Corporate Ladder in The Goal by Eliyahu Goldratt - Book Report/Review Example

? Book Review: The Goal by Eliyahu Goldratt al affiliation Book Review: The Goal by Eliyahu Goldratt The goal IntroductionThe book focuses on a character that is an upwardly mobile executive going by the name of Alex Rogo. The character portrays the images of the character of many business administrators; the character initially works as a project engineer, as a result of the exceptional performance at the work place, Alex climbs the corporate ladder to become the division manager. The factory Alex works for, according to Goldratt & Cox (2004), assembles machinery to be put to use by other factories as components of the final products. The factory hires competent and well qualified staff to ensure that the products they produce are favorable to the firms that use them. As the division manager, Alex ensures that the products are of superior quality and that the prices that each product has favors the customers. This is through reduction of costs in the various operational areas around the company. The character portrayal in the book is fiction since at the beginning the firm is performing poorly as every product is behind schedule and the factory machinery looks dire. Alex turns around the company through the help of some personal acquaintance (Goldratt & Cox, 2004). The book sets out to show the aspects in modern day production companies through the main character, Alex the division manager and Jonah the acquaintance who is also a physicist and advisor to Alex on company affairs. Through their cooperation, the reading brings out the key goals of a company including the manufacture of products. This is when Jonah insists on making sufficient and quality products for their customers. The goal of a company also includes increasing the market share, producing efficiently, hiring workers as seen through the character of Alex who as the division manager recruits new and efficient workers and this provides employment to people which is a goal of a company. The book by Goldratt & Cox (2004) also explores other goals of a company including to provide support to the neighborhood, the national economy and the overall state, this also includes increasing the value of stockholders. Through these goals, comes the core goal of a company portrayed in the book, which is to, make money at present and the future by increasing the net profit while still increasing the investment returns and the rate of cash flow. The book helps readers to understand the financial measures that a company should take the initiative to introduce so as to show description of the goal of the company (Goldratt & Cox, 2004). The book considers the net profit whereby, from the goal of a company which is increasing the net profit, Alex takes initiative through the advice of Jonah to increase the throughput which is the rate of sales and be able to reduce the stock and operational expenses which are the operational measurements. This in turn, helps in increasing the net profit of the organization since the sum of cumulative income and initial sales is greater than the cumulative costs. On a rather positive note, the book depicts the aspect of productivity through the company which Alex is the manager. Before Alex took the management position in the company the productivity level is low but through the initiatives of both Alex and the production team and advice from Jonah, the company picks up by producing quality products for their customers. Alex focuses on bringing an old machine which did not cost anything to acquire and brings it to increase the capacity that the current machine produces, the factor of introducing an old machine to a non productive machine brings out the idea of bottlenecks in a company. According to Goldratt & Cox (2004) a bottleneck is any resource whose capacity is less than or is equal to demand placed upon the resource. Identifying the bottleneck is critical for any company, Alex as the division manager identifies the processes that take place at the heat treat as another bottleneck which leads to massive delays and the process causes some products to undergo heat treatment for many times, making the products become initially soft and then hardens again. To avoid pressure from the owners of the company, Alex comes up with ways of reducing the identified bottlenecks which are delaying the production process of the company. From the reading, there is a need to compensate for the old machine, this makes Alex brings in an old machine to assist the available machine in the production process. This helps to accelerate the production process where the machine which gets introduced, in the company acts as a backup in case the current machine breaks down. The two machines also run concurrently and hence speeding up the production process. To solve the bottlenecks in any company, according to Goldratt & Cox (2004), the management should engage in the identification of the bottlenecks and then come up with methods of reducing or totally eliminating the bottleneck as seen in the book. Consequently, the author explains that if the capacity of bottlenecks is equal to demand and then there is a drop in demand, the cost escalates leading to a financial loss. A company, which wishes to, prosper has to focus on balancing capacity and flow. The book under scrutiny brings out the aspect of balancing the capacity where Jonah reveals to Alex that to be able to balance the capacity, then the company has to balance on the market demand. On a rather contradictory note, if a company balances the capacity without balancing the flow, it is evident