¶ … 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,...

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,…