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“The Goal”

November 29, 2018

The Goal introduces the theory of constraints as a management technique with over 7 million copies of The Goal by Eliyahu M. Goldratt and Jeff Cox having been sold since it was first published in 1984. Last year a graphic version was published containing the full essence of the original which is still relevant and which I have been recommending to clients as well as using it in my practice.

The Goal has been written as a novel with people running manufacturing operations as its target audience. However, the concepts can apply to any endeavor where there is multiple handling.

The Goal refers to the goal of a business which is to make more money [given adherence with social concerns and responsibility and being a good “citizen” and neighbor]. The book’s concept is quite simple: Identifying what is blocking the business from achieving its goal of making more money and eliminating it. That block, or bottleneck, is referred to as a constraint which is any factor that prevents a system from achieving a higher level of performance with respect to its goals. The Theory of Constraints (TOC) was developed as a management philosophy directing focus on identifying and then eliminating a system’s constraints.

TOC can, in fact, be applied to any type of organization—for-profit, not-for-profit, small, large, manufacturing, service and government. It can also be applied to an entire factory floor or individual team. Some types of constraints include physical, policy, and paradigm and examples include capacity, resources, capability, rules, regulations, measures, assumptions, and beliefs. In order to succeed, an institution must be able to overcome the potential of a wide array of bottlenecks.

TOC offers tools in three different areas: 1) Thinking processes that provide the tools necessary to identify the core problem or bottleneck and deal with it effectively; 2) Performance measurement allows better management of the constraints by determining the level of efficiency within the system; 3) Planning and control systems (logistics) deal with the completion of each process at the right time to coincide with the organization’s schedule.

The authors also claim that part of the problem is traditional accounting systems that measure cost accumulation versus throughput which they define as the rate at which the system generates money through sales. Businesses typically use cost accounting to make decisions including product mix, introduction and discontinuance, make verses buy, pricing, bidding on an order, transfer pricing, and profit-and cost-center results. The book suggests that different measures are needed to better understand how to use and benefit from the TOC.

There is more to what the authors write about, but if you believe from this brief summary that you would want to learn more about TOC, the I recommend you read the book. I have found that once clients become aware of the TOC, it triggers an aha moment and steps are usually implemented that get results pretty quickly. If you want to discuss this after you read the book, contact me at emendlowitz@withum.com.

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