Lessons from The Goal

The Goal by Eliyahu M. Goldratt is one of the book, which has influenced my thinking a lot. This book introduced the Theory of Constraints to the world of business and has made its way to B-Schools as a textbook. Eliyahu Goldratt has done an excellent job in explaining his theory using a novel-style writing. It is a story of a struggling plant manager to improve his plant's performance and save it from closure. The expert in this story provoked the main character to "derive his solutions by supplying the question marks instead of exclamation marks".

If your organization/plant faces the classic problem of Quality, Cost & Delivery: "why can't we consistently get a quality product out the door on time at the cost that can beat the competition?" or if you have a plant manager who is "always promoting some new thing he's doing, and most of the time what he's doing isn't any different from the things everyone else is doing", then you better read this book and make others to read it as well.

The important lessons one will learn from this text are summarized below. This will be beneficial to you only if you have read this book once and would like a recap. If you have not read the book yourself, then do not expect to gain the understanding of these concepts from this post.

• The goal of an organization is to make money by increasing net profit , while simultaneously increasing ROI and cash flow.
• Three critical measurement to achieve this goal and develop operational rules to successfully run a business are: throughput, inventory, and operational expenses.
• Inventory is turned into throughput by incurring operational expenses.
• So, the real goal is to: Increase throughput while simultaneously reducing both inventory and operating expense.
• Every process is a set of dependent events...in combination with statistical fluctuations.
• What's happening isn't an averaging out of the fluctuations in our various speeds, but an accumulation of the fluctuations.
• And mostly it's an accumulation of slowness - because dependency limits the opportunities for higher fluctuations.
• Balance flow, not capacity.
• A system of local optimums is not an optimum system at all; it is a very inefficient system.
• The numbers are meaningless unless they are based upon the constraints of the system.
• Bottlenecks dictate inventory as well as throughput.

So, the Theory of Constraints is postulated as:

1. Identify the system's constraint(s).
2. Decide how to exploit the system's constraints.
3. Subordinate everything else to the above decision.
4. Elevate the system's constraint(s).
5. If in the previous steps, a constraint has been broken, go back to Step 1, but do not cause inertia to cause a system's constraint.