The Goal

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The Goal is a book by Eliyahu M. Goldratt, the business consultant who created the theory of constraints model for systems management. It was published in 1984.

1 Setting
2 Cost versus Throughput
3 Bottlenecks
4 Socratic Method
5 Evaporating cloud
6 References
7 See also

[edit] Setting

Like other books by Goldratt, 'The Goal' is written as a piece of fiction, to which the Financial Times reviewer quoted on the cover of the second edition attributes much of its direct commercial success. The main character is Alex Rogo, who manages a metalworking plant where everything is always behind schedule. His distant acquaintance, Jonah, who represents Goldratt himself, helps him solve the company's problems through a series of telephone calls and short meetings. A second story line, which only occasionally intersects with the main topic of the book, describes Alex's marital life.

[edit] Cost versus Throughput

The first big point made in the book is that traditional measures of cost accounting do not properly measure or predict the obvious "goal" (hence the title) of a company, which is to make money. Other measures need to be used that are both meaningful and reasonably measurable. For a corporation as a whole, Alex and his trusty controller, Lou, figure that net profit, return on investment, and cash flow are good measurements, but faced with the inapplicability of those to their own organization, they turn to "Jonah" who proposes they use a form of throughput accounting...

[edit] Bottlenecks

The book goes on to point out the role of bottlenecks (constraints) in a manufacturing process, and how identifying them not only allows for removing them, but also yields a useful tool for measuring and controlling the flow of materials. By careful observation and manipulation of constraints, Alex and his crew manage to make their plant successful, and in the end Alex is rewarded with a major promotion.

[edit] Socratic Method

In the book Jonah teaches Alex Rogo by using the socratic method. Throughout the book whenever a meeting or telephone call dialogue happens with Jonah he poses a question to Alex Rogo or a member of his crew which in turn causes them to talk amongst themselves to come up with a solution to their problem. When Alex Rogo is with his wife he finds that the socratic method to be a way to fix his marriage which then he uses, with his crew, to come up with the 5 steps they should use to fix problems in the plant which ultimately leads him and Lou think up the 3 things every division manager, the positon Rogo is promoted to, should be able to do.

[edit] Evaporating cloud

The book gives a good example of the evaporating cloud thinking process when Alex Rogo wants to increase the plants throughput but he can not do so according to a salesman, Johnny Johns, because there are not any deals available. However, later it turns out that there is a deal from a French client who wants a certain part at a low price and in a massive amount, the conflict being they won't make a big profit and Alex's plant can't produce the amount wanted in time. Alex's team comes up with the idea that if they can't produce it all at one time they could produce the quantity in pieces which bumps the price back up because the client isn't ordering in bulk anymore. The French client hears of the plan and makes a deal with Johns even though it's a little more costly which increases the throughput of Alex's plant and the net profit of Unico by finding a win-win solution to a situation that had goals in conflict with each other.