Megachron

The Goal, by Eliyahu Goldratt, demonstrates the 'theory of constraints' in an interesting manner. It portrays clearly what the goal of a business is and suggests a number of methods that could be applied in both manufacturing and service companies - methods that are fascinating practical and logical.

Throughout the book, Goldratt raises a number of issues concerning management decisions and key issues that need to be considered. Goldratt emphasizes the fact that the society itself is a source of information where flows and relationships can be applied in the business world i.e. the hiking experience. Furthermore, it encourages managers to use common sense and always consider alternative ways of doing things. Also, managers should be able to identify the need for change. Nevertheless, it is vital to know what to change, what to change to and how to cause the change.

However, some of the illustrated points are contradicting conventional business assumptions. Firstly, the flow should be balanced with demand and not capacity. Secondly, It is the actual constraint of the system that will determine the activity that can generate profit and not individual potential. Thirdly, activating a resource and utilizing is not the same thing. Finally, an hour lost at the bottleneck is an hour lost by the system as a whole when the same thing but for a non-bottleneck is not worth considering.

Accepting the above anti-conventional assumptions can produce a number of conclusions. Money is a more significant issue for management than efficiency. Also, cost accounting and the conventional way of evaluating inventory costs is an enemy for productivity as a number of cost sources is not considered fully, Finally, a workforce where everyone is working in full capacity is inefficient because of the implications involved from the interdependence of bottlenecks and non-bottlenecks.

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