The Goal An Executive Summary Essay Research

The Goal: An Executive Summary Essay, Research Paper Eliyahu M. Goldratt’s The Goal is an interesting and informative business book that covers many of the issues facing businesses today. These issues include bottlenecks, activating versus utilizing resources, small batch sizes, work in progress, the concept of a “Balanced Plant”, “the real goals” of an organization, and the Theory of Constraints. In this novel, Al Rogo learns there are three things that a manager must be able to do in order to manage and that is to learn what to change, what to change to, and how to cause the change. To start at the most basic level of changing mindsets, you must understand that the real goal of any organization is to make money. No company exists to lose money or to produce a

product out of the goodness of their heart. Therefore, the real goal is to make money. There are three measurements which “express the goal of making money perfectly well, but which also permit (development of) operational rules for running (a) plant” (Goldratt 60). These measurements are throughput, inventory and operational expense. According to Goldratt, these are defined as follows. “Throughput is the rate at which the system generates money through sales.”; “Inventory is all the money that the system has invested in purchasing things which it intends to sell”; and “Operational expense is all the money the system spends in order to turn inventory into throughput” (Goldratt 60-61). The balanced plant concept is a mistake that managers have been trying to

achieve for years. Efficiency ratios do not increase sales. There are dependant and statistical variables that impact the way the plant should be running. The balanced plant concept is based on balancing capacity with efficiency. By balancing your plant with your capacity, you are insuring bankruptcy (Goldratt 86). The reason is due to dependent events and statistical fluctuations. A dependent event (or series of events) is one that must take place before another can begin; the subsequent event DEPENDS on the prior ones. A statistical fluctuation is an event that may vary from one instance to the next. Statistical fluctuations average themselves out over time (i.e. a worker can average 25 pieces per hour but his exact output will likely be more or less than that number each

hour). To balance a plant accurately, you must look at dependent events and statistical fluctuations together. The Theory of Constraints is the key concept in Goldratt’s book. This theory is why he wrote this novel. The Theory of Constraints () consists of three parts: A set of problem-solving tools – called the Thinking Processes (TP) – to logically and systematically answer the three questions essential to any process of on-going improvement: “What to change?”, “To what to change to?” and “How to cause the change?”; A set of daily management tools – taken from the Thinking Processes – that “can be used to significantly improve vital management skills, such as communication, effecting change, team building and empowerment; and; innovative, proven

solutions created by applying the Thinking Processes to specific application areas, such as Production, Distribution (as discussed in Its Not Luck), Marketing and Sales (as discussed in Its Not Luck), Project Management, and Setting The Direction of The Company, to name only a few” (Nguyen). The Theory of Constraints is composed of views of the short run and the long run. In the short run most costs are fixed, so we could maximize profit by increasing throughput and reducing inventories and operating costs. The theory of constraints helps identify methods to maximize operating profits when faced with a mix of bottleneck, and non-bottleneck operations. The bottleneck is the resource that is limiting throughput (Coughlin 46). In the long run most costs are not fixed and should