The Goal: A Process of Ongoing Improvement Book Summary, by Eliyahu M. Goldratt

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Alex manages a factory for UniCo that is in financial distress. One day, his boss Bill Peach comes to the plant and tells him to ship an order by that night or else he’ll shut it down. Alex knows they can’t keep up this pace, but if he doesn’t do so then his wife will be unhappy with him because she wants to go out with him.

Alex is at a meeting with his employees, and he thinks that they don’t know how to manage the plant. He remembers advice from Jonah two weeks ago when they ran into each other at an airport. Alex had mentioned problems in the plant, but Jonah was able to identify exactly what those problems were by just listening for a few minutes. Jonah advised Alex that any business’s goal should be making money, so he could measure productivity based on whether it helps make more money. Lou agrees with this idea and says that if you want to measure something like this, you need specific metrics for it.

Alex calls Jonah and explains the problem he’s having with Bob, Lou, and Stacey. They’re concerned that the robots are creating more inventory than they’re generating in throughput. Alex decides to fly to New York City to meet with Jonah for advice on how to solve this problem. However, Julie is angry at him because he didn’t tell her about his plans in advance. When he arrives at Jonah’s office, Jonah tells him that a plant where everyone is always busy isn’t efficient or effective because it can be ruined by statistical fluctuations in production output. He doesn’t understand this either but has an important meeting so leaves without explaining further.

When Alex gets home, he and Julie fight about how little time he spends with her. He promises to spend the entire weekend with her, but on Saturday he realizes that he promised to go with his son Dave on an overnight Boy Scout hike. On the hike, Alex figures out that hikers are a set of dependent events like stages in a manufacturing system, which causes compounding delays for everyone behind them in line. However, by placing slowest kids at the front and fastest kids at the back of the line can mitigate this problem.

Alex is excited about what he has learned and believes that he can put it into practice at the plant. However, when Alex and Dave get home from their hike, Julie has left him. He asks his mother to move in and help take care of the kids while he deals with work and figures out where Julie went. Meanwhile, Alex observes the same compounding delays due to statistical fluctuations in the plant even when each machine or person is individually efficient. Alex realizes that they need to optimize their entire manufacturing system rather than focus on individual efficiencies. When Alex reports this to Jonah, Jonah tells him his next step is identify bottlenecks within his plant since these slow down the entire manufacturing system. They realize that there are two bottleneck machines which cannot be sped up but through which most of parts they make must go. Jonah advises them that if they can increase capacity of those bottlenecks then they will have increased capacity for whole production line as well as throughput rate. They develop a tagging system for sorting parts by bottleneck machines so people know where parts should go before being processed by bottleneck machines.

Alex finds out that Julie is living with her parents and considering divorce. To prevent this, he starts going to see her several times a week, as well as going on outings together. Meanwhile, the plant’s production has improved considerably: it now stocks fewer parts than before and ships orders more quickly. Within two months, the plant is once again profitable. Jonah teaches Alex how to let bottleneck machines regulate the pace of the entire system and keep it from getting backed up with inventory. Despite their progress so far Peach feels that they will close down unless there’s a 15% improvement in sales during their third month; however Jonah believes that they can do it if Alex cuts batch sizes by half so time-to-market is halved improving yields at idle capacity where little or no material handling cost exists compared to running materials through the takt time which are increased costs for conveyance equipment services labor fixed overhead direct labor variable overhead raw material

“When all’s said and done,” observes Hooker, “the more likely reason why global leaders have difficulty communicating value creation strategies – be they organizational initiatives or economic plans – stems simply from not clearly embracing seven indispensable management principles.” He identifies these foundational management concepts below (Hooker 2).

6) Convert operational measures into “economic deployed measures”

6) overcome difficulties across corporate boundaries caused by unclear definitions of terms

7) worry less about being “transparent” – since our critics often impose false realities on us anyway! Rather focus upon facilitating other stakeholders’ clarity…. through helping them grasp WHY! What you’re doing matters…what your intentions are? What happens next? Why aren’t things happening already?

