The Goal

A Process of Ongoing Improvement


Alex Rogo is a harried plant manager working ever more desperately to try improve performance. His factory is rapidly heading for disaster. So is his marriage. He has ninety days to save his plant - or it will be closed by corporate HQ, with hundreds of job losses. It takes a chance meeting with a professor from student days - Jonah - to help him break out of conventional ways of thinking to see what needs to be done. The story of Alex’s fight to save his plant is more than compulsive reading. It contains a serious message for all managers in industry and explains the ideas, which underline the Theory of Constraints (TOC), developed by Eli Goldratt.



Big Ideas

Understand The Goal

  • The goal is to make money
  • You can only measure progress in terms progress to the goal
  • You can’t measure each individual piece separately
  • Any action that moves you towards the goal is productive, and any action that moves you away from the goal is unproductive.

How to measure progress

You can measure the goal at the organization level as Net Profit, ROI, Cash Flow - You have to translate that to metrics for your organization.

Not sure what this is for tech

(Features Delivered * Percent Success) == Potential net profit increase (Features Delivered Per Quarter) == ROI

Inventory is like Features yet to be worked on Operational Expense is like Features Delivered Per Engineer How can you measure success towards the goal as an organization (Net Profit, ROI, Cash Flow) and how you can translate that into metrics for inside the plant IE the folks who build the stuff.

Statistical Fluctuations and Dependent Events

Small SF between DE can be amplified over a number of events to bigger numbers then you expect.


“A bottleneck is any resource whose capacity is equal to or less than the demand placed upon it. And a non-bottleneck is any resource whose capacity is greater than the demand placed on it. ’”

If you aren’t increasing capacity at the bottleneck you aren’t increasing through put of the system

Continuous Improvement

Once you identify the bottlenecks and the team knows the goal people can be trusted to work and focus independently to improve the capacity of the bottlenecks and therefore the overall through put.

Understanding the Value Chain

  • How to think about time a part spends in the factory
    • Setup: time it spends waiting for a resource
    • Process Time: the it spends being modified into something new
    • queue time: The time it spends waiting for a resource to work on it
    • Wait time: For another resource to be to move to the next step

Chapter Notes

Chapter 1

  • Intros
  • There are problems at the plant
  • Management
    • Micro managing the process
      • Peach shows up an demands an order be prioritized
    • Workers treat the asks as something they should do because maybe management knows more then they do
      • Plant manager re-enforcing what the manager came to do
  • The plan is in efficient
    • Not sure what this means in the context yet
  • Orders are Late
  • Plant is loosing money
  • Plant will come in 3 months if things don’t get better
  • Companies is loosing money on the division

Chapter 2


Problems at work are starting to effect his home life.

Goes back to work, and by the skin of their teeth they get the order out.

It took heroics. They spent a lot of extra money, they had to pull everyone in the plant on to the process, and shipped eventually.

Every is glad they got it out the door, but why do they have to do it that way. Why does everything require expediting.

The manager thinks about the problem.

He’s got everything going for him, but he still can’t seem to reduce costs to compete. He realizes that there is a lot of work-in-progress everywhere, but thinks that par for the course.

Not sure what to do.


  • Problems mount
  • The problems at work are stressing out Managers home life
  • Town the plant is in seems depressed economically
  • They are holding people let to fill and order this will be a big expense
  • They bring everyone from the extra departments to this part
  • Manager doesn’t want to do heroics anymore
    • What does it take to get to this point?
    • Some people seem to live for the crunch time.
  • The company doesn’t seem to be doing well in general
  • Can’t compete with Japanese manufacturing
  • Manager breaks down the problem
    • Something is wrong doesn’t know what
    • They have good tech
      • N/C machine
      • Robots
      • Computer Systems
    • Good People
      • could use more though
    • Good relationship with Uniion
    • There’s a market for the goods they are making
      • Because there are competitors
    • He’s cut costs, has good output quality
    • His “efficiencies” are pretty good
    • They start things on time But there is a lot of WIP
      • everyone is in the same boat as well

Chapter 3

We learn some bad news. The division isn’t going well. Q1 has really bad results. And the whole division might be for sale by the end of the year. This makes the main character worry for his job.

