GROUP 12

ASHISH VERMA - MS20A007

GOGATE MANASI SATISH - MS20A021
MOHAMMED RAEES - MS20A032
ROSHNI RAVI - MS20A047
SWETHA C - MS20A060

THE GOAL - BOOK REPORT

The Goal provides a practical solution to the innumerable challenges faced in manufacturing units. It
has shown different perspectives to approach these problems and analyse different methods to arrive
at the actual reason behind the situation in the plant; to achieve ‘The Goal’ of that company. This book
helps us understand the logic and interdependent variables of the manufacturing unit which
ultimately aids in making the manufacturing unit more efficient in its operations, reduce its inventory
and increase its sales and profit. Though this book is about management problems, it tells us a real-
life story in a simple, engaging and insightful way.

The main character of the book is Mr. Alex Rogo who had just moved to his native place, Bearington,
to work in a manufacturing unit as a plant manager of ‘Unico’. This manufacturing unit is facing issues
like inventory, which was piling up, lesser sales, just enough labour force to work and delayed product
delivery. This has led to huge losses to the company despite having the latest technology of robots in
that plant.

One day, Mr. Bill Peach, who is Unico’s vice president, visited this unit to check on the order which
was supposed to be delivered a few weeks ago. At that time, he gave an ultimatum to Alex wherein
he was given 3 months to revive this manufacturing unit or it will be closed. This stress was affecting
his personal life where he couldn’t give time to his wife and children.

After this ultimatum, he gets reminded of one conversation with his physics professor Jonah where
he enquired if robotic technology is ‘actually’ helping the plant to have more sales or giving the false
picture of its growth. He contacts Jonah asking for guidance on this situation at hand.

Jonah asks Alex if he knows the goal of the company and what is the meaning of productivity. He
explains to Alex 3 measurement parameters for manufacturing units and what their real definition is.
Those are throughput, inventory and operating expenses where throughput needs to be more while
inventory and operating expense need to be lower. When he tried to understand these factors
affecting his unit with the help of Bob (production manager), Stacey (inventory manager) and Lou who
is head of the accounts department, it gives him a new perspective to solve this problem, but it was
not enough to get rid of it entirely. Then Jonah tells him that two more factors need to be taken into
consideration – dependent event and statistical fluctuation.

While on a Hike with his son Davey, Alex learns that dependencies and statistical fluctuations are
related to the slowest inventory or process determining the throughput. After learning about the
effects of dependencies and statistical fluctuations on the hike, Alex returns to work to find that Hilton
Smyth is promoted to division productivity manager focusing on "manufacturing-productivity
improvement with emphasis on cost reduction". The task of ensuring that 100 sub-assemblies reach
without lateness is assigned to Alex. It is also highlighted that the goal is to make the entire system
productive and that the issue is not the consistency of the robots. To illustrate the same, sub-
assemblies were considered.

Evident from the table, the actual scene did not match the ideal scenario. Although Pete's department
delivered 28 pieces to make up for earlier delays, the capacity of the robot was still 25 pieces. This is
highlighted by the "mathematical principle that the maximum deviation of a preceding operation will
become the starting point of a subsequent operation." Dependency and statistical fluctuation were
identified as probable cause for late orders. The challenge would be to control the variables plant-
wide while increasing lead time would result in increased inventory. Optimization of the entire system
is mandatory as resources at the end require additional capacity relative to the resources at the
beginning of the line.

Jonah mentions two types of

resources:

Bottle-Neck Resource whose Capacity

≤ Demand

Non-Bottle-Neck Resource whose

Capacity ≥ Demand

It is imperative to balance the flow of product through the plant with demand from the market rather
than balancing capacity with demand. To find bottlenecks the following measures were used: 1)
Understand total market demand for the plant's products. 2) Find out the time each resource
contributes to filling demand.

If the number of hours available for the production of resource ≤ hours demanded, it will be a
bottleneck.

Two bottlenecks were identified:1) NCX-10, the most efficient equipment, with weeks of backlog. The
NCX-10 replaced 3 other machines by reducing the overall rate of producing parts from 14 minutes to
10 minutes. However, the three 3 machines in the past were higher in number and did not create a
noticeable bottleneck. Further, having a trained machinist on NCX-10 was challenging. 2) Heat-treat
machine - The expeditors are unable to run this machine to proper capacity resulting in the heat-
treatment of a few parts while keeping a majority waiting.

Jonah's Suggestions: The NCX-10 has 585 hours a month of production. Jonah suggested that the
employees working on bottleneck machines should not leave the machine idle as it would waste
machine usage time leading to a reduced throughput. He recommended running older machines
parallelly with NCX-10. He enquired about external vendors to do the process for the heat-treat
machine.

