The Goal Chapters 1-12

1. The GoalChapters 1-12 A Process of Ongoing Improvement Eliyahu M. Goldratt and Jeff Cox

2. The Goal Plant Manager Physicist/Production Consultant Division VP of Manufacturing Plant Production Manager Plant Controller Production Control Manager IT Manager Characters: Alex Rogo – Jonah – Bill Peach – Bob Donovan – Lou ____ - Stacey Potazenik – Ralph Nakamura –

3. The Goal Setting: City of Bearington – location? UniCo Corporation Manufacturing Plant – Pennsylvania, Ohio, Indiana manufacturing town • probably 15 years old • other impressions?

4. The Goal Introduction: What’s your first impression of the manufacturing plant? • Plant out of control • VP of manufacturing expediting an order • New robots • Controlled chaos • Good at “fighting fires” • Excellent at getting order filled when pressed • Lots of inventory

5. The Goal Alex travels to corporate meeting with a bunch of “corporate speak”. Alex begins daydreaming.

6. The Goal Alex/Jonah Chance Meeting in Airport Alex – “Robots increased productivity by 36% in one department” Jonah – “Are plant inventories down?” : No “Is employee expense less?” : No “Shipping more product?”: No Alex – “Must keep robots running to maintain efficiencies”. Jonah – Then “Inventories must be sky high and orders must be late.”

7. The Goal Alex/Jonah Chance Meeting in Airport – cont. Jonah – “In your own words, what is productivity.” Alex – “ Accomplishing your goals”. Jonah – “Correct, then what is the goal of your company?” Alex – “To be more productive?” : No “To produce products?” : No “To increase market share?”: No Jonah – “How can you be productive? You don’t know the goal.”

8. The Goal What does Alex determine “The Goal” is? How do you know you are making money (Alex and Lou)? To make money!! • Net profit (Income-Expenses) • Return on Investment • Cash Flow Why are each of these important?

9. The Goal How do the “making money” measures translate to the production environment? (Jonah’s translation) • Throughput – Is the rate at which the system generates money through “Sales” • Inventory – all the money that the system has invested in purchasing things which it intends to sell. • Operational Expenses – all the money the system spends in order to turn inventory into throughput.

10. The Goal What is the common word in all three measurement definitions? • Money going into the system (Op. Exp.) • Money stuck inside the system (Inv.) • Money flowing out of the system (Throughput) Money !!

11. The Goal • Throughput – Is the rate at which the system generates money through “Sales” • Inventory – all the money that the system has invested in purchasing things which it intends to sell. • Operational Expenses – all the money the system spends in order to turn inventory into throughput. Where do the following fit? • Raw materials • Direct labor • Indirect labor • Tooling, machines, building • Knowledge gained by employees

12. The Goal Alex meets Jonah in New York seeking help to determine steps to take in achieving the goal: Jonah – “Do you run a balanced plant? Do you have any idle workers and is it good or not?” Alex – “We try to keep all our employees productive”

13. The Goal Jonah – “Impossible to perfectly balance capacity to demand, there even exists a mathematical proof showing if you did, inventories go through the roof?” Alex – “How’s this possible” Jonah – “Due to two phenomenon: • Dependent events – a series of events must take place before another begins. • Statistical Fluctuations – the length of events and outcomes are not completely deterministic. The combination of these phenomenon are the issue.”