from the book that failure is to happen. This is through the advice of Jonah that the closer the company moves towards capacity balancing, the higher probability of becoming bankrupt. A balanced capacity and flow is necessary because, from the book it is clear that when capacity gets trimmed to the demands in the market, the throughput deteriorates and the inventory goes up. If capacity balancing continues, a company leaves behind a bounty of inventory with no potential market for the stock. To balance capacity and balance flow, the management according to Goldratt & Cox (2004) does not have to trim the capacity to demand. This is because the demand drops and the carrying costs sky rockets and consequently there is no stock flow in and out of the company. This concept as seen in the study work of Goldratt & Cox (2004) explains the failure of many modern companies as a result of poor methods of establishing a seamless balancing capacity and balancing flow. The book sets to elaborate the phenomena of dependent events and statistical fluctuations. To be able to understand the two concepts, there is a definition of the two, where the dependent events are a series of occurrences that take place prior to the beginning of another event, while statistical fluctuations result from predictive information, which has no, precise determination criteria. According to Goldratt & Cox (2004) there are fluctuations that arise as a result of the two where the fluctuations affects the predictions on market demand estimates and the attempts by the company to measure the level of productivity. The author brings out the two aspects by giving an illustration of a hiker, where the hiker who lags behind, is akin to a set of events which are dependent, subject matter to statistical fluctuations. The fluctuations as explained in the book, are not able to average out, rather, they accumulate as the influence of dependent events confines the opportunities for fluctuation gain. Theory of Constraints principles This theory explains that the organizational processes are vulnerable because the weakest personnel in the entity or the weakest aspect in the organization can cause damage and cause adverse effect on the outcome. TOC problem solving First, there is the identification of the system’s constraints preventing the party from obtaining the set goal in a unit time. This is by obtaining the constraint within the system, and then the management sets up a path way for the solution as the management knows the main problems. Secondly, decisions on the procedure to follow in exploiting the constraints of the system then get considered. In this case, the executive to the organization comes up with ideas on how to solve the identified constraints. The executive should then align the whole organization so as to support the decision that the executive has made. In this problem solving procedure, the executive subordinates all the other entities to the above decision. The executive eventually elevates the constraint of the organization or system. The executive who is the principal decision maker in an entity then makes more changes that are necessary in breaking the constraints identified earlier. This procedure acts as the final step unless something arises that may be problematic and requires management to go to the next step so as to eliminate the problem. Finally, the panel involved in solving the stipulated problem, analyses the steps in solving the problem and in case a constraint get broken, the whole procedure gets initiated starting from the first step to avoid system’s inertia as seen in the book by Goldratt & Cox (2004). The author goes ahead to explain the role of batch sizes in scheduling whereby, Jonah explains that when the load balancing takes place so as to meet the market demands for the products which are in excess, the batch sizes then undergo reduction so as to reduce the total commitment on capital used in the production process. This consequently reduces the work-in-progress time. According to Goldratt & Cox (2004) reducing the batch sizes of products increases the speed of obtaining the throughput. It also increases the rate of turn-around on orders of the customers during scheduling. This aspect receives much keenness since it plays a considerable role, in ensuring that the market is open to ensure capacity flow since shorter lead time causes better response in the market demands. The author explains that to be able to utilize all the resources it is vital for the management to come up with better activation procedures, so as to reduce the bottlenecks and consequently reduce the lead time. The activation process according to Goldratt & Cox (2004) entails the consumption of all the remaining capacity in the organization without giving a provision for excess capacity, which is necessary, to absorb the production’s statistical fluctuations. As a result of proper activation and utilization of resources, the author explains that, for the success of an organization, it is a necessity for the management of the organization to know of what changes the organization requires, what the organization will look like after the changes and how to implement the changes. In response to the discussion questions, it is clear that the management of an organization should be able to construct and check the solutions that help solve the negative effects in an organization without creating new problems. According to Goldratt & Cox (2004) it is crucial to cause changes smoothly without causing resistance. References Goldratt, E. M., & Cox, J. (2004). The goal: A process of ongoing improvement. Aldershot: Gower. Read More