I’ve never before had a business book that kept me turning pages like The Goal: A Process of Ongoing Improvement. Someone on one of the blogs I read suggested this so I requested it from the local library. When the 384-page paperback showed up I groaned – I do not usually get through nonfiction of this size. This is a business novel, which teaches its business principles through a story, so that helped a lot. I enjoyed both the story and was thrilled with the subject matter so much it really kept me moving till I got to the end.
I recognized many of the principles it teaches being related to Lean manufacturing, but didn’t realize right away that this book was written a long time before Lean hit mainstream. For some reason that gives it more credibility in my mind.
The book is one man’s journey to debunk common manufacturing theory errors. He has the help of a “guru” type character. Of course every book where the protagonist has a guru, it’s important that the guru be scarce. You’ll find this frequently in fantasy books – the main character has a guide, but that guide suddenly disappears for long periods of time, leaving the protagonist to struggle and often experience failure. Consider Gandalf in any story he’s in, from The Hobbit through The Return of the King. That guy is disappearing (or dying, or having his staff broken) at the most inconvenient times! Leaving poor little hobbits and dwarves to fend for themselves, struggling (and learning and growing) in a cruel world.
Getting back to the book, here are some basic principles I found fun to ponder.
The success of a manufacturing plant can be improved by working on three values. In order of importance they are:
- Increasing throughput to sales.
- Decreasing inventory
- Decreasing operating expense.
To continually over time make changes in a manufacturing plant that move these numbers in these directions is to become more successful. In the book, the real value is in increasing throughput. The book purposely deemphasizes operating expenses.
- Throughput is limited by the bottlenecks of the production system. The bottlenecks must be identified.
- Trying to optimize anything besides the bottlenecks is a waste of time: it will not improve throughput.
- Keep the bottleneck resources running! An hour lost for a bottleneck resource means an hour lost all the way up and down the system.
The book illustrates why throughput is limited by the bottlenecks by including a section about a boy scout troop hiking single-file for six miles.
- The rate at which the last person of the troop travels the trail is throughput.
- The amount of space between the first and last scouts is inventory.
- The amount of effort each boy uses is operating expense.
One of the boys is a “bottleneck” because he’s a bit out of shape. When the bottleneck is in the middle of the single-file line, bad things happen. The faster folks up front get way ahead, representing high inventory. The folks behind him can’t go any faster than the bottleneck. Throughput of the entire system is constrained to the bottleneck, even when the other resources have excess capacity. Even the scouts up front, way ahead, aren’t helping matters because the product isn’t done until the last boy arrives at the camp. All they are doing is increasing inventory (waste) by always increasing the space between the first and last people.
The main character puts the bottleneck up front, and demands that everyone stay in line. Inventory at this point goes way down (good!) but throughput is still unchanged – they’re still moving along at the bottleneck’s pace. The boys complain about the slow-poke up front.
Then a very interesting thing happens. The protagonist gets everyone thinking about constructive ways to make the bottleneck faster. Before long they remove his backpack from him and share it among everyone who wants to go faster (they have excess capacity). Now the whole line speeds up:
- Throughput it up! Everyone is moving faster.
- Inventory is down! Everyone is still together.
- Operating expense is down! The brisk yet steady pace is efficient for everyone.
The leadership team at the manufacturing plant applies these, and other principles, to their plant to great success. Here’s how they end up summarizing what they’ve done:
- Identify the system’s constraints (bottlenecks).
- Decide how to exploit the system’s constraints (focus everything on maximizing utilization on the constraint: minimize downtime, do a QA check on parts before they go through the bottleneck, etc.).
- Subordinate everything else to the above decision (don’t try to maximize non-bottleneck resources; make them work in a way that supports the bottleneck. The idea of a “cadence” in a production line is in line with this).
- Elevate the system’s constraints (try to improve the raw capacity of the bottlenecks, e.g., purchase more equipment or subcontract it out).
- Warning: if in this process a constraint is broken, go back to step 1, but do not allow inertia to cause a system’s constraint. (I actually don’t know what this means.)
The book concludes with a generalization of management. The hypothesis is that good management is properly figuring out (1) what to change, (2) what to change it to, and (3) how to change it. I think those might be clarifying steps to follow when one gets bogged down in a management situation.