Goldratt, E. M. and J. Cox. 1986.

The Goal: A Process of

Ongoing Improvement. New York: North River Press.
Summary by Chris Hourigan
University of South Florida, Spring 2001
Theory of Constraints Main Page | What is this thing called TOC?
The Goal is a very compelling novel. Novel, HUH!! Who ever heard of a novel about
a production plant? Well, Eli has made the production managers have quite an
epiphany. In one book he might have changed the whole world of cost accounting. Eli
approached the production world with a common sense view. Using just one goal,
making money, he referenced every activity to it. Eli said, "I view science as nothing
more than an understanding of the way the world is and why it is that way." You see,
Eli is a physicist, and in being one, has to understand why things work the way they
do. His common sense approach is illustrated beautifully in this novel. He has looked
at cost accounting from the outside and has developed a whole new system because of
it.
Everyone from accountants to production managers to CEOs should read this book.
Because of its fundamentals, it should be part of the curriculum of every accounting
program. This novel has and continues to help the industry to make strides toward
continuous improvement.
Chapter One
The first chapter gets the reader acquainted with Mr. Alex Rogo and his apparent
problems with his production plant. This is shown through a confrontation between
Mr. Rogo and his boss Mr. Peach, the Division Vice President. The dispute is over an
overdue order #41427. Through their conversation its learned that Mr. Peach will not
settle for anything less than the order being shipped today, and since the plant is
neither productive nor profitable, Alex has three months to show an improvement or
the plant will be shut down!
Chapter Two
This chapter gives insight to Alexs home life. Since moving back to his hometown
six months ago, it seems adjustment isnt going well for his family. Its great for Alex,
but its a big change from the city life that his wife is used to. You also experience Mr.
Rogos background through his reflections back on his travels to eventually find
himself back where he started. "Hes now 38 years old and a crummy plant manager".

By the way, the order #41427 does get shipped, but not very efficiently. All hands in
the plant are working on one order with forbidden overtime to boot.
Chapter Three
Mr. Peach calls a meeting at headquarters for all plant managers and his staff. At the
meeting everybody finds out how bad things are and are given goals to achieve for the
next quarter. Through the grapevine Mr. Rogo finds out perhaps why Mr. Peach has
been acting so erratic lately, the Division has one year to improve or its going to be
sold, along with Mr. Peach.
Chapter Four
While at this meeting, Alex thinks back on a recent business trip where he ran into an
old physics professor, Jonah, at the airport. Jonah puzzles Alex with how well he
knows how Alexs plant is doing. Jonah has no knowledge of where Alex is
employed. Johan predicts the problems of high inventories and not meeting shipping
dates. He also states that there is only one goal for all companies, and anything that
brings you closer to achieving it is productive and all other things are not productive.
(See What is this thing called Theory of Constraints for more on Alex's encounter with
Jonah.)
Chapter Five
Alex decides to leave the meeting at the break. He has no particular place he would
like to go; he just knows this meeting isnt for him, not today. He needs to understand
what the "goal" is. After a pizza and a six pack of beer it hits him, money. The "goal"
is to make money and anything that brings us closer to it is productive and anything
that doesnt isnt.
Chapter Six
Mr. Rogo sits down with one of his accountants and together they define what is
needed in terms of achieving the goal. Net profit needs to increase along with
simultaneously increasing return on investment and cash flow. Now all that is needed
is to put his specific operations in those terms.
Chapter Seven
Alex makes the decision to stay with the company for the last three months and try to
make a change. Then he decides he needs to find Jonah.