8 ) Convey goals & objectives in understandable business terms ?(e g revenue profit margin growth share price EPS cash flow return on investment capital employed?) rather than simply stating them factually (‘by 2015 2000 euros greater expansion’).   Decide ‘who cares?’ first then explain accordingly…..with HOW steps etc…..Describe reality….don

Alex’s plant does not meet the growth targets set by Peach. However, as Alex is being promoted to a new role at corporate headquarters, he learns that his boss and the chief accountant are also getting promotions. They’re so impressed with Alex’s work that they promote him to be the division manager of their new division. He asks Jonah for help in preparing for this role and Jonah encourages him to figure out what he wants to learn from it. Therefore, Alex decides that he wants to learn how manage large organizations and better manage his personal life.

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Alex and Julie make an effort to share their thoughts and feelings with each other on a daily basis. Meanwhile, Alex prepares for his role as division manager by hiring two new managers: Lou and Bob. Lou is interested in cost accounting metrics that give a more accurate description of a business’s health, whereas Bob wants to become the plant manager in Alex’s stead so he can master production processes at the plant level. After two months of learning from them, Alex works with Johnny Jons to land a contract with a large French client. With this success under their belts, they continue studying how best to reform manufacturing operations in the entire division.

Chapter 1

Alex Rogo drives into the parking lot of his plant. He sees Bill Peach, their division’s vice president, parked in Alex’s spot as a way to assert his authority. When he enters the plant, four people come up to him and yell about how an hour ago Peach walked into the building demanding to know where order 41427 is because it’s weeks behind schedule. All of its component parts are finished except for one small piece that hasn’t been made yet so it can’t be assembled and shipped out which means this product will never get done on time.

The plant manager, Alex, was told by his staff that Peach ordered one machinist to stop what he was working on and start making the final piece for order 41427. The machinist is furious because it will take them several hours to reset their machines. Alex tells him to follow Peach’s orders. He goes into Peach’s office and finds him sitting behind Alex’s desk. Peach angrily tells him that Bucky Burnside spent an hour yelling at him about how late they are with his order last night. It turns out that this is the third time he has yelled at them in two weeks, so it seems like a pattern of behavior from this client now. In addition, they’ve lost money because of these delays as well as other problems which have happened over the past few months (which we haven’t yet been introduced to). Because of all this bad news, Peach threatens to close down the plant if things don’t turn around within three months’ time.

Alex, the CEO of Peach Manufacturing and his production manager Bob Donovan are walking through the factory. Alex notices that one of his employees is upset, so he approaches him to find out what’s wrong. The employee tells Alex that a new order was messed up by another employee who quit on them before damaging a machine crucial for their operation.

Chapter 2

At home, Alex’s wife Julie is dressed up and has her hair done. She wants to go out with Alex for the evening but he can’t because of a work crisis at the plant that might close in a few months. This makes Julie grouchy since she hates Bearington, where they live, but when Alex explains that it would mean they could move away from there, she brightens because she hates living there too. However, this means Alex will feel like he betrayed his hometown if the plant closes down.

After a quick dinner, Alex returns to the plant. He is informed that they fixed the NCX-10, but not until late in the evening. For most of the night, everyone in his department focuses on Burnside’s order—they ship it just before midnight. Afterward, he takes Donovan out for burgers and beer at a local diner where he drinks with him to celebrate finishing their order so quickly. Donovan is proud of his team for working hard and doing such an amazing job; however, Alex is wary. He knows this can’t continue because it isn’t cost effective. Something needs to change or something bad might happen if they don’t make some changes soon enough.

Later, Alex reflects on the day and realizes that there is nothing to celebrate. He feels like he has failed because his plant shipped one overdue order. In three months if he can’t turn things around, Peach will go to Granby with the numbers from their plant. Granby will look through them and decide to shut down the plant, putting all 600 people who work in it out of a job.

Alex is a hard worker with degrees in engineering and business, but he can’t figure out why his factory never ships on time and they lose money. He has worked for UniCo for years, moving up the corporate ladder only to see his efforts wasted.

Chapter 3

Early in the morning, Alex drives to his office where he is supposed to meet with other plant managers. He thinks about how much Peach has changed since they used to be friends. Now he seems manic and tense all the time. They mostly argue now instead of being friends like they used to be.

