The Goal : A Process of Ongoing Improvement

The book tells the story of Alex Rogo, a plant manager at UniCo who realizes that his factory is facing difficulties. Due to weak performance Alex’s boss Bill Peach gave three months to make the plant profitable otherwise he will shut the plant.

To solve the problem Alex takes help from Jonah. Based on Jonah’s guidance Alex gathered his team and found that the Goal of any company is to make more money rather than efficiency. Anything that brings him closer to the Goal is productive. And all other activities are non-productive. To achieve the goal they need to increase cash flow, ROI, and the net profits.

Jonah gave him three operational measurements - Throughput, Inventory and Operational expense. Throughput is cash coming in. Inventory is the cash at present inside the framework. Operational cost is the cash we need to pay out to get throughput going.

During the next meeting Jonah discloses the Theory of Constraints. Constraint is a factor that prevents the system from achieving the Goal. Constraints define the overall performance of the system. In the manufacturing plan bottleneck is the most important aspect to analyse performance of the plant. A bottleneck is any resource with lower capacity than the current demand. During more than one bottlenecks are present in the same line of flow, the one with the least capacity is the constraint. The only way to increase production is increase the capacity at the bottleneck operations.

After some work they found bottlenecks- NCX10 and heat treatment. Jonah explains that each minute of loss at a bottleneck results in lost throughput for the entire plant. So team decides to keep the bottlenecks fully utilized. To take care of problems occurring during the process of improvement Alex’s team takes some counter measures like keeping inventory and quality check before bottleneck and reduced the batch size. Despite many challenges they succeed to make the plan profitable and also break the record of previous sales. And Peach promoted Alex as head of the division to manage three plants instead of just one.

After Alex’s core team promoted to their new positions, they formulate a Five-step Process Of On-Going Improvement:

One - Identify the Constraint

Effective technique for that is a simple walk through manufacturing process. By reviewing equipment performance data, average cycle time and Inventory we can find out constraints.

Two - Exploit the Constraint

The output of the constraint restricts the output of the system as a whole. So it is important to maximize the utilization and productivity of the constraint. Some actions like, Create an inventory buffer in front of the constraint, Check quality immediately before the constraint, constraint capacity is continuously scheduled for running, can help for that.

Three – Subordinate every other constrain

The primary objective of non-constrain is to support the need of constraint. It is necessary to avoid it to produce more than the constraint can handle. So proper utilization of Upstream and Downstream equipment is needed.

Four – Elevate the Constraint’s performance

Once the capacity of constraint is 100% utilized, it needs to be expanded by investing in additional machineries/land, labour. Without implementing 3rd step investing too soon raises risk unnecessarily because there is always hidden capacity available.

Five – Repeat the Process and go back to the beginning

If the current constraint has been broken, then look for a new constraint and repeat the process from step one.

By means of this book dr. Goldratt explains business fundamentals give a new approach to solve a problem.

Application of TOC in my life:

When I was a design engineer, my team was working on new development of equipment which works on hydraulics. Due to new development and inadequate knowledge my team is running out of time and it seems impossible to release design on time. At that time our manager introduced us to the concept of TOC. With help of him we identify the flow diagram of the design process and find interdependent events. We found that the main structural designs design depends on the hydraulic cylinder mounting and sleeve bearing availability. Based on the mounting point we also need to identify the availability of the cylinder and power and flow capacity of the HYD power pack. So basically HYD cylinder and bearing is our constraint and causes a bottleneck. We called that items as long lead items and we first worked on them and released them first. Due to proper guidance & planning we could complete our project within the time limit.