  • Starts with manager having to go to an important but mysterious meeting
  • The division isn’t doing well, so the boss is going to introduce a new plan to turn everything around
  • Find out that the whole division is going to be on sale if they can’t turn things around.
  • Turns out the quarter was really bad
  • They need to increase productivity
  • It’s hard to focus when you feel like your job is on the line

Chapter 4

Big Idea

You can’t measure productivity be measuring the efficiency of each individual part. You must measure the throughput of the overall process.

The way that you measure success is if you have made progress on a goal.

  • Having a discussion with an old teacher
  • Jonah is impressed with the robots
  • Teacher isn’t impressed. He’s pretty sure the robots aren’t actually impacting productivity
    • “Did you ship even one more product per day because of a robot?”
    • “Did you’re inventories go down”
  • “But if your inventories haven’t gone down . . . and your employee expense was not reduced… and if your company isn’t selling more products—which obviously it can’t, if you’re not shipping more of them—then you can’t tell me these robots increased your plant’s productivity.’’
  • The teacher is able to pinpoint his problems by talking about productivity
  • The business seems to be measuring everything other then output
    • Instead of measuring for the overall output
    • It measure the efficiency of each individual component of work
    • Even though all the individual spots are effiecnet the over all productivity isn’t increased
    • On top of that there is a lot of work in progress between work centers

“Alex, I have come to the conclusion that 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. Do you follow me?’’

  • The professor is being impossibly standoffish, and won’t give out answers. One of the most annoying tools the books employs.
    • But, he’s trying to him to understand the over all goal

Chapter 5

Any action that moves you towards the goal is productive, and any action that moves you away from the goal is unproductive.

  • After remembering his meeting with the professor he realizes that the meeting he is in may not be the most effective at fixing his problem.
  • He decided his energies are better spent else where.
  • Trying to figure out what the goal is
    • Is it turning raw materials into finished goods at the lowest cost?
      • They buy millions in raw materials that just sit their
    • Is it to employ people?
      • They are the most important asset
    • Is it quality?
    • Is it technology?
    • Is it sales?
  • It’s money!
    • “The goal of a manufacturing organization is to make money”
  • All of the other concerns are important to running a successful company, but making money is the goal.

“If the goal is to make money, then (putting it in terms Jonah might have used), an action that moves us toward making money is productive. And an action that takes away from making money is non-productive.”

Chapter 6

How can you measure success towards the goal as an organization (Net Profit, ROI, Cash Flow) and how you can translate that into metrics for inside the plant IE the folks who build the stuff.

  • Starts to get upset about folks “not working”
    • Doesn’t know if making people work and making money are the same thing
  • How can you tell if anything is making progress towards the goal of making money?
  • How can you tell if you are making money
    • Net Profit
      • How much money after expenses
    • ROI
      • Money made relative to money invested
    • Cash Flow
      • If you have it you are good
      • If you don’t have it nothing else matters
  • He talks with accountant

“To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow.”

  • He talks with is wife
  • He visits with night manager
    • He’s thinking about the three measures, wants to hold the night manager accountable to them
    • He realizes that the night manager is thinking about
      • Parts per hour
      • Hours Worked
      • Orders Filled
    • He’s not sure how to connect the daily production to the measures of success
  • He gets pulled into an all day meeting with his boss even though he wants to talk with the professor
  • Get’s to talk with Jonah
  • You can restate the goal, in ways where it still means the same thing
  • Just like you can use the terms Net Profit, ROI, and Cash Flow to restate making money as the goal
  • You can use throughput, inventory, operational expense to restate for the floor
  • Throughput the rate at which the system generates money through sales
  • Inventory is all the money that the system has invested in purchasing things which it intends to sale
  • Operational Expense is all the money the system spends in order to turn inventory into throughput

Chapter 9

They investigate the performance of the robots. According to the new metrics of success, and it doesn’t appear that the robots help at all.

  • Starts investigating the impact of robots on the plant
  • They didn’t increase throughput, or reduce operational costs, but they did cause inventory to go up
  • They did that because the robots were at 30% effency, which looks bad, so they increased the materials to the robots, but that left them with a surplus in parts

Chapter 10

Robots were a huge expense, but they didn’t actually improve anything. The Robots feel emblematic of many decision tech orgs make. Like we are going to go “serverless”, or move everything to kubernetes.

