The Goal, written by Eliyahu M. Goldratt

by Jim McDiarmid

In the ‘80s, American business schools and managers were studying a variety of new management concepts. Kanban, JIT and European MRP were being endorsed by American industry, and were widely applied.

At this time, a manufacturing innovator with an entirely new approach to making money introduced new theories in a book, The Goal. It did not endorse attacking operating expense primarily, and it did not advocate downsizing. It looked upon control systems as a valuable tool that must not supplement continually looking at the process.

This innovator said that some idle labor time could be a good thing. Consider that while large safety inventories should not be used as the crutch to support improper business thinking, some inventory is a good thing. In fact, in the commonsense view of this pioneer, cost accounting, developed at the turn of this century is "enemy number one of productivity."

The author

Who is this original thinker, who knows so much about how manufacturing really works -- wrongly in most situations? His name is Eliyahu M. Goldratt. He had previously been know for a new computerized scheduling system introduced worldwide in the seventies. In that system, he showed that finite scheduling can help in the production environment. Remarkably, his book The Goal is a work of fiction.

Have his concepts been conveniently indexed and filed away by business thinkers? Hardly. The novel’s printing has passed one million copies. The B-schools now include it in curriculums. Special advisory firms now implement its beliefs in industry, globally. Management training uses its game playing approach (its dice game) as a teaching tool. Business software is now sold to make the concepts available widely available.

Some startling inclusions

What kind of novel is this that is so widely read and studied? Visualize a book that includes the following:

• A number of sections on the central character’s marital troubles.
• A wife who tells the plant manager that he should be using Socratic principles to rescue his failing operations.
• The troubles of a Boy Scout troop on a 10 mile hike -- and the thinking engendered as a result
• Criticisms as to why a group of fabricating robots is working full time instead of part-time
• Dispensing with comparisons using manufacturing standards, output per hour, except as historical information.

The Goal describes changed business processes based on intuitive thinking with the help of a few basic principles. It endorses the "pull" system (tie to customer usage) first used in the grocery industry, but it goes further, showing just how individual workstations should be operated as part of an overall plan for the operation. This book includes many other innovations, and leads the reader to think ahead, challenging him or her to see where each character in the book is going with his ideas.

Company problems

Some problems are familiar to most experienced production managers:

• Each order is late in shipping
• Of course, each order is hot
• And priorities are pulled for other priorities
• Order service is swamped with calls
• Poor billings and cost reduction programs result
• Good people are leaving.

The solutions

Does the author tell us how to fix this? Well, not exactly. His book includes a sage, named Jonah, who is very busy in other cities and cannot always be on hand. But he does ask a lot of questions, and he does state that the current solutions are not working. After he leaves town the first time, the manager and his staff are left to figure out the answers for themselves. The staff begins looking at the total picture, and comes up with its own answers. Most of the managers "get it."

Socratic Way

Along the way, the reader is reminded that the posing of questions is the Socratic way of learning. And his pupils, who wrote down his teachings, wrote in novel form.

The book starts off by addressing manufacturing. It ends by addressing management processes generally. In passing, it is acknowledged that information technology and process knowledge is integral to innovation and to fast action on organizational needs.

Goldratt writes that a process with many stages will have both statistical fluctuations and dependent resources. Yes, managers must seek to minimize these, but they will still exist. The concepts of Goldratt (usually called the Theory of Constraints) seeks to work with these inherent attributes.

It is also held that the Theory of Constraints (TOC) as set forth in The Goal is a shop floor operating concept. In that sense, it is in the same category as JIT (Just In Time) and TQM (Total Quality Management) concepts. But TOC holds that the overriding objective is to increase throughput. And this, in turn, leads to organizational philosophy.

In the organization, treating throughput as the overriding objective engenders several new requirements. First, artificial barriers must come down, and the organization must be managed as a whole. The managers, working as a team, must be genuinely concerned with organizational "constraints" over cost reduction or local objectives. This opens up organizational psychology discussions, a separate subject.

And yet, Goldratt leaves us with one final thought: "The powerful solutions of today are likely to be the disasters of tomorrow." More stimulation for innovative thinking.

The Goal has brought forth a number of follow-on books and articles. There is even a textbook on this ‘90s approach to managing. Now there are several new consulting firms and management software firms who specialize in introducing these concepts to businesses in the U.S. and worldwide. Have the teachings of this novel been achieved? Perhaps they have, at least in some organizations. Already, newer concepts are coming forth here -- and are being copied in Europe and Asia.

And what is The Goal? It is to make money, of course.

Jim McDiarmid handles new logistics initiatives (planning, electronic commerce, customer partnerships, transportation and warehousing) for manufacturers and distributors. He can be reached via e-mail at Normamcd@aol.com.