughput, inventory and operational expense.” Jonah, pg 60

Chapter 09 (Video Summary)

Late is better than wrong, but both can be the bridge to a deal. Rogo wakes up at his childhood home and returns to the plant. He asks questions of his team to confirm that the NCX-10 robot hasn’t led to improved plant throughput, but instead has been a localized optimum. The NCX-10 has had inventory build up in front of and behind it, making the plant metrics worse. Rogo is beginning to understand theory of constraint thinking and is trying to help his team see the mistakes they have made.

Chapter 10 (Video Summary)

We begin ten where nine ended; Rogo has explained the basic principals of throughput accounting:

• Local optimums don’t matter.
• Results should be measured against the goal.
• Throughput, inventory and opex should be reflected in the financial metrics – and all should be optimized.

The chapter continues with the team debating and classifying different types of expenses. How should they classify education expenses? Different kinds of inventory? The list goes on.

Second Ten Chapters: 11 – 20

Chapter 11 – Dependent Events and Statistical Fluctuations (Video Summary)

Rogo flies up to New York to meet Rogo in a hotel, where Goldratt has him explain two of the most important concepts in The Goal and in the Theory of Constraints. GANTT charts don’t complete on time – a delay early causes delays later. Later events are dependent on earlier events.

If an activity has a mean time to completion, then it will complete around that mean. The time to complete experiences statistical fluctuations. Those fluctuations are additive if the events are dependent – early finishes do not create negative time.

“Why do you think it is that nobody after all this time and effort has ever succeeded in running a balanced plant?” Jonah to Rogo, pg 86.

For the reader that has not worked in a plant or been involved with large project management, it can be easy to believe their smartsheet or .xls. It takes some further data work to show a mean time to completion with a standard deviation. Re-running the data (I would have done it with Crystal Ball earlier in life) with this included would show that the time to completion for the whole project would continue to creep out.

Just as with the financial metrics – local optima – completion of a single step, is not what matters. The goal is the completion of the whole project, not just one project. The goal is not just one financial metric, but the optimization of all three.

Racing through one step at the expense of others does not create a finished good capable of creating revenue – the whole process must be complete.

Eleven explains two of the most important concepts in the book – thirteen provides more detail on the same subject, but with a real world example.

Chapter 12 – Singles Bar (Video Summary)

Seven, at four pages, was our first throw away chapter. Twelve has two pages.

Rogo recalls another UniCo colleague whose wife left with a lipstick message of, “Goodbye, you bastard.” Julie foreshadows to him with her comments about going to a singles bar with her friend, Jane. Jane is the tiny devil sitting on Julie’s shoulder asking for a divorce.

Chapter 13 – Herbie’s Hike (Video Summary)

Herbie’s hike is the most known lesson taught by the goal. Herbie is a, “fat” [Goldratt’s term] boy scout, and as a good father, Alex is leading his son Davey’s troop on an outing. “Herbie the fat kid goal” is one of the most popular search terms for the goal – this is an iconic character.

Herbie walks slow. He is the slowest walker. The goal is for the whole troop to finish the hike. But the troop does not finish until Herbie, the slowest walker, finishes.

“You’re doing great, Dad,” he says. David (aka ‘Davey’) Rogo to his father Alex after the scout hike. Pg 98

The troop’s completion time is a Dependent Event on Herbie’s Completion time. Each hiker’s completion time has statistical fluctuations. Herbie’s completion time is the optimal finishing rate, but the troop’s completion time will never be better than Herbie’s.

Chapter 13 is a real world example of the concepts explained by Jonah in Chapter 11.

Chapter 14 – Boring Dice Game (Video Summary)

If Eleven and Thirteen haven’t made the concepts of Dependent Events and Statistical Fluctuations clear enough – 14 gives the reader a stick and points you towards a dead horse to beat.

Rogo works with the scouts to show mathematically how statistical fluctuations cause delay by creating a boring dice game. The dice game shows that statistical fluctuations around the value of a role of the dice stack up – and if you make their total values dependent, then the sum of a series will always be more than the sum of the expected means of a series.

Chapter 15 – Herbie and Teamwork (Video Summary)

Herbie is the slowest hiker and he knows it. Herbie feels bad that he slows down the whole troop. Herbie wants to go faster. The whole troop wants Herbie to go faster. How does the troop help Herbie go faster?

1. Admit that Herbie is slowest.
2. Discuss why Herbie is so slow.
3. OODA loop – help Herbie go faster.
4. Implement the solution and get it done.

Herbie has a bunch of stuff in his bag. Split his stuff up, share the load. Helping Herbie (the constraint) go faster helps the whole troop go faster.

The slowest operation is the constraint.

