Looking Into a Short Analysis on The Goal

¶ … Goldratt's Goal A Short Analysis on "The Goal" What "The Goal" is and a brief description of Goldratt's measures (T, OE, and I) "The Goal" is a production management-oriented book, written by Eliyahu M. Goldratt, which is widely used for understanding operations management concepts and their application in real life. The work is composed of a fictional setting and characters to teach the concepts of bottlenecks and techniques for alleviating them.

The book is about a manufacturing plant manager, Alex Rogo, who is given an ultimatum from the corporate headquarters to turn around the failing conditions of the plant within the next three months or else the plant would be scrapped (Goldratt & Cox, 2004). Jonah, an advisor, helps Alex with TOC (Theory of Constraints) principles like bottlenecks, flow balancing and throughput which Alex finds a revolutionary way to do business in modern world.

The TOC introduces three measures that are helpful in predicting the effect of manager's decisions: T (throughput), I (inventory) and OE (operating expense). Throughput is all the money a company secures through its sales; inventory is the money that the company has invested on products that it plans to sell in future; operating expense is the money that the firm spends to turn inventory into throughput.

Three Most Important Steps Alex's Team Took to Improve the Plant and Their Effects on T, I and OE The three most important steps Alex's team took to improve the plant were: Step 1: Deciding that efficiency was not the most important factor to keep the plant in profits since this was causing people to work continuously and negatively affecting the bottom line of the plant. It increases levels of useless inventory (I) that were not being translated into throughput (T) anywhere in near future.

Step 2: Identifying the system's bottlenecks, which were spotted in the form of two machines during Jonah's visit. The machines were holding up the orders and constantly expediting parts through, resulting in increased inventory (I). Step 3: Taking measures to eliminate or at least, lighten the effects of those bottlenecks. The team noticed that the operation of one of those machines was on break and the team decided to reposition it to after the completion of setup to make sure that the machine was always running.

Moreover, it was noticed that the machines were mostly busy in making extra parts. After careful observation, it was deducted that production of extra parts was only utilizing the machines to produce extra inventory (I) where they could be used to produce parts that were required for sales (T). Some of the OE also increased when the team tagged the parts produced via bottlenecks a priority.

It was deemed better to limit the amount of materials released so that they were able to focus on the existing production and its finishing time. This also helped in keeping the inventories low due to quitting production of extra parts. Application of the Concepts to the Firm where I Work I currently work in a production company that is about to launch a new juice product in the market.

The production of a new item is the main goal of the organization at the moment that might result in another goal, which is making money. The T for the process is earning profits through the future sales of the juices; I is the inventory of the juices; OE includes the costs associated with turning the inventory into sales, such as accounting expenditures, insurance costs, legal fees, office supplies, property taxes, rent and repair costs of the production units, advertising costs, traveling costs, sales commissions etc.

The primary constraints in the process of producing new juices are: i. Labor issues; for example, the workers follow the trend of taking advance payment and then running away once they receive their requested payment. ii. Transportation cost of finished batches from one city to another is another constraint since these costs are quite high for farther cities. iii. The raw materials for the juice production are unavailable when the season is high. They have to be stored in the cold storage a year in advance.

The recommendations for breaking each of the constraints are: i. The labor issue can be solved by giving the workers half of the advance payments and then giving small portions of the rest of the payment as they keep completing their work.

For example, sometimes, the payment can be cut from their monthly small payments if they do not show up on the production day since the absence of one worker puts burden on the rest of the workers, especially during the high season when the production batches are large and the workload is high. One absentee's contribution has to be compensated by the other workers causing them to feel over-burdened.

Such occurrences can be tackled by deducting small portions of an absent worker's monthly wages or holding back half of the advance payment of the newly hired workers to prevent them from quitting jobs. ii. The high transportation cost of the finished product from one city to another can be handled by negotiating with different competing suppliers. This could reduce the costs since it allows the management to compare and negotiate the best charges for their transportation services. Moreover, the larger the batches, the lower they cost for the transport.

Also, to further cut the costs, the packaging used for transportation can be obtained from the courier company. If we use our own packaging, then the costs of shipping would increase again. Moreover, sometimes a regional courier can be helpful. Although they have limited delivery network but most of the network fall within out delivery spots, so they can be used in order to reduce costs. In addition to that, third party insurance can be a good solution as well, since the transportation companies charge for insurance as well.

A third-party insurance.