This document summarizes a book called "The Goal" by Eliyahu Goldratt about using a process of continuous improvement to achieve business goals. It discusses that the characters Alex Rogo and Jonah debate what the true goal of a manufacturing plant is, as Alex believes efficiency metrics like machine utilization are most important while Jonah argues the goal should be increasing productivity. The document then explains that Goldratt defines the goal as increasing throughput while reducing inventory and operating expenses, and that decisions should be evaluated based on their impact on these operational measures rather than just financial metrics.

1. The Goal
A Process of Ongoing Improvement
-presented by
Nachiket Kulkarni #311
Ashwin Mehta #313
Pratik Mehta #314
Ishan Parekh #315
Ankit Shah #317
Dishank Shah #318

2. About The Author
• Born in March 31, 1948
• an Israeli physicist who became a Business
Management Guru
• B.Sc. from Tel Aviv University (TAU), Israel
• M.Sc. Doctorate of Philosophy from
Bar-Ilan University (BIU), Israel
• An Educator, Author, Scientist, Philosopher
& Business Leader.
• He holds a number of patents in the areas
from medical devices to drip irrigation to
temperature sensors.
Eliyahu Moshe Goldratt

3. Introduction – The Goal
• Dr. Eli Goldratt's book “The Goal”, has been a best seller since 1984 and
is recognized as one of the best-selling management books of all time.
• The Author has used the Socratic inductive reasoning to teach his Theory
Of Constraints
• It is an underground best seller that utilizes a non-traditional approach to
convey important business information.
• It has reached a sale of eight million copies.
• This book which is an overall framework for various businesses determine:
▫ What to change?
▫ Change to what ?
▫ How to cause the change?
The Goal – An Ongoing Process of Improvement

4. The Goal - Scenario
• Story revolves around 38year
old young executive – Alex
Rogo.
• An Engineering Graduate +
MBA.
• Started career in UniCo as
project manager and now
works under Bill Peach as plant
manager in Bearington, his
hometown.
• Factory produces machined
assemblies.
• Well trained staff led by highly
experienced managers.

5. Story Characters
Alex Rogo,
Plant Manager
Julie,
Rogo’s
Wife
Bill Peach,
Vice
President
Bob Donovan,
Production
Manager
Fran,
Rogo’s
Secretary
Dempsey,
Shift
Supervisor
Martinez,
Union Steward

6. 6
Set the Stage
• Alex Rogo, plant manager of the Bearington plant
• Bearington plant, part of the UniWare Division, part
of the conglomerate UniCo
• Alex meets Jonah, his college physics professor, at
the airport

7. 7
Interchange between Alex and Jonah at
Airport
Alex Jonah
I'm going to speak at a Robots
for Productivity Conference
So your plant uses robots
Yes Have they increased productivity?
Sure - 36% in one area 36% more money?
You didn't increase productivity

8. 8
Airport conversation continues
Did you ship one more product?
Alex
Not sure.
Jonah
Did you fire anybody?
Then you didn't increase productivity.
No
Probably not
Did your inventories go down?
But we run at 90% efficiency with a low cost per part.Alex

9. 9
Alex and Jonah: a conflict
• Alex: I am running an efficient plant.
• Jonah: You are running an inefficient plant.
• Data
▫ Machines run 90% of the time.
▫ Unit costs are low.
▫ More products are not shipped.
▫ No one is fired.
▫ Inventory is not decreased.
▫ Inventories are high.
▫ Can't ship on time.

10. 10
What is the source of the conflict?
• Productivity: Anything that moves toward the
goal is productive. Anything that moves away
from the goal is not productive.
• Alex and Jonah have different definitions of the
goal.
• What is the goal?

11. 11
Question left by Jonah: What is
the Goal?
• Make product
• Increase market share
• Produce quality products
• Produce efficiently
• Hire workers
• Support the city, state and national economy
• Increase stockholder value

12. 12
Why is a goal important?
• Directs decisions
• Allows Measurement of accomplishment
• Without goals we are moved by the current
requirements to the exclusion of concerns for the
future.
• What would Deming say is the Goal?
▫ Point 1: Constancy of Purpose for the Improvement of
Product and Service.
• We need one goal not many

13. 13
What is the goal of a public
company?
Make money now and in the future

14. 14
How do we measure progress
toward the goal?

15. 15
Financial Measures
• What Financial Measures Describe the Goal of
Making Money?
▫ Net Profit (NP)
▫ Return on Investment (ROI)
▫ Cash Flow (CF)
• Are these sufficient for making decisions?

16. 16
Can NP, ROI and CF be used to
make decisions?
• Engineering Economics says “yes”
▫ Accept the project if the IRR of the cash flow is
greater than the MARR.
• Goldratt would say “no”
▫ It is difficult to see how the global measures are
affected by individual design and operating
decisions.

17. 17
What Operational Measures
Describe the Goal?
• Throughput (TP)
▫ Rate at which system generates money through sales.
Sales Revenue - Raw material Expense
• Inventory (I)
▫ All the money that the system has invested in
purchasing things which it intends to sell
• Operational Expense (OE)
▫ All the money that the system spends in order to turn
inventory into throughput

18. 18
How do these measures relate
financial measures?
• NP = TP - OE
• ROI = NP/I
• Cash flow is OK if
▫ cumulative income + initial cash > cumulative
costs.

19. 19
NP ROI CF
TP I OE
How do the measures relate to
decisions?
TP
I
OE
Operational Financial
NP ROI CF
NP ROI CF
NP ROI CF
• An effective decision simultaneously
increases TP, decreases I, and decreases OE.

20. 20
Was the decision to add robots a
good idea?Jonah Alex
Did you ship one more product?
(did you increase throughput?)
Not sure
Did you fire anybody?
(did you decrease cost?)
Probably not
Did your inventories go down? No
Did the robots increase productivity?

21. 21
The Goal
The goal is to reduce operating expense, reduce
inventory while simultaneously increasing
throughput. The most powerful effect is to
increase throughput.

22. ThankYou