Goldratt teaches ‘dependent events’ and ‘statistical fluctuations’ because all events depend on the constraint. Each event has an expected value, but all of those expected values fluctuate. The constraint is the slowest, or max value for a time series, event. All other events depend on the constraint to complete. Each event has its own expected time to complete, but those expected value experience their own statistical fluctuations.

He says, “You know, Dad, I was really proud of you today.” David Rogo to his father, Alex. Pg 119

Chapter 16 – Why hate Julie? (Video Summary)

Rogo returns from the scout hike to find his wife has moved out and his daughter was left at his parents home. This chapter is two pages long, and other than his wife’s departure, it serves as a transition point like twelve and seven.

Chapter 17 – Back to the Robot (Video Summary)

Rogo starts the chapter at home, a scurrying single father getting his kids out the door to school. The bulk of the chapter is spent at the plant, where he works through four big concepts with his team:

• Goals: The team’s goal is to ship intermediate parts to a sister plant run by Hilton Smyth – the closest thing to a protagonist we find in the book. Every activity that doesn’t achieve the goal is a waste of time. Only pursue activity that achieves the goal.
• Constraint: The parts must pass through the NCX-10 robot, which can only handle 25 parts per batch. Not 26! If 24 are run, then one empty slot wasn’t run.
• Dependent events: The pre-robot step is human operator driven. Parts arrive to the NCX-10 in an irregular fashion. The NCX-10 depends on the upstream processing – so if that step is uneven, then so too will the loading be of the NCX-10.
• Statistical fluctuations: The NCX-10 has a tight performance window with little fluctuations – but the upstream processes are much more variable.

Rogo’s team has a clear goal, and they celebrate almost achieving it before realizing that ‘almost’ doesn’t matter for their customer. They miss their target because they feel to;

1. Recognize the constraint – the 25 unit cap at the NCX-10.
2. Map the dependent events. The NCX-10 is last in line, which makes it subject to…

Anticipate statistical fluctuations. The upstream step ahead of the NCX-10 has high variability – and this causes delays at the NCX-10.

Chapter 18 (Video Summary)

Rogo walks through the previous days’ results with his team and phones Jonah for advice. Jonah coaches them that constraints aren’t bad – they are simply a reality that must be identified and dealt with. Every system has a constraint. The team is surprised to find two constraints – the foreshadowed NCX-10 robot and a newly discussed heat finishing step.

In the same way that Goldratt assumes a culture of teamwork and data use – he gifts Rogo with a talent for change management. Rogo listens and prioritizes change based on customer need and team receptivity.

Chapter 19 – Change (Video Summary)

Jonah flies in to help the team develop their approach to managing the constraints. For the plant to increase its output, the constraint must increase output. Any other activity is a waste of time in regards to total plant output. Jonah reinforces the team’s understanding of; Goals, Constraints, Dependency, and Fluctuations.

Chapter 20 (Video Summary of Chapter 20)

“Why don’t we go ahead with the easier things right away and see what kind of effect they have while we’re developing the others.” Donovan to Rogo, pg 163.

Julie Rogo remains at her parents and Alex fights to get her back. Donovan, his earnest help at the plant, coaches him on managing change. Change starts with small wins that show everyone the benefit of changing.

Chapters 21 – 30

The team continues to work their constraints. Rogo finds the NCX-10 idle. An idle constraint means the process is not working towards its goal. Diving into the problem, they find that parts upstream of the NCX-10 are delayed. A constraint should not be idle.

Chapters 21 – 23 identify the following methods to improve a constraint:

• A constraint should not be idle.
• A constraint should have enough feedstock to avoid being idle.
• Adding incremental capacity with different equipment, opens up the constraint.
• Data drives constraint improvement.
• Tee up work ahead of the constraint.
• Staff the constraint with the best people.
• Modify products to minimize use of the constraint.

Our heroes continue to focus on the constraints – they locate an old tool, a Zmegma, that will unburden the heat treatment step. Even small additions of capacity, which might look silly to do, improve overall output if they are done at the constraining process step.

Focus on the constraint continues. Ralph Nakamura, the plant data manager, realizes he needs better data – and fights to get it. Rogo realizes that his 2nd shift manager, Mike Haley, has been aggressive in keeping the constraint moving. Other changes in how the constraints are approached create more capacity – constraints should be staffed by the best team members, and modifying processes to shorten exposure at the constraint should be approved wherever possible.

The plant’s focus on constraints through Chapters 21 – 23 leads to record shipments. This leads to a night of celebrating, wherein a drunken Rogo is driven home by Stacey. A sleeping Julie – who has surprised him by returning home, jumps to conclusions. Stacey calms down Julie. The team then worries that their constraints are wandering.

Jonah returns to help the team understand their wandering bottlenecks. By focusing on the cadence and capacity of the constraints – the team has been mistakenly releasing too many inventory requests. This other inventory buildup is choking up the plant with material.