As Alex enters the building, he runs into one of Peach’s employees. The employee tells Alex about a rumor that Granby is considering closing Peach’s entire division. If this happens, everyone in the division will lose their jobs and there won’t be any jobs left for them at other companies either because they’re going to close down so many divisions. This must be why Peach has been acting so stressed lately—they’re all worried about losing their jobs soon if things don’t improve quickly enough. Alex realizes that this must also be why Hilton Smyth (a manager) was glaring at him when he walked into the meeting room—he thinks Hilton might have heard the same rumor from another source and is trying to figure out who told Alex first. He decides not to say anything about it though because he doesn’t want anyone else getting mad at him for knowing something they don’t know yet – maybe someone else already knows too but hasn’t said anything yet and then it’ll look like he just made up a story or something…

Alex reaches into his jacket pocket for a pen to take notes with during the meeting but instead finds an unlit cigar (the same kind as Hilton Smyth smokes). He remembers what happened on that day:

Chapter 4

Two weeks ago, Alex felt that his plant was operating smoothly. He ran into an old physics teacher of his in the airport and told him about how he’s now a plant manager and they’ve started using robots to make things more efficient. However, when Jonah asks if the robots are making them 36% more money, Alex admits that they’re not doing so yet.

Alex believes that the plant is more efficient with robots, but Jonah questions Alex about his employees and inventory. Alex admits that neither has decreased. Jonah then states that the plant is no better off with robots than without them. When Alex says that their efficiency rating is over 90 percent, Jonah guesses they must run all day and night, which would mean a high amount of inventory. Again, Alex admits Jonah’s point and wonders how he knows so much about the plant’s operations.

Jonah explains that he studies manufacturing plants and that many of them have the same problems as Alex’s. Jonah is late for his flight, but says that although Alex believes his plant to be efficient, it must not be because of the things he has said. Even though Alex measures what everyone else does, he still doesn’t measure correctly and therefore thinks everything is fine when it really isn’t.

As Alex and Jonah near the gate, Jonah hands Alex a cigar and tells him to question whether his plant is productive. He asks if they make things, but notes that this isn’t necessarily the goal of their manufacturing plant. It’s not enough just to produce something; there must be an actual goal behind it. Without a clear objective, you can’t reach true productivity.

Chapter 5

In Peach’s meeting, Alex wonders if Jonah is right and nobody in the room knows what they’re doing. They all have complex charts and are using big words, but Alex doesn’t understand what it means. It seems meaningless to him. He decides he needs some time alone to think about productivity. When the meeting adjourns for a short break, he leaves without telling anyone where he’s going because Hilton Smyth was watching him leave anyway.

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Alex drives back to the plant, but he doesn’t go directly inside. Instead, he buys some pizza and beer so that he can think about what his goals should be. He thinks of buying materials, providing jobs, making quality products, keeping costs down or investing in new technology. None of these ideas seem right.

Alex looks at the unsold merchandise in his warehouses and thinks that sales are the most important thing. However, he realizes that if they don’t make money, then it doesn’t matter how many sales they make. Therefore, he decides to focus on making money instead of just focusing on making sales. He also realizes that any action that helps him achieve this goal is a good one and should be done. Any action or decision which does not help him achieve his goal should be avoided since it’s counterproductive. With this insight, Alex feels energized to go back to work again with renewed enthusiasm for UniCo’s future success.

Chapter 6

Alex enters the plant at 4:30 p.m. On his way in, he notices three laborers sitting and reading a newspaper. As soon as they notice him, they scatter and look busy while Alex chastises their supervisor; with the strain that the plant is under, they can’t afford idle workers. However, as Alex watches them do unnecessary work to keep busy, he realizes he shouldn’t assume that being busy is the same thing as making money. He looks at the manufacturing floor: nearly everyone and everything is moving since that is what Alex has always demanded of his employees ever since he became CEO of this company years ago when its founder retired and left it to him after having worked there for decades before retiring himself from active management years prior to handing over control to Alex. Now, however, Alex wonders how much of that work was productive or even profitable, given all the financial trouble lately caused by competitors who are able to produce goods more cheaply than his company does due in part to lower costs for labor. Also, how many measurements does Lou use really only measure how hard people are working rather than whether or not those efforts actually generate any revenue ?

