The Goal: A Process of

Ongoing Improvement
Eliyahu Goldratt
North River Press

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Created by Esteban Gomez – Last synced January 8, 2018

The Goal: A Process of Ongoing Improvement

December 25, 2017 32

consistently get a quality product out the door on time 33

at the cost that can beat the competition?

December 25, 2017

We’ve got stacks and stacks of inventory out there. 34
We release the materials on schedule, but nothing
comes out the far end when it’s supposed to.

December 25, 2017

"The future of our business depends upon our ability 41

to increase productivity.’’

December 26, 2017

"You need something like return on investment... ROI, 64

some comparison of the money made relative to the
money invested.’’

December 26, 2017

So this is the goal: To make money by increasing net 66

profit, while simultaneously increasing return on
investment, and simultaneously increasing cash flow.

December 26, 2017

measurements which express the goal of making 76

money perfectly well, but which also permit you to
develop operational rules for running your plant,’’ he
says. "There are three of them. Their names are
throughput, inventory and operational expense.’’

December 27, 2017

"Throughput,’’ he says, "is the rate at which the 77
system generates money through sales.’’

Definition of Througput

December 27, 2017

"The next measurement is inventory,’’ he says. 77

"Inventory is all the money that the system has
invested in purchasing things which it intends to sell.’’

Definition of Inventory

December 27, 2017

"Operational expense,’’ he says. "Operational expense 77

is all the money the system spends in order to turn
inventory into throughput.’’

Definition of Operational Expense

December 27, 2017

Increase throughput while simultaneously reducing 84

both inventory and operating expense.

December 27, 2017

the closer you come to a balanced plant, the closer 104

you are to bankruptcy.’’

December 29, 2017

The goal is not to improve one measurement in 105

isolation. The goal is to reduce operational expense
and reduce inventory while simultaneously increasing
throughput,’’

December 29, 2017

The bottlenecks stay bottlenecks. What we must do is 173

find enough capacity for the bottlenecks to become
more equal to demand.’’

January 2, 2018

"Every time a bottleneck finishes a part, you are 178

making it possible to ship a finished product. And how
much does that mean to you in sales?’’

January 2, 2018

the capacity of the plant is equal to the capacity of its 179

bottlenecks,’’

January 2, 2018
"Whatever the bottlenecks produce in an hour is the 179
equivalent of what the plant produces in an hour.

January 2, 2018

"The actual cost of a bottleneck is the total expense of 180

the system divided by the number of hours the
bottleneck produces,’’

January 2, 2018

make sure the bottlenecks’ time is not wasted,’’ 180

Bottleneck's types of waste time

January 2, 2018

"How is the time of a bottleneck wasted? One way is 180

for it to be sitting idle during a lunch break. Another is
for it to be processing parts which are already
defective—or which will become defective through a
careless worker or poor process control. A third way
to waste a bottleneck’s time is to make it work on
parts you don’t need.’’

Bottlenecks' type of waste time

January 2, 2018

make the bottlenecks work only on what will 180

contribute to throughput today...
January 2, 2018

other way you increase bottleneck capacity is to take 180

some of the load off the bottlenecks and give it to
non-bottlenecks.’’

January 2, 2018

you gain capacity which enables you to increase 181

throughput.’’

January 2, 2018

"Why are we making the bottlenecks work on 185

inventory that won’t increase throughput?’’

January 2, 2018

to improve our due-date performance, 185

January 2, 2018

we’ve expedited orders on the basis of who’s 185

screamed the loudest,’’

January 2, 2018
late orders should get first priority over the others. 185

January 2, 2018

"Let’s work on the assumption that anything not 186

needing to go through a bottleneck is either waiting in
front of assembly already, or will be by the time the
bottleneck parts arrive.’’

January 2, 2018

The numbers are meaningless unless they are based 233

upon the constraints of the system.

January 4, 2018

activating a resource and utilizing a resource are not 233

synonymous.’’

January 4, 2018

"utilizing’’ a resource means making use of the 233

resource in a way that moves the system toward the
goal.

January 4, 2018
we must not seek to optimize every resource in the 234
system,’’

January 4, 2018

"A system of local optimums is not an optimum 234

system at all;

January 4, 2018

the total time from the moment the material comes 254
into the plant to the minute it goes out the door as
part of a finished product, you can divide that time
into four elements. One of them is setup, the time the
part spends waiting for a resource, while the resource
is preparing itself to work on the part

January 4, 2018

total time from the moment the material comes into 254
the plant to the minute it goes out the door as part of
a finished product, you can divide that time into four
elements.

January 4, 2018

One of them is setup, the time the part spends 254

waiting for a resource, while the resource is preparing
itself to work on the part.

January 4, 2018
Another is process time, which is the amount of time 254
the part spends being modified into a new, more
valuable form.

January 4, 2018

A third element is queue time 255

January 4, 2018

The fourth element is wait time 255

January 4, 2018

the bottlenecks dictate inventory as well as throughpu 255

January 4, 2018

with shorter lead times we can respond faster. 255

January 4, 2018

If we can respond to the market faster, we get an 256

advantage in the marketplace
January 4, 2018

Worker efficiency—whoops, out the window. Optimum 301

batch sizes—there it goes. Releasing work just
because we have the material and the people—that’s
gone as well.

Reviewed Parameters with TOC

January 6, 2018

view production as a means to satisfy sales. 301

January 6, 2018

‘capacity constraint resources,’ 303

capacity constraint resource (CCR) or CCR. A resource that is not a

constraint but will become a constraint unless scheduled carefully.

January 6, 2018

information as those sections of the data which are 305

needed in order to make a decision—

January 6, 2018

Information is the answer to the question asked. 305

January 6, 2018
engineer a sale, 305

January 6, 2018

manage the buffers, 305

January 6, 2018

managing the local improvements. 305

January 6, 2018

local performance. 305

January 6, 2018

Improvement for us is not so much to reduce costs 325

but to increase throughput.’’

January 7, 2018

"The entire bottleneck concept is not geared to 325

decrease operating expense, it’s focused on increasing
throughput.’’
January 7, 2018

The fact that we have bottlenecks and non- 354

bottlenecks is not because we designed the plant very

January 8, 2018

poorly. It’s a must. 354

January 8, 2018

We took more orders, 354

January 8, 2018

they did drastically reduce the amount of spare 355

capacity on the

January 8, 2018

non-bottlenecks, and we didn’t compensate with 355

increased inventory in front of the bottleneck.’’

January 8, 2018