Book SummaryThe Goal: A Process of Ongoing Improvement, by Eliyahu M. Goldratt

1-Page Summary1-Page Book Summary of The Goal: A Process of Ongoing Improvement

Productivity is defined as bringing you closer to your goal. Every action that brings you closer to your goal is productive. Every action that does not bring you closer is not productive, even if it seems so.

The Goal of every business is to make money. Likewise, activities that do not bring you closer to making money are not productive.

• Beware of defining subgoals that do not really drive toward the Goal, like production efficiency, team size, money raised, etc.

Organizations can be measured by 3 metrics: Throughput, Inventory, and Operational Expense.

• Throughput: the rate at which the system generates money through sales
• Inventory: all the money system has invested in purchasing things it intends to sell
• Operational expense: all the money the system spends to turn inventory into throughput

Ideally, your activities improve all three at once.

• Many companies focus primarily on decreasing operating expense, which can lead to unproductive behaviors that stifle throughput. Instead, switch your mindset to increasing throughput.

**The bottleneck of the system determines the throughput of the entire...

The Goal: A Process of Ongoing Improvement Summary Shortform Introduction

The Goal is a classic management text, and on Jeff Bezos’s short-list of books recommended to new managers.

The Goal is written in the form of an allegory, where a manufacturing plant manager has to reduce a large backlog of orders and improve factory throughput. Its management lessons are interwoven with the manager’s epiphanies. Because we felt the lessons were more important than the narrative,...

The Goal: A Process of Ongoing Improvement Summary Part 1: The Goal and Metrics

Productivity is bringing a company closer to its goal.

• Every action that brings a company closer to its goal is productive.
• Every action that does not bring a company closer to its goal is not productive.

Defining the Goal is critical. The Goal of every business is to make money. Without money, the company is dead.

• Do not deceive yourself into picking a subgoal - like decreasing cost per part, employing good people, manufacturing efficiency, product creation, quality, satisfaction, cutting-edge technology, market share. None of this matters unless it meets the Goal.
• Be wary of separate departments overoptimizing their subgoals without meeting the main goals. Like purchasing being more cost-effective and renting warehouses to store excess inventory, which can make the whole company less profitable.

If you improve efficiency at one step without increasing overall output, you are not being more productive. You might even be causing an excess inventory and increasing cost per good sold.

• For example, imagine if you added a robot at one part of the assembly line. To justify the cost, you drive it at max capacity, which requires feeding...

Shortform Exercise: Define Your Goal

Make sure you’re focusing on the right output and not just wasting time.

What is your big Goal? What is the ultimate purpose of your work?

The Goal: A Process of Ongoing Improvement Summary Part 2: The Fallacy of Average Production Rates

In manufacturing, a balanced plant tries to match average capacity of every resource exactly with market demand. Any resource beyond the average rate is seen as extraneous, so it is either put to use or eliminated. This is the traditional mode of thinking at the protagonist’s company in The Goal.

However, two interconnected concepts make the balanced plant backfire, thus decreasing throughput, increasing inventory, and increasing carrying costs:

• Dependent events - one part of the chain depends on the upstream part.
  • The speed of the downstream part is constrained by the upstream part - if the upstream part isn’t delivering, the downstream part can’t do any work.
• Statistical fluctuations - many factors cannot be predicted precisely
  • Even at an average steady state rate, there are fluctuations in production. Someone may produce 2 widgets per minute on average, but at times he produces 2.5 and at times he produces 1.
  • Larger events - machines may break down; workers many get sick; inclement weather may arrive.

Fluctuations happen regularly at each part in the chain. However, **each downstream part can only catch up to the extent that the...

The Goal: A Process of Ongoing Improvement Summary Part 3: The Importance of the Bottleneck

The critical concept in the book is identifying the bottleneck, or the key constraint that holds back throughput. While this sounds like common sense, it can be hard to objectively identify your own bottlenecks when you’re in the thick of work.

Building Blocks of Manufacturing Flows

Relationships between a bottleneck (X) and non-bottleneck (Y) can be summarized in the following 4 diagrams:

Y → X

• The non-bottleneck feeds to the bottleneck
• Y has excess capacity. Letting both X and Y run continuously will build up inventory in front of bottleneck X.

X → Y

• The bottleneck feeds the non-bottleneck.
• Y is starved for inventory to process and marches to the beat of X’s drum. This is totally fine, even if Y is idling at times. No inventory builds up in front of Y.

X → Assembly ← Y

• Parts passing through X and Y flow into a joint step of assembly.
• Working Y out of pace with X produces inventory in front of assembly.

X → Product A | Y → Product B

• Here X and Y are independently operating for separate marketing demands.
• If X cannot produce enough to meet market demand, then the constraint for product A is bottleneck X.
• If Y can...

