According to the Goal: How Eliyahu Goldratt Helps Organizations Examine Their Processes to Achieve Maximum Results
Summary of Book
The Goal: A Process of Ongoing Improvement is a work of fiction describing a very real thing—the process of manufacturing a product. This includes the engineering and production process, marketing, sales, and interaction with corporate and regional headquarters. As an employee in a corporate contract manufacturing environment, I felt that this was not a work of fiction at all. In fact, this book describes “my plant” in many instances.
The main character in the story is Alex Rogo. He is the manger of a UniWare division plant in Bearington. Readers are never fully introduced to what kind of products they make, but soon learn that UniWare requires heavy machinery and elaborate engineering processes to manufacture their products.
Alex’s plant has not been profitable for some time, and the division president informs Alex that the Bearington plant will be closed within 3 months unless there are visible improvements. Alex decides that he will not give up on the plant because it is in his hometown and he has an increased sense of responsibility for the plant’s future.
In order to overhaul the plant, Alex contacts his former professor, Jonah. Curiously, Jonah is a physicist, yet Alex remembers a meeting with Jonah a few months ago during which Jonah questioned Alex’s business decisions. Alex was scheduled to give a presentation at a UniWare division meeting, but Jonah raised particular questions about the way Alex defined productivity and efficiency in his presentation. Alex was upset about this because he has an M.B.A., and he feels that Jonah is “just” a scientist.
It turns out that Jonah has been an independent consultant to businesses to help improve their productivity. He is very busy and travels frequently. During several phone conversations and face-to-face meetings, Jonah explains his business model to Alex. He does this by giving Alex definitions to examine plant structures. He also explains correlations that determine the success of the business.
At the heart of Jonah’s business model are three definitions: throughput, or “the rate at which the system generates money through sales,” inventory, or “all the money that system has invested in purchasing things which it intends to sell,” and operational expense, or “all the money the system spends in order to turn inventory into throughput” (Goldratt and Cox, 1992, pp. 60, 61). Using these definitions, Alex always has a basis to determine if his decisions are helping the plant move towards the goal. The goal of the plant is to make money, which is characterized by increasing throughput and decreasing inventory and operational expense.
The story progresses through Alex’s struggles at home and in the plant. Just as in everyday life, there are several victories followed by setbacks. However, through hard work and with the use of a skilled team and Jonah’s help, Alex is able to make the plant the most productive one within the UniWare division. Alex is promoted to lead the UniWare division as president and is entrusted with implementing Jonah’s business model throughout the entire division. Alex’s marital life also improves because he and his spouse resolve their conflicts.
This summary is brief and leaves out many of the fictional elements that make the story such an interesting and fast-paced read. I encourage anyone who is interested in learning about manufacturing a product to read Goldratt’s book. It is the most efficient way to understand the challenges involved in the manufacturing processes. In this essay, I will focus on the business model Goldratt describes.