The Goal is an entertaining book which presents new theories for organizational finances and plant management. The protagonist, Alex, is caught in a common dilemma. Two very demanding situations require his attention: his marriage and the saving of his employment at the local plant. The competitive nature of modern business led the plant to utilize a theory of constraints which solves dilemmas with a gradual plan for improvement. Specifically, this involves a study of the plant’s problems and of the probable cause(s) and available resources (Goldratt 18). Much of The Goal is centered on this theory. In this paper, the realities, areas of clarification, and necessary changes of the theory of constraint will be presented and analyzed. During the course of these discussions, bottlenecks, the Socratic method, and the evaporating cloud will be examined as crucial components of the theory of constraint. These interrelated components can be utilized to streamline productivity and generate more revenue through increasing throughput, managing inventories, and minimizing operational expenses (Goldratt 67). Furthermore, Alex’s story illustrates the difficulties facing innovation, the system, and the concerned individual.
When faced with blatant failures and mismanagement, Alex was fortunate to run into his Physics professor, who questioned Alex’s assumption that increased productivity occurred without a significant shift in supporting components. Accomplishing a faulty or short-sighted goal is counted as a success if considered solely as an issue of productivity, but theory of constraints (TOC) questions the underlying rationality which determines organizational functioning. Later, Alex meets Herbie, who wonders about efficiency and sustainability.
Theory of Constraints
The theory of constraints is a very important approach to the management of organizations. This philosophy emphasizes organizational resources’ role in enhanced performance in spite of a given constraint and in the production of a direct impact on profits and losses. First, constraints are acknowledged and allocated enough resources to ensure that the organization is performing well (Goldratt 53). For The Goal’s protagonist, Alex, his plant is running two months behind on some deliveries and unsold goods totaling a staggering $20 million; UniCo and its plant controller, Lou, were not concerned enough to re-examine their way of thinking or to take immediate action. Thus, Alex demonstrates the importance of roles and resources within the organization would highlight the importance of TOC in the midst of a growing amount of surplus stock.
Most TOC practitioners have used this book to explain various concepts, such as the process of identifying the best solution for a given constraint. For his efforts, Alex was promoted (Goldratt 143). He illustrated six key points: a) Flow and demand- rather than capacity- should be balanced, b) Constraints in activity are dependent upon the system, c) Not all activated resources are being used, d) Bottleneck productivity is correlated to organizational productivity, e) Bottleneck productivity is useful, and f) The bottom line should be used to gauge operational performance. Regarding improved performance of the system, Alex and his team recognized various constraints that were a problem: predominantly proper execution and long-term sustainability.
A bottleneck is a phenomenon that revolves around the availability of resources exceeding the demand. The performance of a system is always limited by such components; they slow performance. Bottlenecks result in losses because costs will always go up as a result of such hiccups (Goldratt 79). In The Goal, Alex enlists Ralph to help root out the cause. Upon reviewing these aspects, it is evident that Herbie (the bottleneck) needs to be properly identified by the organization and examine the evolving roles of bottleneck, furnace, and automation machine.
This therefore implies that such inefficiencies are supposed to be alleviated for the system to perform effectively and fully. The solution was to come up with a new machine that could perform faster and effectively while using few operators because retraining of replacements was proving to be too expensive for the organization. To come up with a good solution, it is advisable to transform bottlenecks into good and effective non-bottlenecks that will move the organization forward. Certain machines were underperforming, but early, proper identification can lead to sustainable solutions (Goldratt 92). Proper alleviation of bottlenecks can be achieved by eliminating time wastage through optimization. From Alex’s experience, it is better to remove defective parts that might make it impossible to get enough throughputs. Bottlenecks can be removed by routing some work which enhances productivity.
One of the most effective ways of eliminating bottlenecks is proper and early communication. Assigning specializations or areas of responsibility help to avoid further complications by assigning tasks to the most appropriate set of people and must be carried out according to a standardized procedure or automation (Goldratt 265). Time consumption limits production. Bottlenecks vary according to the organization processes, types, and strategies. For Unico, a large failure was found in the training for the operation of NCX-10 robots. In an attempt to find a “quick fix”, the company was actually employing 10 licensed qualified machinists when two could complete the job in five fewer minutes.
The Socratic Method employs two people of opposing viewpoints to argue both sides of an issue with equal existing bias. It employs questions to evoke new responses or ways of thinking. This method may activate a higher-order level of thinking through this change of perspective. Whether or not the people come to a common agreement, this method is an effective brainstorming tool which supplies a multifaceted view of possible contributing factors (Goldratt 140). In The Goal, the Socratic Method is frequently used by Alex and Jonah. Alex, as the knowledgeable “insider” sees things from the organizational perspective under which he was trained and with which he has had personal experience. Unfortunately, Unico’s plant controller, Lou, is not involved in the process despite several conversations which questioned general efficacy. When Jonah cannot answer his questions, Alex seeks out his own solutions to fall within the constructs which Jonah provided. These constructs serve as ground rules for the unpredictable Socratic Method. This method can be applied to complex situations in any organization because good solutions are arrived at after critical evaluation has been explored (Goldratt 85). Practically, this means that people can be given an opportunity to present ideas that will ultimately enhance an organization’s performance.
The evaporating cloud process utilizes a focused approach to enhance business functions. Business systems are the focus of this process. This process entails settling on a good solution to a given conflict that might surface between two points of view, creating a win-win situation for the achievement of a unifying goal. In Alex’s situation, the need for a solution was clear; millions of dollars and much time was wasted, especially when system officials were not interested in his preliminary findings (Goldratt 110). In contrast to the Socratic Method, the evaporating cloud process makes concessions when necessary. In the book, Jonah helps as he can but is often limited by his own constraints of time, so the input of respected friends and colleagues was a large part of the development of Alex’s theories. When all are considered, optimal efficiency can be reached with the creation of a synergy, a shared stake in the outcome of the compromise which was reached.
The theory of constraints should be common sense, but organizations often value the answers they want to hear rather than those which they need to hear. As productivity and delivery slow, the demand for goods either cannot be met or is impeded by the supply process’s reputation, increasing the number of bottlenecks. While no definite conclusion is usually reached using the Socratic Method, a fuller list of possible contributing factors will often be produced, and basic operational assumptions may be overturned or even revealed to be a part of the constraint. The Evaporating Cloud process produces a greater synergy and may placate disgruntled employees.
Goldratt, M, E. (2004). The Goal: A Process of Ongoing Improvement. Great Barrington, MA: North River Press.