Shortform Exercise: Identify Your Bottleneck

Find the bottleneck that’s decreasing your total throughput.

In what step do you have the greatest inventory piling up in front? Where is your largest backlog?

The Goal: A Process of Ongoing Improvement Summary Part 4: Identifying and Improving the Bottleneck

Now that we know the bottleneck is hugely significant, we’ll learn how to improve the bottleneck’s capacity.

Five Focusing Steps for Improvement

In The Goal, Goldratt describes the 5-step process for continuous improvement:

1. IDENTIFY the system’s constraint.
2. OPTIMIZE the system’s constraint. Squeeze more capacity out of the constraint.
3. SUBORDINATE all the non-constraints to the above decisions.
4. ELEVATE the system’s constraint. Add more capacity to the constraint.
5. If in the previous steps the constraint no longer remains the constraint, go back to step 1 for the new constraint.

We’ve discussed identification in the previous chapter. We’ll now dive more deeply into improvement.

Increase Capacity at the Bottleneck

The protagonist of The Goal book undergoes multiple iterations of increasing capacity as his bottleneck to increase overall throughput. Without detailing every struggle, in this book summary we’ll cover common causes of reduced capacity at bottlenecks, and fixes to increase capacity.

(Shortform note: This is a good point to consider your own work or life in this context, and to construct effective ways to relieve your personal...

Shortform Exercise: Improve Your Bottleneck

Try to increase capacity at your bottleneck. This might not be a machine in an assembly line, but also your knowledge work or personal life.

How could you improve work at the bottleneck itself? (Remember: skip unnecessary steps; add supplements to increase capacity; increase time the bottleneck is active.)

The Goal: A Process of Ongoing Improvement Summary Part 5: Structuring Around the Bottleneck

Once you identify the bottleneck and improve its capacity, you may find other problems arising that decrease throughput. In the narrative, the team goes through multiple iterations of solving problems, yielding the below principles.

Keep Non-bottlenecks Synchronized with the Bottleneck

In the story, the team identifies a robot as the bottleneck. They devise a system whereby all parts destined for the bottleneck are always worked on at highest priority at non-bottleneck steps. This increases throughput temporarily, until they discover that at final assembly, suddenly there are shortages in non-bottleneck parts while there is massive inventory upstream of the bottleneck. How could this be?

They discover that they were running non-bottlenecks at full-speed and cranking out bottleneck parts far in excess of what the bottleneck could process. In turn, the non-bottlenecks had insufficient capacity to produce their non-bottleneck parts.

To avoid this, you must synchronize the non-bottlenecks with the bottleneck, to prevent massive deviations. Goldratt proposed the Drum-Buffer-Rope method, as follows:

Drum

**The bottleneck dictates the pace of production...

The Goal: A Process of Ongoing Improvement Summary Part 6: Miscellaneous Notes

Misleading Accounting Disguises Progress

Measurements like financial accounting should induce the organization to do what’s good for itself. But as you improve throughput, traditional accounting measures may make your situation look worse than it really is.

Examples:

• Inventory is usually marked as assets, and reducing inventory will show up as a loss in assets.
• Drum-buffer-rope will cause idle time at non-bottlenecks, thus decreasing local efficiencies.
• Consuming surplus inventory (beyond that determined by drum-buffer-rope) will decrease local efficiencies.
• Decreasing batch sizes increases setup time and overhead, thus increasing apparent cost-per-part.

However, these are usually temporary adjustments. Remember, what really matters is the total throughput of the system - increase that, and you’ll be able to make more sales. Over time you’ll enjoy lower...

The Goal: A Process of Ongoing Improvement Summary Part 7: Plot Summary of The Goal

As an allegory, The Goal is explication of a philosophy with a fictional novel wrapper.

This has various effects beyond pure entertainment value. Portraying the protagonist’s struggle makes you empathize and absorb the teachings better. Unlikable characters stereotype critics of the philosophy (like Eddie, who doesn’t ever question the traditional way of doing things). Overcoming the struggle paints a vivid picture of how the strategy can work.

However, at times the dialogue and epiphanies in The Goal book can feel forced, and the conversations don’t sound natural.

Thus, we consider the plot to be a minor portion of the value of the book. Here’s the summary, for context:

The Problem

Alex Rogo is a beleaguered plant manager in a small manufacturing town. They’re in a bad situation: large backlog of orders, all orders are late unless expedited.

Company policies are to blame. The division’s goal has been to increase cost efficiencies, so they focus on local efficiencies of production (like the fallacy, “we have to keep the robots running at all times or else the cost per part will go up and we’ll never make back the cost.”). Large inventories accumulate, and they...