Alex enters his office and notices that most of the day-shift workers have already left. He tries to call Bill Peach back, but he can’t get through to him. Lou comes into Alex’s office and tells him that he is sending Peach all of their accounting numbers. Alex asks Lou what some metrics are for determining if a business is making money, and they come up with net profit (more sales than investments), return on investment (ROI) (how much revenue you make from your investment in a product or service), and sustainable cash flow (whether or not a company has enough cash coming in).

Lou asks Alex if the plant is about to be closed, and Alex admits that it is. However, he wants to try everything possible to save it. Lou promises that he will help him try, but says that Alex should stick with standard business practices instead of new metrics. He thinks all of these ideas are just excuses for why the plant isn’t doing well.

Alex listens carefully as Lou gives his opinion on why the plant has been failing lately, but knows that all of those reasons are typical complaints people have when something goes wrong in their lives; they find an excuse for what went wrong so they don’t feel like a failure or like someone else was responsible for their mistakes. He believes Lou and everyone else at this meeting are smart men who know how things work in business, so he wonders how they could possibly make such bad decisions about how to run their company’s plants.

After work, Alex sits at his desk and tries to figure out how to balance the three metrics of net profit, ROI (Return on Investment), and cash flow. He thinks about what he should prioritize first: net profits or ROI? After some time, he realizes that all three are equally important because they’re vital for a business’ success. However, it’s difficult for him to link those metrics with the operations in his plant. The old corporate metrics don’t seem very useful anymore; instead of simplifying things, they make them more complicated than necessary.

The man realizes it’s late and calls his wife, telling her that he’ll be home in an hour. His wife is upset because she had waited all night for him to come back home and never came. After talking with his wife, the man asked a manager (shift supervisor) about how the plant was doing on investment returns earlier in the day. The man looked confused as if he couldn’t make sense of how business management and making money could improve their daily operations at work.

Chapter 7

Alex comes home and finds dinner in the microwave. His second-grade daughter, Sharon, appears with her straight A report card to show him. Alex listens to Sharon tell him about her day and good grades before putting her to bed around midnight. He can’t sleep because he worries about keeping his company afloat. So, he decides to track down Jonah for help with this problem.

Chapter 8

The next day, Alex realizes he needs to find Jonah. He goes back to the plant and spends most of his day in a conference call with Peach (who is furious that Alex left their meeting), Lou, and Ethan Frost. After dark, Alex remembers his old address book at his mother’s house. He calls Julie to tell her he won’t be home until late but she hangs up on him.

Alex visits his mother’s house, which is in the city. They used to visit her more often, but Julie doesn’t like it so they stopped. Alex’s mother is surprised and invites him to stay for dinner. After several hours of chatting, eating, and searching through the attic and basement, Alex finds an old address book with a number that belongs to an old university friend who lives in Israel. It’s one o’clock at night there so he calls him using his mom’s phone. He speaks with several people before he finds out that Jonah has moved to London and left a message for him at work.

Alex is waiting by the phone for Jonah to call back. He asks Alex what his manufacturing plant’s goal should be. Alex answers that they need to make money, but he tells Jonah that he needs better measurements so he can understand if his plant is meeting its goals. Jonah congratulates him for finding the answer, and offers three new measurements: throughput, inventory, and operational expense. Throughput describes how much money a business makes through sales; inventory describes how much money a business spends on purchasing goods; and operational expense describes how much money a business uses to make goods into throughput (i.e., sellable products). However, Alex must figure out himself how to implement these metrics because Jonah has another appointment and must leave now.

Chapter 9

Alex wakes up at 11 a.m. He calls Fran to tell her that he’ll be heading to the plant soon. Fran tells Alex about several issues: broken machines, a fight on the factory floor last night, and a message from Granby saying they will shoot a promotional video with robots in his factory because it will look best for Granby’s brand image. Alex eats breakfast with his mother before leaving for work; she encourages him not to let work stress him out too much even though he has so many responsibilities there.

Alex drives to the plant and thinks about Jonah’s new metrics. He decides that he needs to increase their throughput while keeping operational expense low. When Alex arrives at the plant, Lou informs him that they have installed robots in order to save on expenses. However, this had a negative impact on sales and did not achieve the goal of increasing profits.