With this chapter, Goldratt gives some items to avoid doing:

• Do not build inventory that doesn’t flow to the constraint.
• Do not overbuild inventory.
• Do not optimize vanity metrics.
• Do not pursue activity that does not lead to achieving the goal.

Rogo and his kids debate ways to keep Herbie on pace with the troop during their hike. They debate a ‘drum-and-rope’ system to keep the troop with Herbie by binding them together and helping call out Herbie’s cadence.

At the plant, Ralph worries that building inventory ahead of the constraint to ensure that it is not idle will ruin local metrics. Reducing inventory away from the constraint will also hurt utilization. Rogo shows leadership, saying;

“And I’m not about to stand by and let that happen just to maintain a standard that obviously has more impact on middle management politics than it does on the bottom line. I say we go ahead with this. And if efficiencies drop, let them.” Rogo to Nakamura pg 219

Rogo delivers much improved results to Bill Peach at corporate. Still under threat of plant closure, he guarantees a 15% improvement – what does he have to lose, when his other option is a shutdown? With Goldratt’s Theory of Constraints showing results, Rogo now knows that he has the tools to succeed.

The chapter resolves with Alex and Julie discussing relationships, marriage and goals. Alex wants the same re-evaluation of ‘the rules’ in his personal life, while Julie remains cautious.

Rogo and his team understand constraints, dependencies, fluctuations and the importance of a goal. Their new goal is to achieve 15% growth. Jonah advises to cut their batch size. If our plant is a system, and if our goal is throughput – then smaller batches flow through faster. Smaller batches get results faster, can get tested faster and can accelerate pacing – provided the three cost metrics (throughput, inventory and opex remain optimized). The team cuts the batch size.

Rogo’s batch size cutting works. His WIP is now 100% focused on customer orders. Now he reaches out to sales and says, “get me some business.” Rogo negotiates with sales – rather than just taking orders, he negotiates what the plant can do. The customer takes the negotiation and the order is won.

Only sign up for contracts where you know you can deliver.

Corporate finagles a press event to showcase the NCX-10 robot, and in doing so realizes that the metrics they care about (the vanity metrics Rogo’s term has been taught by Jonah to ignore) are all off. This is balanced out by a surprise helicopter visit from Bucky Burnside – our first customer exposure who is now giddy with the sales he has won thanks to the Bearington plant’s focus on the goal and persistent batch size cutting.

Rogo translates his plant learnings into commercial wins. When plant and commercial combine, businesses are capable of phenomenal growth.

Chapters 31 – 40

Rogo is back at corporate, defending his metrics to a snippy Hilton Smyth. Smyth cannot reconcile good financial performance with wasting efficiency metrics. Rather than search for understanding, he pursues a blistering critique of Rogo. Rogo sits with Peach as he exits – and instead of learning that he has more tongue lashings ahead, discovers that he will soon be given Peach’s job as a promotion.

The Goal Book Pdf

In many ways, Chapter 31 ends a major portion of the book. Goldratt’s major lessons have been taught – we understand the improtance of a goal, dependence, fluctuation and batch size cutting. Goldratt’s chapters through Rogo’s promotion become more philosophical and internally focused.

Rogo reflects on his promotion, and Goldratt uses this to lay out a framework for change management. Rogo faced urgency to turn his plant around. His team created consensus around the Theory of Constraints by experiencing the results and seeing that it explained their situation and prescribed how they should behave.

“If it weren’t for the conviction that we gained in the struggle—for the ownership that we developed in the process—I don’t think we’d actually have had the guts to put our solutions into practice.”

Rogo continues to prepare for his next role, and as he does so he explores the relationship between sales and operations. The capabilities of the Bearington plant are now known – by following the Theory of Constraints, UniCo now knows how much capacity it has available to sell. Further, by understanding the benefits of the Throughput Accounting method (focusing on throughput, inventory and opex), as opposed to backwards looking cost accounting and vanity metrics – Rogo knows that he can bid mor eaggressively on business and still have it create cash flow.

Rogo works with Johnny Johns to negotiate for new business. By starting with his capabilities, which he knows from his work with constraints, he is able to bid and come to terms with customers in new ways.

The team has managed the constraint to the point that it exists at the boundary between Bearington and its customers. By documenting their internal processes, the constraint has been pushed outside.

Rogo asks his team to think about the best ways for him to walk into his next position. They talk through re-organizations, fact-finding and the faddish nature of management practice. Goldratt positions these as activities that do not serve a goal – they are action for the sake of action and not necessarily effective. There are echoes of modern data-mining, where teams look backwards at data and farm it for results – rather than beginning with a hypothesis and proving it.

Goldratt builds a lot of momentum with this chapter, but it isn’t neatly channeled into a resolution.

