Strategy Essay - "THE GOAL" by E.M. Goldratt

What is The Goal? The book claims to be many things. It claims to be about science and education, about progress, about global principles of manufacturing and some of you might say that it is about a love story (for those of you that think so, please let me know your names so I can preassign your course grades). For me the book is

(a) a fascinating description of an operations process (for those of you without an operations background, an excellent opportunity to get an introduction to manufacturing environments),

(b) an excellent example of how supply chain management should be viewed: as a business function which can be understood with the use of a business language and not with the use of obscure technical terminology, and

(c) a powerful demonstration that the important, and in most cases only, prerequisite for becoming an operations manager is common sense and intellectual attraction to environments that exhibit complexity and variability.

After you finish reading the book, answer the following questions: This is an individual assignment. It should not take more than four (at most five) double-spaced page(s) to answer the questions. Be clear and concise. Essays should be in question-and-answer format (not one long essay).

1. 5 FUNCTIONS OF SCM

Within the factory setting, Alex has to deal with all parts of the supply chain. Give an example of challenges or decisions they had to face regarding...

a. Buy: Dealing with suppliers (e.g. negotiating prices, delivery terms, problems stemming from quality issues, etc)

b. Make: Production schedules, job order, managing the capacity of a resource, quality, etc.

c. Move: Shipment schedules, dealing with delivery options (modes, batch size, or frequency) on parts or finished goods, etc.

d. Store: Inventory, inventory, inventory! Finished goods, WIP, raw materials...

e. Sell: Processing, influencing, or anticipating demand. Pricing can fall in here, too.

For each example site the chapter and approximate pages where the situation is mentioned; what the challenge was, how it was handled, and how it relates to something we discussed in class.

2. SLACK

a. The system has a lot of slack. Give examples (with approximate chapter references) of when and how the system had excess, underutilized, non-value-adding, or idle resources in the forms of INVENTORY/MATERIALS, LABOR (PEOPLE), CAPACITY (MACHINES), and SPACE.

b. We know that slack is part of the system usually due to several causes. Discuss the drivers of slack in the context of the book: Quantity Uncertainty (input, output, demand), Economies of Scale, Time Delays (Little's Law (Leadtime) and/or Trumpet of Doom (forecasting)), Lumpy Supply and Demand (Seasonality of Supply and Demand). How were each of these driving decisions and what did they do to address them?

3. Dependent Events and Statistical Fluctuations

a. Alex plays a game with the campers in Ch 14 and replicates something similar in the plant in Ch 17.

In this game, he shows that even if the capacities are perfectly balanced (they all have the exact same average capacity), having stages that depend on each other (dependent events) can be very limiting if there are statistical fluctuations at each stage. Explain this problem/concept in your own words. Use an example OTHER THAN the matchstick game or the production plant to describe a situation when the flow of a process is limited by a statistical fluctuation through a series of dependent events.

b. One way to address this problem is to add flexibility-or SLACK-to the system. How would that apply to your example? Is this flexibility more important at the beginning or end of the system?

c. A frequently mentioned principle in the book is: "Do not focus on balancing capacities, focus on synchronizing the flow." Explain how this relates to your example.

4. Give me the definition of a bottleneck operation as used in the book. Develop your own simple example to demonstrate it to me. This should be your OWN example, not Herbie, a hike, or a machine in a production setting. Describe two or three different ways to discover the bottleneck of a process.

5. When Alex put Herbie at the front of line,,that was equivalent to making all of the other machines (hikers) work only as needed based on the speed of the bottleneck rather than working as hard/fast as they were able. It did not provide any benefit to have the other machines (hikers) working faster than the bottleneck because the process was still only as good as its weakest/slowest machine (hiker) in accomplishing a finished good (task). This is an example of the principle: "Resources must be utilized, not simply activated". A second principle was also shown: When Alex and the hikers took a bunch of weight out of Herbie's pack, what was that equivalent to in the production world? To which principle from the book is that most related?

6. Provide an explanation of the pitfalls, as discussed in The Goal, of using cost accounting data for manufacturing decision-making.

7. In Chapter 28 of the book it is suggested that it makes sense to cut the batch sizes in half at the non-bottleneck machines. Explain the value of this.

8. Why does their cost measurement system indicate that their cost per part goes up when they cut their batch sizes by half at the non-bottleneck operations (see Chapter 29)? Should they cut the batch sizes?

9. In Chapter 21, in an effort to improve the throughput of the system, they introduced a priority scheduling system using "red and green tags". What is the rationale behind such an action? Explain. In Chapter 25, they discovered some problems with the use of such a system. What was the cause of the problem?

Explain the logic of the remedial action required to address it. How does this relate to the scheduling concepts from our chapter 9 material (SPT, WSPT, LS, FIFO, etc)

10. What other lessons or insights stood out to you?