  • Alex explains the goal to some plant personal
  • They talk about employee time
    • If you just take it as an expense, and ensure that your throughput is up, and inventory is low and you are making money then you are good.
  • They talk about how everything can be
  • They have an inkling of what to do next, but they’re unsure

Chapter 11

  • Tracks down Jonah in NY
  • They agree to talk about the basics
  • Talk about the value of measuring efficiency vs inefficiency
  • When you try to keep everyone busy all the time, for busy sake you end up creating a lot of extra stuff you don’t need
  • When you attempt to run everything at 100% and align with market demands you trim operational expense without improving throughput and usually increasing inventory
  • Jonah talks about the interaction between depdent events and statistical fluctuations
  • There are things you can know. Seating capacity of a resteraunt. Then things that are to know exactly like how long it will take to cook a plate of food. That’s statistical fluations
  • Depdent events are this thing must be done before that thing
  • Somehow statistical fluctuations interact with depdent events.

Chapter 12

  • Alex is pushing it at home.

Chapter 13

Big Idea: He starts to see how the scouts in a line are like the steps in a manufacturing process. And that they are like dependent events. He see’s that the statistical fluctionations between the boys while walking are like inventory flowing through the steps in a manufacturing process. He see’s that the statistical flections accumulate between a set of dependent events. Meaning the whole process takes longer, but there is also a lot effort and inventory tied up in the process.

  • It’s saturday, Alex has forgotten he was on duty for a boyscout hike
  • Horrible parents leave him to somehow take a group of boys counts on an over night hike by him self
    • Who are these garbage people!
  • He starts estimating the through put of the hike with him at the front
    • 2 miles per hour, at 10 mile hike will take 5 hours
    • But, the kids keep spreading apart behind him and they might get lost
  • So, he goes to the back
    • As he goes to the back he meets “Herbie”, the “fat kid”
      • The books is kind of showing it’s age at this point
  • He starts comparing the line of boy scouts to a manufacturing process
    • He’s trying to understand the interaction between dependent events and statistical fluctuations
  • They get separated from the scouts at the front because of a slower child in the middle
  • To catch up, he gets them to try and run, but the slower kid can’t keep running
  • They catch up, and restart but the line spreads out again
  • He notices though that even though each kid is walking at a moderate pace, the distance between each child is variable and increases slightly over time, and the distances amplify the further back you go
  • The distance in the line grows because overtime the statistical accumulations accumulate, and they can’t “catch up” because the each individual boy can’t speed ahead of others. They are dependent events.

Chapter 14

  • He’s eating a sandwich. (Where did that come from, he wasn’t suppose to be here in the first place! Is he stealing food from a kid.)
  • He builds a model with matchsticks and dice
  • Turns it into a game
  • Using the matches and the dice he demonstrates in a simple way that statistical fluctionations and dependent events have amplified effects

Chapter 15

  • He continues to think about the line of scouts
  • He notices that they self organized so the fastest was first, and the slowest was last
  • This meant the line length was growing like crazy
  • He realizes that if he puts the slowest thing first it will smooth out the throughput
  • Also, with the surplus time they take a look at why the slowest is so slow and they help them out by distributing the load

Chapter 16

  • Alex comes home to find an empty house and his wife is gone
  • This whole ordeal has really impacted his family

Chapter 17

  • As soon as he gets to the office, there is an order that isn’t done
  • He finds out a new role was created in the division and all plant managers report on a dotted line to him
  • He faces a lot of skepticism about what he learned with the scouts in the woods
  • There is an expidited order that offers a realistic test of the relationship between statistical fluctuations and dependent events
  • Alex is able to demonstrate that the statistical fluctuations in one department by a small amount effect the ability to schedule a job