Alex decides to talk to Stacey Potazenik, their inventory control manager. He’s concerned about the robots’ effect on the plant’s inventory and wants her input. When he asks her if the robots increased their inventory of unfinished products, she tells him that of course they did; however, she tried to stop it from happening. The first time they were installed, they only operated at 30% efficiency because there wasn’t always enough work for them to do. People thought Ethan Frost would be unhappy with inefficient robots so everyone decided to make them build spare parts in case other parts broke down later on when there was a rush on those particular items and projects couldn’t be completed until more parts arrived. However, since those extra parts often go unused, sometimes because there aren’t enough other necessary components or because people are waiting for new shipments of materials that haven’t come yet, production is slowed down.

Alex brings Bob into the conversation and asks him about the robots. He says that although they are efficient, they increase inventory which is costly to store and move around. They also don’t lead to increased sales, so it appears as though they’re losing money rather than making any. Alex exclaims that “they haven’t been managing according to their goal,” and he has some new ideas for them all.

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Chapter 10

After an hour and a half, Alex has explained Jonah’s new metrics to his staff. The old metrics were confusing, but the new ones are easier to use and understand. Lou thinks they should be used more often, while Bob doesn’t think they’re as good as the old system of measurement. Lou explains that it’ll take some time for everyone to get used to them because of how different they are from what people have always done in their industry.

During a meeting, the conversation shifts to Granby coming to film their plant. Lou, Stacey and Bob are concerned about how they’ll look in his video. Alex doesn’t care as much about that; he just wants them to change the way they use robots so that they can be more productive towards their goal of being profitable within three months or else Peach will close down the plant. They all agree on lowering inventory because it’s wasteful but worry about giving robots less work since it would make them less efficient and upset Peach. Stacey suggests calling Jonah for help with this problem.

Alex calls Jonah’s office in London and is told that he is currently staying at a hotel in New York. Alex calls the hotel, but it’s 2:00 A.M. in New York, so he decides to wait until morning to talk with him. When Alex hangs up, his staff encourage him to travel to see Jonah because they think it will be worth it if their company can help Jonah out.

Chapter 11

Julie is upset with Alex for leaving on an unannounced trip. He says it was necessary, but she doesn’t trust him anymore. She accuses him of always putting work first and family second. He tries to hug her, but she pushes him away, and when he tells her that he’ll call from New York, she warns that she might not be around. They yell at each other until Alex finally leaves with his bag.

The next morning, Alex meets Jonah for breakfast. He already tried calling Julie and the kids but no one picked up. Alex explains Peach’s three month ultimatum and asks Jonah to be his consultant, but he refuses because he doesn’t have time. However, if Alex pays him $10 an hour after 3 months, Jonah will give advice on how to deal with Peach.

Alex and Jonah are talking about Alex’s work force. Jonah thinks the workers are inefficient if they have nothing to do, because it still costs money to pay them while they’re idle. However, he points out that a plant overworked to maintain an equilibrium between production and orders is much more likely to go bankrupt in the long run. After some thought, Alex agrees with his boss’ logic rather than his version of the theory.

Jonah explains that while a balanced plant might be appealing in theory, since expenses are kept to a minimum, unpredictable events and variations can cause serious delays. He tells Alex that he must go but invites him to consider what these two factors mean for his plant. Jonah rushes away and climbs into a limo with some sort of chairman.

Chapter 12

Alex remembers a man who had an empty house when he came home one night. He found out his wife left him and took everything with her. The man feels that the same thing will happen to him, but Alex is surprised when he arrives at home and finds Julie there. She tells him she was just spending time with Jane because the kids were at her friend’s house while she was gone.

Alex and Julie argue about how much time Alex spends at work. Although he claims it’s because of a crisis, she doesn’t believe he’ll ever change. She suggests that he bring some paperwork home so that they can be together more often. He agrees to try this for her sake. They kiss and admit that they missed each other while apart. Alex promises to spend all weekend with Julie.

