Jeff Jorgensen

MGT 3700
Prof. Roper

The Goal: A Process of Ongoing Improvement

Alex Rogo works at a company called Unico, and this company is going through

some hard times. Alex’s plant in particular is struggling to do well. Mr. Peach, Alex’s

boss, arrives one day and tells Alex that he has to stop everything else that is going on

in the plant so that an order can be finished and shipped as soon as possible. It is

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discovered that this order is weeks behind schedule and it is for a big client of the

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company’s. Alex forces everyone at the plant to work on this order and eventually it is

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shipped the next morning. Once things settle down a bit, Mr. Peach meets with Alex
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and informs him that because of the terrible inefficiency’s at this plant, Alex has three

months to turn things around or the plant is shut down.

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This is a big shock to Alex and so he begins to think about what is causing the
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plant to be so behind. Alex then remembers his old physics professor that he ran into at

the airport a couple weeks before and how this professor was able to deduce the
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success, or lack thereof, at Alex’s plant without ever having seen it. At the airport, the

professor, or Jonah, was able to predict that the factory had high inventory and wasn’t
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meeting shipping dates. Alex told him that this was correct. Jonah then says that every
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company should have one goal, to make money. Any process that helps with making

money should be allowed to continue, while any process that hinders with that goal
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needs to be readjusted. After thinking back on this encounter with Jonah, Alex decides

to call him up and ask him what should be done with this new problem.

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 As they talk, Jonah gives Alex some terms that will help him run his plant better.

First is Throughput, or “the rate at which the system generates money through sales."

Second is Inventory, or “all the money that the system has invested in purchasing things

which it intends to sell." Finally there is Operation Expense, which is “all the money that

the system has invested in purchasing things which it intends to sell." Alex tries to

understand these new terms but struggles to grasp them at first. To clear his head a

little, Alex goes back to the plant and looks around. He notices the robots. These are

intended to speed up production but after talking with some of the managers and

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accountants, it’s discovered that the robots only increased costs because they didn’t

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reduce other costs, like direct labor.

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Alex then calls a meeting with his production manager, accountant and inventory
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control manager to decide what to do. He tries to share with them what he learned from

Jonah about the new terms. They all decide that “throughput is the money that comes
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into the plant. Inventory is the money currently inside the system, and operational
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expense is the money we have to pay out to make throughput happen.” Although Alex

is convinced of the validity of these terms, the rest of the group isn’t. Alex decides he
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needs to go see Jonah again, so he flies all the way to New York to meet him. Their

meeting is very brief and leaves Alex with a few more things to think about.
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A little while later, Alex is asked to take his son, David, and the rest of David’s
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scout troop on a hike. Alex agrees and they are off. During the hike, Alex begins to

notice that one scout, Herbie, is slower than the rest of the boys. Initially Herbie is in
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the middle of the line, and over time, the scouts ahead of Herbie begin to walk ahead

while everyone behind Herbie are forced to go at his pace. This causes Alex to think

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 back on what he had learned from Jonah about constraints in regards to production.

Alex compares the line of scouts to a production line. The last scout is the beginning of

production, and the first scout is the ending of production. Herbie is a constraint. The

ultimate goal of the production line is to produce a product with the shortest time from

beginning to end, but the constraint, or Herbie, is causing that time to increase. Alex

then places Herbie at the front of the line and distributes the contents of his backpack

among the troop. Once this is done, the length of the line decreases as well as the

speed of the line because Herbie’s stuff was spread out among the troop. Alex begins

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to see what must be done at the plant.

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After returning to the plant and testing his theory about Herbie, Alex then

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contacts Jonah again. This time Jonah describes bottlenecks and their need. Jonah
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describes bottlenecks as “any resource whose capacity is equal to or less than the

demand placed upon it.” Alex thinks and then, with some help from Jonah, decides that
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the key is more capacity and efficiency at processes that cause bottlenecks.
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To help with this new system, red and green tags are used to determine which

parts are worked on first, with red being the higher priority parts. As time goes by,
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efficiency in the plant increases. Alex is ecstatic. However, more bottlenecks are

discovered as the initial ones are fixed. Ralf, the computer guy, says he can write a
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program that will schedule what parts go where so that there isn’t excess inventory in
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front of the bottlenecks.

Things begin to look hopeful for Alex and the plant, but then Mr. Peach says that
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unless Alex can increase improvement by 15% the next month, the plant will still be shut

down. Alex can’t believe it. Luckily, Jonah calls Alex to see how things are going and

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 Alex describes what just happened. Jonah tells Alex to try shipping smaller batch sizes

more frequently instead of large batch sizes periodically. Alex does this and the result is

a 13% percent increase in productivity along with a really happy customer.

The next day, Alex meets with the executives from Unico, or rather, the

executive’s underlings. They aren’t convinced of Alex’s new method of production, but

after some discussion, along with support from Frost, the division controller, Alex is not

only proven right, he is given Mr. Peach’s job. Now Alex is in charge of three plants. He

convinces his team from the plant to stay with him so they can implement everything at

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the other plants they are now in charge of.

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After some time, the team decides there are five steps needed for improvement:

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first, identify the system constraints; second, decide how to exploit the system’s
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constraints; third, subordinate everything else to the step 2 decisions; fourth, evaluate

system bottlenecks; and fifth, if a bottleneck has been broken in a previous step, go
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back to step one. By following these steps, Alex is not only able to save the plant, he is
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able to increase capacity enough to enter into the European market.

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What did I learn from this book?

I thought this was a surprisingly good book. I honestly didn’t think a book about a
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plant manager would be as interesting as it was. This book helped to cement in my

mind the different concepts we have been discussing all semester by using them in a
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more practical way. Although I still am learning what all the different terms mean and

how they applied, I feel like I have a much better understanding about how a production

line works.

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 Even though I probably won’t have a job similar to Alex’s, knowing how a plant

like his works shows me what to expect when I work for a business. I worked at Al’s

Sporting Goods for over 3 years and I had the chance to work in their warehouse

multiple times. Reading this book opened my eyes to how things must have worked in

the warehouse.

Knowing what a company’s “herbie” is can really change how they function as

well. I have never thought about how different companies produce the varying products

I use every day. Mr. Goldratt, however, has written a novel that is not only compelling,

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but showed me the workings of these different companies. By efficiently altering his

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“herbie,” Alex was able to increase productivity while decreasing costs. This seems like

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the Holy Grail for production. I can now take this idea and apply it in other areas of my
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life that need to become “efficient.”

The book showed me that more often than not, fixing a problem as it is seen
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initially, usually doesn’t fix it in the long run. Had Alex only done the first thing Jonah
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had said then the problem would not have been completely fixed. It took multiple steps

and revisions to the original plan in order to fix the overall problem: production
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inefficiency. This is critical to anything we do in our own lives. Very rarely does any

problem get fixed with the first attempt. It takes constant reevaluations to fix a problem
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for good, and even then we need to be vigilante in maintaining processes so that they
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don’t fall back into the same pattern as before.

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