Chapter Eight
Alex finally speaks to Jonah. He is given three terms that will help him run his plant,
throughput, inventory, and operational expense. Jonah states that everything in the
plant can be classified under these three terms. "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." "Operational expense is all
the money the system spends in order to turn inventory into throughput." Alex needs
more explanation.
Chapter Nine
Alex fresh off his talk with Jonah gets word that the head of the company wants to
come down for a photo opportunity with one of Alexs robots. This gets Alex thinking
of the efficiency of these robots. With the help of the accountant, inventory control
woman, and the production manager, Alex discovers the robots increased costs,
operational expenses, and therefore were less productive. Implementing the robots
increased costs by not reducing others, like direct labor. The labor was shifted to other
parts of the plant.
Chapter Ten
After explaining everything, Alex and his staff (Bob from production, Lou from
accounting and Stacey from inventory control) hammered out the meaning of
throughput, inventory and operational expense until satisfied. Lou, states the
relationships as follows. "Throughput is money coming in. Inventory is the money
currently inside the system. And operational expense is the money we have to pay out
to make throughput happen." Bob is skeptical that everything can be accounted for
with three measurements. Lou explains that tooling, machines, the building, the whole
plant are all inventory. The whole plant is an investment that can be sold. Stacey says,
"So investment is the same thing as inventory."
Then they decide that something drastic is needed to be done with the machines. But
how can they do that without lowering efficiencies? Another call to Jonah is placed
and Alex is off to New York that night.
Chapter Eleven
The meeting with Jonah is brief. Alex tells Jonah of the problems at the plant and the
three months in which to fix them. Jonah says they can be fixed in that time and then
they go over the problems the plant has. First, Jonah tells Alex to forget about the
robots. He also tells Alex that "A plant in which everyone is working all the time is

very inefficient." Jonah suggest that Alex question how he is managing the capacity in
the plant and consider the concept of a balanced plant. According to Jonah, this "is a
plant where the capacity of each and every resource is balanced exactly with demand
from the market." Alex thinks a balanced plant is a good idea. Jonah says no, "the
closer you come to a balanced plant, the closer you are to bankruptcy." Then Jonah
leaves Alex with another riddle, what does the combination of "dependent events" and
"statistical fluctuations" have to do with your plant? Both of those seem harmless and
should work themselves out down the production line.
Chapter Twelve
This short chapter tries to capture the essence of the problems the job is causing at
home with the extra workload. The marriage is very strained because of the devotion
Alex needs to give to the plant.
Chapter Thirteen
Stuck for the weekend as troop master, Alex discovers the importance of "dependent
events" in relation to "statistical fluctuations". Through the analogy between a single
file hike through the wilderness and a manufacturing plant, Alex sees that there are
normally limits to making up the downside of the fluctuations with the following
"dependent events". Even if there were no limits, the last event must make up for all
the others for all of them to average out.
Chapter Fourteen
Finally, through the dice game or match bowl experiment, it becomes clear that with a
balanced plant and because of "statistical fluctuations" and "dependent events"
throughput goes down and inventory along with operating expenses goes up. A
balanced plant is not the answer. (See the Dice Game or Match Bowl experiment
note).
Chapter Fifteen
Fully understanding the "dependent events", Alex puts the slowest kid in the front of
the hike and he relieves him of extra weight he has been carrying in his backpack.
This balances the fluctuations and increases the kids productivity, which increased
the throughput of the team.
Chapter Sixteen

Well, after the camping trip the boys arrive home to find the mother has disappeared.
All the stress of his job was too much for her so she left. Now the kids and the job are
all Alexs responsibility. This was supposed to be a weekend for Alex and his wife, but
when the hike came up it seemed to be the last straw for her.
Chapter Seventeen
Alex tries to portray his new revelation to his team at the plant. Nobody seems
interested. But the walk in the woods becomes apparent when it is put to the test for
an overdue order in the plant. Now even the production supervisor agrees. Now what?
Chapter Eighteen
In this chapter Jonah introduces Alex to the concept of bottlenecks and nonbottlenecks. Jonah defines these terms as follows. "A bottleneck is any resource
whose capacity is equal to or less than the demand placed upon it. "A non-bottleneck
is any resource whose capacity is greater than the demand placed on it." Jonah
explains that Alex should not try to balance capacity with demand, but instead balance
the flow of product through the plant.
Later, Alex and his team recognize the bottlenecks, the areas where capacity doesnt
equal demand, like the slow kid Herbie on the hike. With this discovery goes the ideas
related to reorganizing the plant like Alex did with the hike. Production is a process
and it cannot be moved around so easily. Many processes rely on the previous one to
be able to complete the next. Alex would need more machines, which takes more
capital, and division is not going to go for that.
Chapter Nineteen
Well, Jonah makes a visit to the plant. Jonah tells Alex that a plant without bottlenecks
would have enormous excess capacity. Every plant should have bottlenecks. Alex is
confused. What is needed is to increase the capacity of the plant? The answer is more
capacity at the bottlenecks. More machines to do the bottleneck operations might help,
but how about making them run more effectively. Jonah tells them that they have
hidden capacity because some of their thinking is incorrect. Some ways to increase
capacity at the bottlenecks are not to have any down time within the bottlenecks,
make sure they are only working on quality products so not to waste time, and relieve
the workload by farming some work out to vendors. Jonah wants to know how much
it cost when the bottlenecks (X and heat treat) machines are down. Lou says $32 per
hour for the X machine and $21 per hour for heat treat. How much when the whole
plant is down? Around $1.6 million. How many hours are available per month? About
585. After a calculation, Jonah explains that when the bottlenecks are down for an

