Book Report of “the Goal”

Book report of “The Goal”

Name: Tianqi Chen

Course：MIS352

Date: 11/10/2016

1. summary：

The author of The Goal (M. Goldratt Eliyahu) was originally a physicist, but abandoned the obscure language, using the novel as a carrier to tell the reader how to be simple and effective business management. Generally speaking, this book is about the main character (Alex Rogo) which is a manager in a factory. He gets into trouble with factory and family at the same time. under the guidance of his physics teacher (John) he breaks the usual problem but not easy to find in management with constantly thinking, understand the production bottlenecks really exist in the company and how to serve it better, then lead his employee unlocked the constraintstep by step, finally change the business from loss to profit just in a short period of three months, keep the safe of enterprises and six hundred employees, Alex Rogo promoted to a higher position due to outstanding performance at the end of the story. At the same time, At the same time, Rogo also gain the wife's forgiveness and understanding, so that the family can be harmonious.

(2) major points made by author:

1. The actual goal of the enterprise: The goal of a company is to increase the net profit, return on investment as well as cash flow at the same time.

2. Three criteria for measuring goals: The three criteria are throughput, inventory as well as operational expense. Throughput is the speed which system gains money through sales, inventory is the system that spend money to purchase the things which is intends to be sold, operational expense is the money that is spent in order to change the stock into an efficient output.

3. "Interdependence" and "statistical fluctuations": These two concepts have important impact of an enterprise. Statistical fluctuations are some information that cannot be accurately estimated because their estimation methods are not the same.

4. Theory of Constraints TOC: The basic idea of the theory of constraint is that any organization or system must have more than one constraint or bottleneck to restrain its effective output. One of the important points in the theory of constraints is that the strength of any system or organization should be determined by the weakest link, not the strongest one.

5. Bottleneck and Spreading bottleneck: When the capacity of any resource is equal to or less than the need, it is the bottleneck. If there have one or more than one new bottlenecks, it is spreading bottleneck.

6. The rule to manage a company: The first rule is that utilization degree of the non-bottleneck resources actually not determined by productive potential, but is determined by other constraints within a system. The second rule is that activating resources not equal to utilizing resources, so try to play every resource in the system to the extreme is not correct.

7. The more complex the problem, the solution should be more simple. Rogo and his subordinates significantly improved in a short period of time, but found that the measures and methods that need to be taken are just some common sense.

8. Five focus on the steps to break the bottleneck: (1) find out the bottleneck of system (constraints) (2) make full use of the bottleneck (constraints) (3) use the non-bottleneck based on the bottleneck (4) break the bottleneck (constraint) (5) find the next bottleneck (constraints), that is company should make continuously improve