Chapter 13

Alex lies next to his wife, Julie, who is still asleep on Saturday morning. Alex’s son Dave reminds him that he promised to go hiking with them weeks ago. He feels bad about abandoning her but decides to go because he wants to spend time with the boy scout troop. The other scouts tell Alex that their leader is sick so now Alex has no choice but lead the hike himself. He doesn’t like this responsibility and becomes irritated when it turns out that he’ll have to map out a route for everyone else as well as carry all of their supplies.

The group plans to hike for about 10 miles. Since they’ll be hiking at two miles per hour, it should take them five hours to get there, plus an additional hour and a half for lunch and rest breaks. The group is led by Ron, who takes the lead on the trail while Alex trails behind so he can keep an eye on everyone. A chubby boy named Herbie slows down the boys in his group because he hikes slowly.

Alex thinks about Julie and his conversation with Jonah. He believes that while people are hiking, they should be able to maintain a steady speed of two miles per hour. However, he notices that Ron is too far ahead so he calls for the hikers behind him to slow down. Some boys make fun of Herbie because it takes him longer than others to catch up due to the weight of his backpack.

While hiking, Alex and Ron stop to rest. Alex tells Ron that he should have kept a moderate pace but Ron insists that he did. When they start walking again, the line of hikers slows down because each hiker is dependent on the others for speed. They cannot simply run ahead to fix any slowdowns because they are constrained by the people in front of them.

Alex understands that the speed of each hiker will fluctuate, but there’s no limit to how long they can be delayed. So rather than the fluctuations in hiking speed averaging themselves out, the negative fluctuations accumulate and slow down everyone else. Alex realizes that this is a problem at work since machines are dependent on one another; if one machine isn’t finished with its task by the time it needs to start working on something else, then all other machines behind it have to wait for their turn. The distance between Ron (in front) and Alex (in back) represents inventory buildup because Ron has already worked on his part so he doesn’t need to do anything until later while Alex still needs to finish up his part first before he can move onto something else. And since Ron is slowing down due to lunch breaks or whatever reason, this means less work gets done overall which slows production even more as well as increases inventory further into being backed up and waiting around for someone who hasn’t gotten started yet.

Chapter 14

The troop stops to eat lunch. Alex thinks that they could hike faster if he trimmed their individual speed so they don’t go slower than the group’s average hiking speed of two miles per hour. He wants to test this idea, and notices a kid playing with dice on a picnic table nearby. He borrows the dice and arranges them in bowls as if it was a manufacturing line, where each bowl represented an assembly stage, and the pieces were moved from bowl to bowl by rolling the dice.

Dave notices Alex playing with matches and bowls. He asks him what he’s doing, and Alex explains that he’s inventing a game. Dave joins in, as do some other kids. They decide on the rules of the game: each kid would roll the dice to see how many matches they can move from one bowl to their own bowl; whoever moves more than three-and-a-half matches wins, and doesn’t have to do dishes that night.

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Andy rolls a two, so he moves two matches from the matchbox into Ben’s bowl. Ben rolls a four, but only has two matches in his bowl, so he can move just those two. Chuck rolls a five and gets more than one match, but since it is not enough to fill up his bowl with all the remaining matches in the box, he cannot move any of them. The boys are disappointed that they didn’t get to play their turns yet again.

The boys continue to roll matches, and Alex realizes that the farther back in line each boy is, the more his low rolls affect other players. Even if Dave and Evan roll high, they can only move a few matches at a time, which lowers their average score. Alex is both stunned and troubled by this discovery because it means that the match system isn’t balanced as he had thought. He thinks about how this will affect his plant’s orders because they’re never able to deliver on time.

Chapter 15

After lunch, the hikers rearranged themselves by speed. The fastest kids took off and Herbie came last in front of Alex. This caused the line to stretch out more quickly than before. Although everyone else could hike at their own pace, Alex had to slow down to Herbie’s speed. This meant that the slowest member would determine how fast the group moved as a whole (representing throughput). It didn’t matter how fast the fastest kids were because they couldn’t move any faster than what was set by Herbie’s pace (the bottleneck).

The hikers have been going at an average speed of one mile per hour, but they still have five miles to go. Alex realizes that the slowest variable governs the pace of the group, so he stops everyone and reverses their order in line. The fast kids complain about being behind slower kids now, but Alex explains that he’s not trying to make them faster; rather, he just wants them all to hike together.

