Eliyahu Goldratt's the Goal

Summary and Analysis of

Eliyahu Goldratt's The Goal

by John Caza

12/15/2010

Alex Rogo is a manager in charge of a large mechanized manufacturing facility which in the beginning of the novel, runs "inefficiently" with a poor level of production and orders that are always late. He is the main character of this interesting plot which starts out with him going to work one morning to encounter one of his bosses, Bill Peach, disturbing the order of his factory and subsequently giving him an ultimatum of 3 months to turn the plant around or Bill will "go to the management committee with a recommendation to close the plant." Alex has a rough time at home where he doesn't get along very well with his wife because she's having trouble accommodating to the new lifestyle that this job brought them.

While traveling to the annual robotics conference held in Houston a couple of weeks prior, he meets an old acquaintance from college, a fellow named Jonah, who makes Alex question the efficiency of his plant after a quick chat where he describes the process. Jonah pointed out to him that his robots weren't really improving the operation as a whole, and defined productivity as "the act of bringing a company closer to its goal," stating that it "is meaningless unless you know what your goal is."

After leaving midway through a meeting with Peach and other fellow plant managers, it occurs to Alex that the goal of any manufacturing company is to make money, and from that point on productivity has a new meaning for him. He realizes Jonah may be able to help him reach his goal and tries to get in touch with him. Getting a hold of Jonah seemed to be a tricky task but after getting through, Jonah leads him on his quest to achieve the goal, and that is by expressing it in terms of "throughput, inventory and operational expense." Jonah then precisely defines the terms for him and tells him that they correlate and are to be applied as a group.

With the help of some of his employees Alex realizes that the robots in his plant actually decrease production because they don't replace the people that were doing the job before, but rather increase operational expense. Alex then enlists his close subordinates to try and conceptually apply the 3 rules to his business model and define them in ordinary, simple terms which everyone can understand and then apply, coming to the conclusion that they should stop using the robots in order to lower the inventory. He then schedules a meeting with Jonah who is now in New York.

As the story progresses, there is more and more tension between him and his wife because of the fact that he has to concentrate on the plant the whole time. Julia doesn't understand that he is under a lot of pressure to get the plant up to industry par. She accuses him of neglecting his family but he has no choice but to leave for New York to meet Jonah in the morning, who by this point is his most valuable resource, the one whose advice might be able to save his plant.

Their meeting in New York makes Alex understand that it may be inefficient to have his workers work all the time. Jonah reinforces the idea of the goal saying it "is to reduce operational expense and reduce inventory while simultaneously increasing throughput." When inventory goes up, operation expense goes up because of the carrying cost; this is the result of the combination of "dependent events" and "statistical fluctuations." Alex cannot understand how either two would have an impact on his plant; they are only significant combined. Jonah is then seen leaving in a limousine.

Many things can be learned from kids. Our protagonist is left in charge of his kid Dave's boy scout team who lost their troopmaster to illness. He can only think that he wanted to spend his weekend with Julie but has to be there for Dave who in the company of his friends doesn't want to know him. As the trip progresses he starts to understand the link between dependent events and statistical fluctuations, a result of the hike in a one file line towards "Devil's Gulch." Alex notices the gaps between the boys expand as they keep walking and comes to the conclusion that the gaps will not average out but rather accumulate because one can only go as fast as his successor, so every step one takes that's not as big as the line leader's can potentially slow down the column. As Mr. Rogo, the way the boys call him, expresses throughput, inventory and operational expense in terms of the boy scout line, he realizes that this is how his company functions as well. The product is the "trail walk" which starts with Ron (the kid in front who represents raw materials) and ends with him (who represents the product sold), therefore defining throughput; the distance in between Ron and him is inventory and the energy consumed to walk the trail is the operational expense.

Mr. Rogo finally comes to the conclusion that throughput in this case was only limited by the slowest process which was Herbie, therefore by placing him in front of the line there would be no gaps (so inventory is smaller) and there is less energy consumed trying to keep up as the operational expense goes down as well. He also realized that by balancing Herbie's load (since he carried a whole kitchen