hour, the true cost is around $2,735, the cost of the entire system. Every minute of
downtime at a bottleneck translates into thousands of dollars of loss throughput,
because without the parts from the bottleneck, you cant sell the product. Therefore,
you cannot generate throughput.
Chapter Twenty
Alex organizes the bottlenecks to work on only overdue orders from the most overdue
to the least. He then finds his wife. She is at her parents house. Through their
conversation it is learned that she still needs to be away from everybody, even the
kids.
Chapter Twenty-One
The crew works out some of the details for keeping the bottlenecks constantly busy. In
the process they find that they need another system to inform the workers what
materials have priority at non-bottlenecks. Red and green tags are the answer. Red for
bottleneck parts to be worked on first as to not hold up the bottleneck machine, and
green for the non-bottleneck parts. That concludes another week. The true test will be
next week.
Chapter Twenty-Two
Great, twelve orders were shipped. Alex is pleased, but he definitely needs more. He
puts his production manager on it. His production manager rounds up some old
machines to complement what one of the bottlenecks does. Things are looking up.
Chapter Twenty-Three
They are becoming more and more efficient, but lag time arouse with the two
bottlenecks because of workers being loaned out to other areas and not being at the
bottlenecks when needed to process another order. It seems there was nothing to do
while waiting for the bottleneck machine to finish the batch. Therefore, in keeping
with the notion that everybody needs to stay busy, workers were at other areas
between batches. Alex decides to dedicate a foreman at each location all the time.
Then one of those dedicated foreman, the night foreman, discovers a way to process
more parts by mixing and matching orders by priority, increasing efficiency by ten
percent. Finally, one process being sent through a bottleneck could be accomplished
through another older way and therefore free up time on the bottleneck.
Chapter Twenty-Four

Now that the new priority system is in place for all parts going through the
bottlenecks, inventory is decreasing. Thats a good thing right? But lower inventory
revealed more bottlenecks. This intrigues Jonah so hes coming to take a look.
Chapter Twenty-Five
"There arent any new bottlenecks", says Jonah. What actually has happened is a
result of some old thinking. Working non-bottlenecks to maximum capacity on
bottleneck parts has caused the problem. All parts are stacked up in front of the
bottlenecks and others are awaiting non-bottleneck parts for final assembly. There
needs to be balance. The red and green tags need to be modified. It seems as if the
bottlenecks will again control the flow, by only sending them exactly what they need
and when they need it.
Chapter Twenty-Six
Ralf, the computer wiz, says he can come up with a schedule for bottleneck parts and
when they should be released. This will alleviate any excess inventory in front of the
bottlenecks, but what about the non-bottlenecks? Jonah says with the same data out of
the bottlenecks to final assembly, you should be able to predict non-bottleneck parts as
well. This will make some time, but there are enough parts in front of the bottlenecks
to stay busy for a month.
Chapter Twenty-Seven
There is another corporate meeting. Mr. Peach doesnt praise Alex like Alex thinks he
should. Alex decides to talk with him in private. Mr. Peach agrees to keep the plant
open if Alex gives him a fifteen percent improvement next month. That will be hard
because that relies heavily on demand from the marketplace.
Chapter Twenty-Eight
Fifteen Percent!! Fifteen Percent!! Just then Jonah called to let Alex know that he will
not be available to speak with in the next few weeks. Alex informs him of the new
problem of more inventories and less throughput. Jonah suggests reducing batch sizes
by half. Of course, this will take some doing with vendors, but if it can be done,
nearly all costs are cut in half. Also, they get quicker response times and less lead
times for orders. Sounds good.
Chapter Twenty-Nine

