Goal

Through reading The Goal, by Eliyahu M. Goldratt and Jeff Cox, I have learned that there is a great importance for productive organization when running a business. The book is an investigation into the life of a redeeming plant that was headed into a downward spiral that would have closed them down. The book is an investigation into the life of a plant that is in a downward spiral until new management ideas start to arise and turn the business upside down and back on track to making money. The book portrays how scientific and systematic thinking processes helped this plant turn its functions into a more positive business, increasing their cash flow by reorganization within the plant.

The first positive step toward a comeback occurs when Alex Rogo, the plant manager, recognizes the true goal of his company: to make money. The goal of every company is oftentimes lost in statistical, production, and efficiency data. In order to make money, a customer must have a want or need for the company’s product(s). A customer is going to value the satisfaction they get from the product. Customers want to find the best deal for the product they are buying. Usually customers look at prices, quality, and dependability. In this book we discover just how important it is to the plant’s customers to get their shipments on time. Fast delivery proves to be a key factor in gaining clients for the plant. When Alex realizes how well his plant is doing with the shipment dates, he decides to take it a step further by cutting the batch sizes in half. Not only does this benefit the customers but the plant as well by reducing the time parts sit in the plant and increasing the flow speed of parts. This gives Alex’s plant an advantage in the marketplace because customers come to them for their faster delivery.

Before the new system, the plant was not giving their customers what they wanted. Jonah helped the plant realize that what was really needed was to have the orders sent to their customers on time. The plant was having trouble getting shipments out on time creating a backlog of orders. When there was a demand for a certain order, more expenses were added to put all efforts on one sale. This caused a negative chain effect throughout the plant because of their faulty cost management system. The cost management system was a mess. This caused a negative chain effect throughout the plant. Customers were unhappy, prices went up, and the plant was not making money. The cost management system was not relating to what the customers valued, a timely delivery. Thanks to Jonah’s helpful questions and process thinking, Alex Rogo was able to put the information to good use and create a new management system that would cater to what their customers valued most.

Effectiveness means having an intended or expected effect, while efficiency is the ratio of the useful output to the total input in a system. Effectiveness is a measure of achieving the goal of a business. Efficiency is the best use of a system of organization, classification, and coordination to get a job done. These two words obviously mean different things, a fact that many business managers must accept. Alex believed in the beginning of the book that by running his machines constantly he was being more efficient and maintaining the cost advantage. We learn in The Goal that in order to be productive, a business does not always have to increase or have high efficiencies. In fact, the book proved in this situation that a reduction in the efficiency of several operations made the entire operation more productive. The efficiency of individual employees or equipment does not add up to the efficiency of the whole plant. Individual success in not important to the goal of the plant; efficiency of the employees and equipment combined is what is important to the plant. Individual success in not important to the goal of the plant. The efficiency of the plant is reliant on the bottlenecks that are present rather than individual employee or equipment efficiency. Put in another way, the maximum deviation of a preceding operation will become the starting point of a subsequent operation. This means that the last operation cannot increase the production number after a preceding operation, but can only match it. The importance of separating the plant into two types of resources becomes essential. Jonah defines these two categories as a bottleneck