As lost time on a bottleneck part would mean that they have lost throughput because the QC is done
after the bottleneck, he recommended completing the QC before the bottleneck by reducing the NCX-
10 and heat-treat’s work on the defective parts. Jonah highlights the cost of bottleneck as follows:
Cost of bottleneck = Total expense of the system / The number of hours the bottleneck produces.

Principles on optimizing bottlenecks: 1) Reduce wasted time on bottlenecks by ensuring there is no

idle time and that it is not processing defective parts. 2) Offload from bottlenecks to non-bottlenecks,
other equipment, or vendors.

The team starts to work on optimizing the bottlenecks and prioritizing the parts ranging from most
overdue to least overdue. To reduce misunderstandings and miscommunications, the foreman,
machinists, and hourly workers were briefed about the importance of keeping the bottlenecks running
and a newsletter was also introduced.

One of the process changes included: Two tags used to mark priority of materials 1) Red- First priority,
needed to be done by bottleneck 2) Green orders - only worked on once the red orders are completed.
If there are two batches of the same colour, the number on the tag would indicate priority. The lowest
number would be the highest priority.

Effect of change in the system of bottlenecks and prioritization of inventory: 1) Over the next week,
12 orders are shipped owing to the success of the new system. 2) Worst overdue order improved from
58 days to 44 days. 3) Red-tagged orders reach the final assembly faster. (Express lane created) 4) QC
being shifted to the front of bottlenecks resulted in 5% of parts going to NCX-10 and 7% going into
Heat-Treat not being up to quality standards. This provides time for increasing throughput. 5) New
employee policy of covering the bottlenecks during lunch breaks also put into effect.

Further changes made:

After discussing further changes to improve prioritization such as using yellow labels on the red tags
to indicate "gold level" priority, the communication team gets to work on improving operations. Bob
Donovan manages to secure the old machinery were three machines, one being Zmegma and another
being Screwmeister, can process the same work that NCX-10 is capable of. This would help improve
capacity and with offloading from bottlenecks to non-bottlenecks. After noticing that the furnaces
kept the parts for much longer than necessary and that the NCX-10 remained idle in afternoon hours
for 30-40 minutes, Bob and Alex decided to station a machinist and a helper at the machines
permanently. If the Zmegma and old machines were activated even for one shift a day, 18% could be
added to the output of parts. Offloading from the furnaces would occur through external vendors.
Mike, a foreman assigned to the furnace, indicates a plan that would involve mixing batches with the
same temperature requirements to keep the furnace running at full capacity. Bob also mentions that
some parts do not require heat-treatment and they could be processed differently. Overall, this
helped with the shipping of 57 customer orders with a value of $3 Million. There was a 12% net decline
in work-in-process inventory.

However, eventually, they learn that the bottlenecks have spread, leading to another consultation
with Jonah. Jonah draws out a few linear equations including Y -> X; X -> Y; X -> Product B, Y -> Product
A where X is bottleneck resources and Y is non-bottleneck resources, leading to the understanding
that even as throughput increased, there was continued inventory loading causing an excess load onto
the milling machines pushing them beyond their perceivable capacity. Although the red-tagged parts
were processed, the green tagged parts were piling up. The flow was clogged due to bottleneck part
volumes. The solution that Alex comes up with would be to use the bottlenecks to predict inventory
input into the system. The materials for red labelled parts would be released strictly at the rate that
the bottlenecks need the material. Ralph then determined a schedule that allowed not only for
releasing red-tagged materials based on bottleneck requirements but also a schedule for the final
assembly by calculating retrospectively to determine the release of non-bottleneck materials in their
routes. Although this improved the operational procedures at the plant resulting in the first operating
profit in the division for the year, to get a better bottom line, Alex Rogo decided after consulting with
Jonah to cut the bottleneck batch sizes in half. The time from the moment material enters the plant
to the moment it exits the plant as part of the finished product can be divided into Setup, Process
time, Queue time, and Wait Time. The total lead time would reduce because of reducing batch sizes
and subsequently the processing time, queue time, wait time in half. They also established that an
hour wasted at a non-bottleneck machine is a mirage because it would not impact the overall flow of
the plant, but only cuts into the idle time. The team then works on delivering the products in 4 weeks
rather than 2 months. After conversing with Jons in the marketing department, the team works on
the same basis. One day, Alex Rogo gets a call from Jons indicating that one of their earlier customers,
Burnside, would require 1000 orders of Model 12's in 2 weeks. Innovatively deciding to cut the batch
size at bottlenecks by half again, and convincing Stacey to get the electronic control modules through
air freight, Alex okays the order but mentions that they will ship it in batches of 250 per week for four
weeks. Jons excitedly mentions that the order has been approved, and the team gets to work.

