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It is possible for one group’s high production results in reduced ability of another group. But neither is it as simple as one group performing well leads to other groups performing well. Goldratt accurately demonstrates the chain-like nature of companies, where the activity of one group or department affects the activity of the others. These enhancements can lead to lower costs for the same level of production, thereby increasing sales and profit. Awareness of a bottleneck enables the analysis to improve the operations as opposed to merely improving production.
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Thus, it applies the adage “a chain is only as strong as its weakest link.” The Theory Of Constraints includes five steps: “(1) identify the System Constraint, (2) decide how to exploit the constraint to the company’s advantage, (3) subordinate everything else, (4) elevate the constraint, (5) return to step 1, but beware of inertia (Coughlin, 46). It (relies) on the idea that businesses can be viewed as a linked set of processes. The Theory Of Constraints essentially provides a set of tools that a manager, or a change agent, can utilize to manage constraints and, consequently, increase profits. It would allow for significant improvement in the company without requiring significant investment of resources. As Goldratt demonstrates in The Goal, most companies only have very few true constraints, so focusing on these is logical. One of the most interesting things about the Theory of Constraints is that it is an efficient way to approach operational issues. The Theory of Constraints’ purpose matches with that of Rogo’s company’s goal-to earn money. The Theory of Constraints focuses on bottlenecks in the production process that negatively impact profit. Goldratt makes it apparent that in order for Rogo to achieve this, he must utilize the Theory of Constraints (TOC). And in order to optimize the production process, the manager must, according to Rogo, balance these three things: throughput, inventory, and operational expense. Still, as we see in The Goal, this is easier said than done. But at its very core, operations management is indeed all about optimizing a plant’s operations so that all steps in the production process is productive for the company. At first it appears simplistic because operations management involves a lot of technical concepts. This insight from Jonah is quite interesting. As Jonah explains, things are quite simple: any activity that leads you to the company’s goal is productive, and anything that doesn’t is not.
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More specifically, as the plant controller, tells him, they need to increase the plant’s cash flow, return on investments, and net profits. Rogo realizes that the company’s goal is to make money or profits-like all other companies. The plant’s previous managers may have lost sight of UniCo’s ultimate goal of earning money that is why their plant operates at a dismal rate. Rogo merely recounts their conversation, wherein the professor asks him “What is this company’s ultimate goal?” And that is the main question that every manager should ask-something that Rogo seems to have forgotten for a moment, and something the entire regional division seems to be neglecting.
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Help, however, comes in the form of his old Physics professor who works as a process consultant, Jonah, whom he met at the airport on his day of arrival. Alex Rogo is thus overwhelmed and feels lost.
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However, before he could even begin to process this, he is faced with a problem-an order that is months overdue must be shipped out that day. On his very first day, the division vice president informs Rogo that he has 3 months to turn things around. However, his excitement quickly disappears as he realizes that the plant had been performing poorly and is on the verge of being closed down. More importantly The Goal shows that the key to successful management is to not lose sight of the company’s goal.Īt the beginning of the novel, Alex Rogo is excited about moving back to his hometown and managing his company’s, UniCo, plant there. The Goal offers interesting life-like applications and insights on the theory of constraints, which appears to be the root of all the challenges by Rogo and his plant. Alex Rogo has to juggle his responsibilities in the plant, which are extremely demanding, with his responsibilities at home as a husband and father. The Goal follows Alex Rogo, a manufacturing plant manager, try to turn around the plant he was assigned to in his hometown. Although the book was published decades ago, its contents remain relevant in today’s business world. Goldratt is a business novel published in 1984.