ASSIGNMENT ON ‘THE GOAL’

Q1. Justify propriety and usefulness of three operating indicators defined by Dr. Goldraft in
assessment and monitoring ‘health’ of a business, giving examples.

Ans. In the Book ‘The Goal’ author Dr. Goldraft has tried to explain that the traditional operating
indicators such as the efficiency of plant, labour standards, man hour worked and other
measurement concepts from the cost accounting do not give the real picture down at the plant
level. Also these conventional do not lend themselves very well to the daily operation of
manufacturing organization. Hence the author has suggested three other different set of the
operational indicators. These indicators are:

 Throughput
 Inventory
 Operational Expense

Throughput is the rate at which the system generates money through sales. It is a measurement for
incoming money. It is different from production as production involves manufacturing something
and it doesn’t concerns with the selling of the product manufactured. Throughput involves the
manufacturing and selling of the products. For example if the product is manufactured and it is not
sold the product does not contribute to the company’s profits. In the book author gives an instance
when the Robots are brought for the manufacturing of products but even when the products which
are manufactured by the robots, it doesn’t have any impact in the sales of the product. Even though
the efficiency of the plant goes up the sales of the plant is not affected showing that the efficiency is
not good indicator instead the throughput shows the real picture since the products manufactured
by the robots is not sold hence does not contributing in the throughput.

Second indicator is the Inventory; inventory is all the money that the system has invested in
purchasing things which it intends to sell. In other words inventory is the money currently inside the
system. It measures the money still stuck inside the system. For example, the robots which were
installed in the plants were manufacturing products which were not sold contributing to the
inventory of the plant. The Inventory so produced by the robots were increasing the inventory
carrying cost of the plant.

Third indicator is the Operating Expense; Operating Expense is all the money the system spends in
order to turn the inventory into the throughput. In other words the operating expense is the money
we have to pay out to make throughput happen, it is the measurement of money going out. All the
expenses can be classified under the operating expense, for example from the oil which is purchased
to service the machines to the knowledge which is used to convert the Inventory to throughput can
be classified under Operating Expenses.

All these three indicators i.e Throughput, Inventory and Operating Expenses covers all the things
that are managed in the plant and indicate the relative health of the plant. For maximizing the
profits for the company it is necessary to reduce operating expense and reduce the inventory while
simultaneously increasing throughput.

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 ASSIGNMENT ON ‘THE GOAL’
Q2. Enumerate and explain the different ways of dealing with a ‘Bottleneck’ in a manufacturing
process as understood by you from the Scout Trek experience narrated in ‘The Goal’.

Ans. A Bottleneck in a manufacturing process represents any resource whose capacity is equal to or
less than the demand placed upon it. The bottleneck are not necessarily bad, it can be used to
control the flow through the system and into the market. The Bottleneck are very easy to identify,
these are the resources which against which the most number of the work-in-progress inventories
are kept.

The author has used the scout-trek to explain the Bottleneck phenomenon. In this incidence, Alex
while taking his son to the Trek notices that the trail of boys after walking a certain distance getting
spread over a distance and the Fat boy named ‘Herbie’ represented the bottleneck in the incident.
Alex notices that, when Herbie is walking slow the other boys are stranded behind Herbie causing
the scattering of the trail. Then to avoid this situation Alex tries different tricks like making Herbie
take the lead in the trail and removing extra baggage which Herbie is carrying. Here the trail of boys
can be taken equivalent to the flow of products in the assembly line, Herbie represents the
Bottleneck.

As understood form the Scout Trek experience, following are the different ways of dealing with the
Bottleneck in a manufacturing process:-

 Bottleneck Leading – As per the experience of the scout trek, if the bottleneck is made to
decide the quantity of the material to be processed can result in the smooth flow of the
material in the manufacturing process. Also this results in the perfect measurement of the
plant capacity which can be used to tap the

 Sharing Load – The extra baggage which the boy Herbie carried which was eventually shared
between the boys which resulted in Herbie walking faster, the same can be done in the
manufacturing plant with the extra load which the bottleneck is not able to process can be
distributed and given outside for processing.

 Supplementing Bottlenecks – The machines which are bottleneck can be replaced by new
machines with greater capacity. For example in the book, Alex for reducing the load of the
bottleneck NCX 10 used the machine Zmegma which performs the same function as that of
the NCX 10.

 Reducing Idle Time – By reducing the time for which the bottleneck remains idle, the
throughput of the plant can be increased. For example in the book, Alex when found out
that the time bottleneck remained idle at the lunch breaks, the break time for the workers
operating the bottleneck were once again negotiated with union people, such that the
machine does not remained idle.

 Priority to Bottleneck work in progress inventories – In the book, special tagging were done
to the work in progress inventories which were to be processed by the bottleneck resources.
Through the special tagging the worker came to know that these inventories are to be

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 ASSIGNMENT ON ‘THE GOAL’
processed on the bottleneck and hence they gave priority to those work in progress
inventories.

 Quality inspection before Bottleneck – The work in progress inventories which are passing
through the bottleneck should be checked for any defects before these inventories are
processed by the bottleneck. This method save the precious time of the bottleneck as well as
the conserves the resources of the bottleneck.

The bottleneck as described in the book can be blessing in disguise as these bottleneck can be used
to measure the capacity of the plant as capacity of the plant is equal to the capacity of the
bottleneck also an hour lost at the bottleneck is an hour lost for the entire system, hence the
bottleneck time is very precious. One of the major advantage of bottleneck is that it can be used to
predict when an order can be shipped the customer with high accuracy, thus adding to the customer
service.

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