Chapter 18

  • Family still impacted - this is stressful
  • The team at the plant assembles figure out how to do with SF and DE
  • They call Jonah again
  • Jonah explains bottlenecks
    • “A bottleneck is any resource whose capacity is equal to or less than the demand placed upon it. And a non-bottleneck is any resource whose capacity is greater than the demand placed on it. ’’
  • Jonah explains how herbie, the slow scout, was the bottleneck
  • They start trying to find the bottleneck
  • The data they have isn’t great though
    • Out of date, etc
  • Bob who is the operation manager thinks he has a sense for where the bottlenecks are
    • His 20 years experience give him a leg up
  • They think they can also find them based on which work center has the longest line of inventory to go into it
  • They find a machine that might be the bottlneck
    • Lots of parts waiting to go through it
  • The machine replaced a group of machines that in aggregate took longer to produce, but there were more machines
  • It takes 6 months to train folks on the machine as well
  • Another possible bottleneck is the heat treat dept
    • Always behind
    • running half batches, or small batches
  • They can’t run the bottle necks first in an industrial capacity unlike the hike

Chapter 19

Big Ideas: They investigate the bottlenecks and realize that if they aren’t working on increasing the capacity of the bottlenecks they are loosing out on significant throughput.

The identify a few ways to improve bottlenecks. Increasing capacity if at all possible by doubling up. Making sure that you QC things before the bottleneck so that you are only working on good parts. Finally, ensuring that the bottlenecks are only working on parts for sale.

  • Family still impacts
  • Alex got Jonah to come to town
  • Alex gives him background on the work they have done so far
  • Jonah explains that you have to ensure that you run the bottlenecks at capacity to meet demand
  • When they approach the ncx-10 its not working
    • Jonah explains that if this is a bottle neck it always needs to be working
    • The union folks went on break
      • He suggests you talk to the union they want things to go well as well
      • They will be reasonable
  • Looking at heat treat
    • Jonah asks does this all need heat treat?
    • Finds out their are parts going through heat treat that aren’t apart of orders
  • They checkout quality control
    • They find that parts that went through heat treat need to go back
  • They start talking about doing QC before heat treat
  • When you loose time on a bottleneck you loose throughput on the whole plant

Chapter 20

They start to put bottleneck optimizations into place

  • They review their disscsion with Jonah
  • They Decide to Rosen the change
  • Changes
    • They move QC before bottleneck
    • Talk to unions about scheduling lunch breaks during down time
    • The decide to prioritize late orders, including what goes through the bottleneck
  • They all agree that this is their top priority

Chapter 21

They continue to make bottle neck optimizations. They start to make some big changes around the plant.

  • reviewing overdue orders
  • About 90% of overdue orders have parts that go through the backlog
  • The work with the foreman of the bottlenecks to make sure everyone understands how important it is that they only work on the overdue orders
  • Alex talks to union president to explain the new lunch rules.
  • They run into trouble keeping one of the bottlenecks running
    • They track down why, and its non-bottleneck running non priority parts to “stay busy”
  • They decide to create a system so that everyone can no what are the important parts to run first
  • They also decide to have short meetings with more people around the plants in order to explain whats going on with priortizaiton
  • Alex hears back from the Union it’s okay to go ahead with the new lunch and coffee break rules

Chapter 22

  • A week has passed
  • They went from being 58 days late to 44 days late
  • The tagging and prioritization is working for bottlenecks
  • Putting QC in front of the bottlenecks helped them catch about 5% bad parts
  • Only taking lunch of downtime at bottlenecks has helped
  • Alex still isn’t happy with progress. “We were limping, now we are walking, but we should be jogging”
  • Alex wants to look into more of Jonahs suggestions
  • QC helps to further increase awareness of parts that have gone through bottle neck
  • Bob finds an old antique machine that can help with the NCX-10 backlog

Chapter 23

They begin to find lots of ways to improve the system. Lots of little ways. This the process of continuous improvement.