The MIS reports are updated with all the improvements and Lou calculates and improvements of 17
per cent. This is mainly due to the large new order. Hilton argues that the actual growth is about
12.8%. Mr Burnside visits the plant and increases the old order of 1000 units to a whopping 10000.
Alex discusses his work with Peach's subordinates who believe the accounting system had flaws and
actual growth should be around 20%. Alex defends his plant to Peach who informs that the plant will
not be shut down and that Peach and Alex both had been promoted and Alex would now be
responsible for 3 plants instead of one.

Alex and Julie discuss Jonah’s involvement in the success of the plant. Alex’s focus now shifted to
recruiting new people to work on these ideas. He is procrastinating as to how he can do so without
putting them off.

Alex then promotes Bob, Lou, Stacey, and Ralph to higher positions with greater responsibilities.

The Team is now focusing on applying the previous model to the new plants. This involved plenty of
work and each team member’s intense involvement in the task. They planned to meet daily to work
out the strategy and tactics.

The team brainstorms to bring forth the idea of how chemists invented the periodic table for
elements. How did they manage to classify so many items into one simple table? They felt that they
could learn from this. The scientists observed vast amounts of data and then formed the order of
elements. The team devises that by acting as scientists, they should design a framework that can
examine all the issues of the division.

The team reviewed the processes they used in the plant and they formulated a 5-step process which
they called Process of Ongoing Improvement:

1. Identify the system bottlenecks.

2. Decide how to exploit those bottlenecks.
3. Subordinate every other decision to 'step two decisions'.
4. Elevate the system's bottlenecks.
5. If, in a previous step, a bottleneck has been broken, go back to the beginning (Step 1).

The process seemed simple, clear yet it was tough to implement.

From the above steps, the team found various areas to be addressed. In addition to this, they found
that there were some fictitious orders to keep the bottleneck busy. If we eliminate this, they could
free up 20% capacity which can be used for actual orders. Stacey modifies the tagging system used by
them. Alex and John plan for future expansion in the market.

Alex gets a large order in Europe with the condition of the lower price which would open the Europe
market for the division. Alex analyses the situation that they will still make a profit by reducing the
price with added benefits of market access. And since the market was in Europe, lower prices should
not be an issue with the domestic market.

New issues arise at the plant, the fresh orders are creating new bottlenecks all around. Julie mentions
Socrates’ theory of ‘If…. then’ deduction. She tells the importance of all the scenarios that might
come and how to prepare for them. The team decides to increase inventory in front of bottlenecks to
ensure full utilization of capacity. Sales will now be able to fulfil orders after 4 weeks instead of 2 which
can cause some issues with old customers, but the business must adapt as per requirements. Peach
reaches out to Alex for help with the plant's improvement.

Alex and Lou go over Jonah’s questions and come up with some of their own. These are:

1. What to change?
2. What to change to?
3. How to cause the change?

These are some of the fundamental qualities that each manager should have before managing the
operations of a company.

Alex realizes that he must work to get to the core of the problems by himself without creating more
problems and that he cannot approach others for advice all the time. In the end, they are happy with
all they have achieved and learned.

Key Takeaways:

1. The Goal: The manager should always try to identify the goal of the firm and then measure if
the processes align with the goal because if it does not that would hamper the operational
processes in the organization and cause other issues.
2. An eye for learning and detail: A manager should always keep her/his mind open for learning
and growth. The source of learning can be from anywhere like in the case – Alex learns a lot
from his old Physics professor, Jonah. In various instances, he learns from children during a
boys' scout hike and from his two kids Sharon and Davey as they also postulate various
possibilities. There are instances where he learns from his mother and his wife as well. There
were opportunities to learn from the environment Alex was in.
3. Teamwork: Managers should try to bring as many opinions as they could in the work as it
brings different perspectives. Just as Alex involved his various department heads in the
conversations, one can gain a lot of input from different viewpoints.
4. Never Give Up: This is one of the most important takeaways from the book as we can see the
plant was on the verge of being closed and from that Alex turned it into a profitable one by
learning and improvements in the process. He patiently and diligently worked through the
puzzles that Jonah provided him.
5. Working Smart: As we see in the book, they focus most of the work on their machine NCX-10
rather than looking for the issue in the process which improved the work tremendously. It is
also about understanding constraints and optimizing at par with them.
6. Improve the whole system: Improvements should not focus on one sector instead the focus
should be on improving the whole system.