The group of hikers is now able to move at the same pace. Before, they were falling behind because Herbie’s pack was too heavy for him to carry on his own. Now that he has some help with his load, he can hike faster and keep up with the rest of the troop. Alex realizes that their inventory (Herbie’s gear) has decreased while their throughput (the amount of time it takes them to get from point A to B) has increased. This means that although there are fewer supplies overall, each hiker is carrying less weight and moving along at a better speed than before.

Chapter 16

When Alex and Dave got home, the house was empty. A note from Julie explained that she had to leave because she wasn’t getting enough attention from Alex. She left Sharon with his mother, and he picked her up later on. When he returned home, it became clear that Sharon was upset about her mom leaving; however, they didn’t say anything about this at first. Later in the evening, when everyone was alone again (Dave went out for a while), Alex told them what happened between him and Julie—they were having problems in their relationship. The kids seemed almost numb after hearing this news; they didn’t seem surprised or shocked by it either way. After explaining everything to his children, he called Jane’s house to see if Julie might be there; but no one answered the phone at Jane’s place or at Julie’s parent’s house either.

Chapter 17

Monday starts badly. Dave and Sharon make a mess while making breakfast, so Alex drops them off at school before going to work. He arrives at the office to find a memo announcing that Hilton Smyth was elected as his new boss.

Alex expects his staff to be as excited about what he discovered with the hikers as he was. He spent hours trying to explain it to them, but they still don’t seem convinced that those things apply at the plant.

The expeditor informs Pete that they need to work fast if they want to finish the order on time. If his workers can assemble 25 parts per hour, then they’ll be able to finish the order by working nonstop for 4 hours. However, this is only possible with some help from a robot. Alex suggests that Pete should follow his advice and see how statistical fluctuations affect dependent events in real life by keeping an accurate log of their output. He bets Bob $10 that he can’t make it happen due to fluctuations.

After the meeting, Alex calls his mother to ask her to move in with him and take care of the kids while Julie is away. He leaves for home and lets her in when he returns later that day. When he gets back from doing this, Bob tells me that Pete’s workers finished making all 100 parts—an hour earlier than originally planned! It seems they sped up their production during the last part of their shift until it kicked into high gear and got them caught up with where they had only done about average work before. But when Bob and I check on the robot, we find out that even if it worked at full capacity initially, we still would have missed our deadline because there was so much work left to be done by then, even though production picked up quickly once people started really working together again after an initial dip in productivity due to adding new members to a team! Even though our time line was off for now, I am glad about what happened because this proves how important it is not just what one person can do but also what a group does tightly integrated as a whole unit or how fast things can be achieved through top notch collaboration between individuals operating at peak performance levels.

Chapter 18

Alex comes home to find his mother and Dave cooking dinner. Julie called but wouldn’t tell them where she is. On Tuesday morning, Alex arrives at work to see Bob, Stacey, Lou and Ralph waiting for him. They discuss what happened yesterday with the two-stage process they were using for their manufacturing processes. Alex points out that even if a machine or worker is efficient on its own, they can’t measure it without considering how it fits into the entire process of production – most of which have 15 stages in total (as opposed to only 2).

Stacey suggests they call Jonah again, so Fran spends the next hour trying to get him on the phone. When they do, Alex explains to Jonah what happened with Herbie and that he needs to optimize his entire system, rather than make each piece efficient. Jonah tells Alex he is correct. He explains that some parts of a system are a “bottleneck resource”—a machine or part who cannot keep up with the demands placed on it and makes it slower than its counterparts—and should be optimized for maximum output. Bottlenecks can’t be eliminated but should be leveraged in order to pace a system’s overall performance.

A few days later, the conference table is covered with charts and data sheets as Alex, Bob, Stacey, Lou, and Ralph search for their bottlenecks. Ralph is frustrated because much of their data is years behind. They’ll need to sort through it before they can find a solution for bottlenecks in the plant. Bob realizes that he has 20 years of experience at the plant so perhaps he could list off where delays usually happen since logically that must lead them toward the bottleneck machines. Stacey adds that parts which are most often in short supply probably run through those bottleneck machines too so they could cross-correlate those lists together. Alex estimates that whatever machines have unfinished inventory may provide clues as well because if there’s a lot of unfinished inventory sitting around it means people aren’t working on those projects or departments are having trouble getting what they need from other departments within the company.