Alex is propositioned with a test. They can greatly increase sales, current and future, if
they can ship a thousand products in two weeks. Impossible without committing the
plant to nothing but the new order? Wrong! How about smaller batch sizes. Cut them
in half again. Then promise to ship 250 each week for four weeks starting in two
weeks. The customer loved it.
Chapter Thirty
Seventeen percent!! Thats great, but its not derived from the old cost accounting
model. The auditors sent down to the plant from Division find just 12.8%
improvement. Most of it accounts from the new order. Which by the way, the owner
of the company that placed the order came down personally to shake everybodys
hand in the plant and to give a contract to them for not a thousand parts but ten
thousand. Anyway, tomorrow is the day of reckoning at division.
Chapter Thirty-One
Well the meeting at Division started out rough. Alex thought he would be meeting
with Mr. Peach and other top executives. Instead, he met with their underlings. He
decides to try and convince them it doesnt work. Just before leaving he decides to see
Mr. Peach. Its a good thing he did, because he just got promoted to Mr. Peachs
position. Now Alex has to manage three plants as the whole division. He calls Jonah
desperately and asks for help. Jonah declines until he has specific questions.
Chapter Thirty-Two
Alex has a nice dinner with his wife. Through the veal parmesan and cheese cake it is
decided that Alex should ask Jonah how he can get other people to understand these
techniques that his team has discovered without being condescending.
Chapter Thirty-Three
Now is the time to assemble Alexs team for Division. Surprisingly the accountant
with two years to retirement is on board, but the production manager isnt. He wants
to be plant manager to continue their efforts. Everything is totally into place at the
plant but more is needed for division.
Chapter Thirty-Four
Alex is firmly engrossed with the problems of taking over the division. With advice
from his wife he decides to enlist the help of his team at the plant. Every afternoon

they will meet to solve the problem. After the first day it is obvious , they will need
them all.
Chapter Thirty-Five
The second day they are led in a discussion about the periodic table of elements, and
how the scientists actually got a table of any sort. Maybe that is how they will solve
the massive problems of division, by understanding how the scientists started with
nothing and achieved order. A way to define them by their intensive order is needed.
Chapter Thirty-Six
The team finally comes up with the process: Step one identify the systems
bottlenecks; Step two- decide how to exploit those bottlenecks; Step threesubordinate everything else to step two decisions; Step four- evaluate the systems
bottlenecks; Step five- if, in a previous step, a bottleneck has been broken, go to step
one. It seems so simple, just different.
Chapter Thirty-Seven
The team decides to revise the steps: Step one identify the systems constraints; Step
two decide how to exploit the systems constraints; Step three subordinate
everything else to step two decisions; Step four evaluate the systems constraints;
Step five- warning!!! If in the previous steps a constraint has been broken, go back to
step one, but dont allow inertia to cause a system constraint.
It also has been discovered that they have been using the bottlenecks to produce
fictitious orders in an effort to keep the bottlenecks busy. That will free up twenty
percent capacity, which translates in to market share.
Chapter Thirty-Eight
Talking with the head of sales. Alex finds out that there is a market order to fill the
capacity. Its in Europe, so selling for less there will not affect domestic clients. If it
can be done, will open a whole new market. Then Alex ponders Jonahs question, to
determine what management techniques should be utilized. Alex determines how a
physicist approaches a problem. Maybe this will lead to an answer.
Chapter Thirty-Nine
Alex experiences a problem at the plant. It seems all the new orders have created new
bottlenecks. After analyzing the problem, they agreed to increase inventory in front of

the bottlenecks an tell sales to not promise new order deliveries for four weeks, twice
as much as before. This will hurt the new relationship between sales and production,
but it is needed. Production is an ongoing process of improvement, and when new
problems arise they need to be dealt with accordingly.
Chapter Forty
Finally, struggling with the answer to Jonahs question, Alex comes up with some
questions on his own: What to change? What to change to? How to cause the change?
Answering these questions are the keys to management, and the skills needed to
answer them are the keys to a good manager and ultimately the answer to Jonahs
question.