  • Ted, guy who runs heat treats, is bothered that Ralph, data guy, is asking Ted to keep detailed records
    • Ted doesn’t know why he wants the data, and he’s busy
    • Alex talks to Ralph
      • Ralph suggestss they don’t have great data on the bottleneck
      • Parts aren’t making it through as fast as they should
      • He went to investigate
        • Parts aren’t being unloaded because workers are doing something else
    • Alex orders Bob to make sure that there are people next to the furnaces at all times
      • Also the ncx machine
  • They are running into a staffing issue by keeping posted at the bottlnecks
    • They decide to rearrange people
    • They are worried about damaging the flow before the bottlenecks
  • They rearrange everyone
    • Alex make’s it clear to everyone that if they can improve through put on the system there will be a reward
  • A guy on third shift comes up with a way to save a couple hours a day on heat treat
  • They find that they can slow down processing in some places and that means it won’t require heat treating

Chapter 24

  • On Friday
    • They shipped more orders this month then ever before
    • They’ve decreased work in progress inventory by 12%
    • Alex gets a call from Bill Peach about doing a good job
  • On monday, Alex gets in an Stacey has found more bottlenecks
  • By increasing throughput on the bottlenecks they’ve increased pressure on other parts of the system
  • They talk to Jonah, he’s gonna come down

Chapter 25

  • Jonah is there
  • They talk about the “new bottlnecks”
  • They go an investigate to see if it’s actually a bottleneck
  • They find piles of inventory in front of the bottlenecks
  • When work stations in front of the bottleneck were idle they would release more inventory into the system regardless of WIP on the bottlenecks
  • This meant that tons of inventory would stack up in front of the bottleneck
  • You can only run inventory though the system at the rate of the bottleneck

Chapter 26

  • Alex is trying to figure out how to limit inventory in process
  • Asks his kids to come up with some ideas
  • They come up with a drummer theory and. Rope theory.
  • Rope would be like an assembly line
  • The folks at work figure out a way to release inventory so as to not overwhelm the system
  • They start to wonder what you do with idle people

Chapter 27

  • Alex is listening to a division report his plant was the only one to make money
  • Alex has to fudge the numbers in order to fit into the existing reporting but everything is profitable
  • Bill peach demands another good month with 15% improvement to the bottom line
  • They may not have enough orders at this point. They need more business.

Chapter 28

  • Jonah laughs off the thought of getting shut down if the plant is making money
  • Jonah suggests that they cut their batch sizes in half
  • Cutting batch sizes in half would reduce inventory and money tied up in the system
  • How to think about time a part spends in the factory
    • Setup: time it spends waiting for a resource
    • Process Time: the it spends being modified into something new
    • queue time: The time it spends waiting for a resource to work on it
    • Wait time: For another resource to be to move to the next step
  • Setup and process are pretty small portion of the total time
  • Queue and Wait time are often large part
  • The theory is if you reduce batch size you reduce what and queue time
  • It reduces lead time
  • It’s okay for more setups at non-bottlenecks because they aren’t “wasting time”
  • They decide to cut batch sizes
  • They also decide to go to marketing an “promise” on deliver earlier
  • They think they might be able to cut delivered from 6-8 weeks to 4 weeks
  • Alex talks to marketing
    • Shows the data
    • Asks if lead times would elicit customer response
    • It will
  • Marketing is interested they decide to do it

Chapter 29

  • Things are going well
    • Contracts are being won by marketing
    • Efficiencies have gone up as well
      • Even after they released materials slower
      • and cut batch sizes
    • Inventories are at their lowest ever in the plant
  • Then the bad news
    • The cost of products looks like it went up
    • Because it looks like folks are doing more setups per product it looks like its more expensive
  • They decide to change the accounting a little bit
    • But, they have to lie
  • Marketing has a deal that requires moving really fast
    • But, it’ll be close
    • they can gain market share if they make this sale
  • They decide to see if they can do it
    • They try and cut batch size again
    • They reschedule orders to be on time instead of early
  • They decide to take the order under certain conditions
    • They will ship 250 a week for 4 weeks
    • The customer goes for it

Chapter 30

  • Order is going well
  • They beat the months expectation of 15% by 2% for a total of 17%
  • Things keep going well over all the plant
  • Congratulations from the boss
  • Performance review time
  • The division efficiency manager was in the warehouse
  • HQ has started asking questions about whats going on with the plant
  • Audit team comes to the plant
  • This brings there win down to 12.8%
  • The customer of the big order came to visit
    • But everything went fine
  • The customer is very excited wants to do a new order for a whole year

Chapter 31

  • Shows up for review but Bill Peach isn’t their
  • Performance review goes badly
  • Person doesn’t understand the goal
  • At end of the day Alex gets promoted