The Goal: A Process of Ongoing Improvement

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3 Sentence Summary

The Goal is a business novel that preaches a simple but insightful truth: productivity is the act of bringing a company closer towards its goal. If the company’s goal is to make money, then we should focus on increasing throughput, decreasing inventory, and decreasing operational expenses. By teaching us how to search for process bottlenecks and apply the Theory of Constraints, Eli Goldratt helps us achieve a fundamental understanding of how we should design productive systems.

5 Key Takeaways

1. The goal is to make money by increasing throughput while simultaneously reducing inventory and operational expense.
2. Fluctuations in a process do not average out, they accumulate.
3. Optimize the whole system, not just an individual process.
4. Do not balance capacity with demand. Make the flow through the bottleneck equal to the demand from the market.
5. In order of importance: Throughput > Inventory > Operating Expense

The Goal Summary

The Goal

• Productivity is the act of bringing a company closer to its goal. Every action that brings a company closer to its goal is productive. Every action that does not bring a company closer to its goal is not productive.
• The goal is to make money.
• Stated differently, the goal is to increase throughput while simultaneously reducing both inventory and operational expenses.
  • Throughput is the rate at which the system generates money through sales.
  • Inventory is all the money that the system has invested in purchasing things that it intends to sell.
  • Operational expense is all the money the system spends in order to turn inventory into throughput.
  • Fluctuations don’t average out. They accumulate. It’s an accumulation of slowness because dependencies limit opportunities for faster fluctuations.

Optimize The Whole System

• We should optimize the whole system. Some resources have to have more capacity than others. The ones at the end of the line should have more than the ones at the beginning, sometimes a lot more.
• A bottleneck is any resource whose capacity is equal to or less than the demand placed upon it.
• You should not balance capacity with demand. What do you need to do instead is balance the flow of products through the plant with demand from the market.
• Make the flow through the bottleneck equal to demand from the market.
• If you scrap a part before it reaches the bottleneck, all you have lost a scrapped part. But if you scrap the part after it’s past the bottleneck, you have lost time that cannot be recovered.
• Make sure the bottleneck’s time is not wasted.
• Take some of the load off the bottlenecks and give it to non-bottlenecks.
• Bottlenecks govern both throughput and inventory.
• Information is not data. Information is the answer to the question asked.
• Throughput is the most important, then inventory, due to its impact on throughput and only then, at the tail, comes operating expense.

The 5-Step Process

1. Identify the system’s constraint.
2. Decide how to exploit the system’s constraint.
3. Subordinate everything else to the above decision.
4. Elevate the system’s constraint.
5. Warning!!! If in the previous steps a constraint has been broken, go back to step 1, but do not allow inertia to cause a system’s constraint.

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