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If machine A and B operate at 200 units per hour, only 150 units will be processed by Machine C so work in progress builds in front of machine C at the rate of 50 units per hour.
According to Eliyahu Goldratt and The Goal, the only performance measures that matter are: 1.
The throughput – effectively defined as sales less material costs 2. Inventory – money tied up in the system The Goal is to make money and you do that by increasing throughput, decreasing operating expenses and inventory or some combination of all three.
Two stories are interlocked in our hero, plant manager Alex Rogo’s life: 1.
How he can save his struggling plant from closure because performance was so bad. His crumbling marriage – because he was pouring so much of himself into saving the business, his personal life was suffering.
Both aspects of the story resonate and The Goal hooks it claws in deeper as you read it and recognise that the symptoms the plant is suffering, echo in your own workplace with high costs, backlogs and the frustration that things just don’t get better as fast as you think they should, despite the best efforts of your team.
Fortunately Alex Rogo has help in the form of a mysterious wise guru called Jonah who teaches Alex the theory of constraints.The Goal introduces a new performance basis which recognises that most expenses should be regarded as fixed in the short term including labour.It is controversial and this is not the place to debate it but the argument is powerful and lead to the creation of a concept called Throughput Accounting.You can see why Theory of constraints thinking has been picked up in strategy and marketing since the constraint can lie in the market or in the approach to the market.] The Goal is set in a manufacturing plant and this makes it easy to envisage the constraint more clearly than in a service based business.Imagine you have four machines in the production line and every product must pass through each machine in sequence.Even worse, each hour lost on machine C – through breakdowns or operator issues – is an hour of output lost to the entire system.The other machines can catch up but, output at machine C can never be recovered. In a series of vivid examples, The Goal introduces you to the ideas which will improve the constraint but the first thing is to recognise which is your constraint.“The Goal: A Process of Ongoing Improvement” by Eliyahu Goldratt and Jeff Cox is an absolute classic book for anyone who is concerned with improving the performance of a manufacturing business or with business improvement in general.First published in 1984 this book introduced the world to the Theory of Constraints and how much of the focus on improvement is misguided at best and wrong at worst.The logic is that every system must have a bottleneck because otherwise, output would be infinite.[If we think of the business as a system, then the constraint is whatever is stopping it from making an infinite amount of money.