Review - The Goal: A Process Of Ongoing Improvement

About:

In unstable, fast-changing environments, flexible operations and the quick turnaround can offer real competitive advantages by allowing you to respond quickly to the market. In "The Goal: A Process of Ongoing Improvement", Eliyahu Goldratt uses a story to explain several inter-related management concepts that are especially useful for operations management and strategic planning. You can also apply the ideas in general management and your personal life.

The Goal: A Process Of Ongoing Improvement:

The story centers around Alex Rogo(AI), a Plant Manager at UniCo Manufacturing who had been transferred to a loss-making manufacturing plant that was perpetually late with its order. Six months into the job, AI was shocked to know that every plant in the division is losing money. If things didn't improve in a year, the entire division would be sold off. Alex was in turn given a moratorium: if he couldn't turn his plant around in 3 months, it would be closed down.

Alex has no idea why his plant is losing money even though it had the technology, people, materials and market demand. Fortunately, he bumped into his ex-Physics teacher, Jonah's help, AI's plant became profitable and achieved unparalleled quality and delivery times. Jonah also used the Socratic approach to help AI work out the solutions with his team and to improve his marriage.
Some key Lessons of this book:

1. Scientific ideas can never be proven. They can only be disproven.
2. Scientific theories are not "truth" themselves, they simply explain a lot of natural processes.
3. To learn, we should not just give people results to memorize, but stories and plots that allow us to deduce the answer.
4. Whenever we think we have final answers, progress, science, and understanding of our world cease.
5. Doing work and making money is not the same thing. Not all work leads to making money. Much of it is wasted.
6. Three metrics that will tell you if the business is doing well: net profit, return on investment & cash flow. All three should be increasing all the time.
7. Three indicators of a healthy business: Operational expenses, inventory, and throughput.
8. Three important questions to ask:
• Did we sell any more products?
• Did expenses go down?
• Did inventory go down?
9. Most Processes are a series of dependent events. In any series of dependent events, most people can only go as fast as the people in front of them. Because of this, your throughput is only the output of the final person/step in the process.
10. Reverse the order so that the process goes from slow to fast.
11. You have to optimize the whole system, not just a process.
12. There is always a bottleneck in every process. You have to manage the process based on the bottleneck.
13. The area with the biggest amount of inventory is usually a sign of a bottleneck.
14. Most people are so focused on technical details that they can't see the bigger picture. Don't bother "checking the numbers" instead "check your assumptions".
15. Making employees work and profiting from that work are two different things.
16. A system with maximums is not an efficient system. You should not try to maximize the productivity of every moment because it's not an optimally designed system.
17. The goal is not to reduce costs but to increase throughput. This has huge implications because nearly everyone is focused on reducing costs.
18. The theory of Constraints:

1. Step One: Identify the system's constraints.
2. Step Two: Decide how to exploit the constraints.
3. Step Three: Subordinate all other processes to the above decisions.
4. Step Four: Elevate and improve the system's constraints.
5. Step Five: If in a previous step a constraint has broken, return to step one