Rogo’s exposition and debate with his team about what to do with his next job continues. As in the previous chapter, Goldratt brings out many interesting topics, but there isn’t a satisfying resolution. The conversation focuses on the value of data and models of systems. Having a model or framework for how a system works is very valuable – without that model it is hard to predict how change can occur. Having an idealized model of how a system should work makes it possible to move towards that system.

Data, without an understanding of how it works within a system isn’t very valuable. The combination of data and a model of the system that generates the data is extremely valuable. (Goldratt built the whole book off the foundation of teamwork and data – without these two concepts Rogo could not have succeeded.)

Rogo was promoted in Chapter 31 and we’ve read through four chapters of introspection and team preparation about how he should go about dealing with his new role. Goldratt is using this transition to help the reader take the Theory of Constraints and apply it to any new situation – not just a promotion. As in past chapters, the plant team serves up strawmen, draws from their experiences focusing on the constraint and the tools they took to setting and achieving their goal.

Chapter 36 ended with a rough draft of Goldratt’s guidance for new situations, which are finalized here as:

1. IDENTIFY the system’s constraint( s).

2. Decide how to EXPLOIT the system’s constraint( s).

3. SUBORDINATE everything else to the above decision.

4. ELEVATE the system’s constraint( s).

5. 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.

Rogo’s team identified that their constraint was not within the Bearington plant. Customers had plenty of demand for their products, the team had to be more effective with their constraint. Once the production process was understood, Rogo worked with marketing to pursue deals and opportunities that made use of their increase in throughput to increase their cash flow.

Two concepts drive this chapter; 1/ marginal revenue and marginal cost should drive business decisions, and 2/ systems are often best changed by outsiders.

Early in the chapter, Rogo leaps at a commercial opportunity:

“We’ll take it,” I say. – Rogo to Johns, pg 312

This might seem pretty flip – and a reader who had picked up the book and started reading at this page would think any manager who was so cavalier with his business was being too commercially aggressive. However, at this point we’ve been through Rogo’s journey from not being able to ship parts on time to knowing exactly what has to be done to increase his plant’s capacity.

Throughout these challenges Rogo has had great plant data from Ralph Nakamura. He’s had a competent and commercially savvy controller who was willing to look at his performance numbers in a different way. Rogo never deals with a bad actor – he’s had sufficient delegation of his plant and the closest to corporate politics he’s had to deal with is a suspicious Hilton Smyth.

The Goal Cliff Notes Goldratt

Rogo knows he cannot win the business unless he goes for it – and he has confidence in his numbers. He’s also developed a feel for change management that he is excited to employ in his promotion. For his new division to grow, he doesn’t expect change to come from people within the system – if they need marketing growth, he expects that to come from ideas generated outside of his marketing team.

As the plant chews through the new business that Rogo’s aggressive bid brought in they encounter new challenges. Systems that worked with less volume struggle to convert the orders into throughput – processes have to be updated. Inventory wobbled through the plant – too much of things that weren’t needed, too little of items that were essential which resulted in starved constraints.

Rogo reflects on his pursuit of the business and realizes that the challenges they face now could have been anticipated. Once a system is mapped and the constraints are known, then that same map can be used to model what is needed in the future!

“We’re reacting rather than planning.” Rogo to Donovan, pg 326

The Goal By Eliyahu Goldratt Pdf Full Book

Rogo and Lou discuss the division’s state of affairs in a drive back from corporate. Goldratt has tough task in front of him with this final chapter – he’s brought us through Rogo’s journey to understand constraints and save his plant and expounded on the Theory of Constraints as Rogo prepares for his promotion. The Goal must have been a hard book to finish. Goldratt has promoted some complex ideas and succeeded in making them easy to digest – but it is easy to imagine that he found it difficult to bring everything to a close.

There are several big points brought up in the dialogue between Rogo and Lou:

• Causing change (the “How?”) is as important as what to change and what to change to.
• Leaders and their priorities are a constraint within the organization.
• Teams are a series of operations – and just like the plant floor – there is a constraining capability within any team.
• There are many organizational red flags (sloppy reporting, tolerance of late projects, under performing teams) that can be addressed with the Theory of Constraints.
• Prioritization determines output. Goals must be prioritized – otherwise minutia can absorb all of the time.

Yes, many small actions are needed, but that doesn’t mean that we can afford to be satisfied with actions that improve the situation.

Goldratt’s point here makes an interesting contrast with how he prescribes change management. Teams need small wins – but they need to not get wrapped up in small wins and not address an organization’s bigger challenges.

Small wins are necessary to create change – but small wins are not sufficient to create broader organizational growth. Leaders must be constantly looking for a higher order change to promote in order to find bigger constraints to unlock greater throughput.