Not long after that, they are faced with the challenge of not having enough people to run their bottleneck machines. They have a machine called NCX-10, which is very uniquely designed and requires little labor from humans. It also takes several hours to finish one batch of parts. Also, there’s another machine for heat treating steel because it needs to be treated so that it doesn’t become too brittle once cut into pieces. However, these two machines can only operate with limited capacity due to the plant’s complicated logistics system and thus cannot process a full batch at once.

Alex is disappointed that the plant won’t be able to reorganize as easily as he had hoped. The machines can’t simply be moved from one area of the plant to another, and they don’t have enough money for new equipment. Stacey suggests some possible changes in how things are done, but it’s unclear if those will help at all.

Chapter 19

Alex, Dave and Sharon are having dinner with Alex’s mother. Alex is upset about some problems at the plant that he can’t solve. His mother suggests that he talk to his father, who should be able to help him find a solution. Alex says that he’ll go pick up Jonah from the airport later on today because they need to discuss these issues together.

Alex told Jonah on the phone that he had a new problem with bottlenecks. Jonah offered to visit the plant and see for himself what was going on. Alex picked him up from the airport and drove him to the plant, explaining their problems along the way. When they arrived at the plant, Bob, Stacey, Ralph, and Lou met them there. They were trying to figure out how they could increase throughput without raising operational expenses (i.e., cost of production). They needed more capacity (ability to produce) in order to meet demand. Jonah assured them that if they raised capacity at one bottleneck, it would raise capacity throughout all parts of their operation because all operations are linked together by material flow. So when they went into see the first bottleneck, which is called “NCX-10”, it wasn’t running because union workers who operate it were on break.

Jonah advises that the workers should take their lunch break while the NCX-10 is in the middle of a batch, still running on its own. He states that any machine not performing at maximum capacity can hold up other machines and affect overall production. This particular bottleneck machine needs to be operating all the time so it doesn’t slow down production elsewhere in the plant. There are no other machines like this one, but there used to be before they were replaced with more efficient ones. Looking at another bottleneck—the heat-treating machine—they see 1,000 parts waiting for treatment.

Jonah asks if they can outsource some of the heat-treating work to vendors in town. Stacey says that they could, though it would cost some money. Jonah then realizes that each part in the bottleneck is delaying a product from being shipped and sold for $1,000 per item. This delay costs them $1 million if every part goes through this process. He also sees that quality control only happens after products go through the heat-treating machine, meaning defective units are sent on to be sold as well. To save time and money, he recommends doing quality control before putting parts into the heat-treating process so that no valuable space will be occupied by faulty parts during their bottleneck period.

In this text, a businessman explains how the bottlenecks of an organization can impact its performance. If you don’t account for them in your calculations, then you will be overexerting yourself and wasting valuable resources because your business operations won’t be performing at their maximum output potential.

The next day, Alex talks to his mother and siblings about Julie. He hears that she called last night but wouldn’t tell them where she was or what she was doing. They also heard violin music in the background, which is something her father likes to listen to.

Chapter 20

Alex calls Ada’s house to speak with Julie. However, she does not want to talk with Alex because he has neglected her for a long time. She hangs up on him and Alex meets with his staff to figure out how they can implement Jonah’s advice. They decide that at least 80% of everything they work on must pass through the bottlenecks, do quality inspections before sending parts through bottlenecks, worry less about efficiency, and prioritize manufacturing overdue orders before starting new jobs.

Alex decides to drive over to Julie’s parents’ house and surprise her. He knocks on the door, but Ada tells him that she doesn’t want him there. Alex says that he’ll just wait in his car until Julie comes out. After 45 minutes, she does come outside and asks why he came unannounced. She also points out that if they’re going to divorce, it’s not a good idea for them to see each other so much. Nevertheless, Alex is confident that everything will work out well because they love each other and have two kids together. However, Julie isn’t convinced of this anymore after what happened with the affair accusation earlier in the story (this part should be mentioned). Therefore, she refuses to decide whether or not they should get a divorce yet before leaving again without saying anything more than “bye.”

Chapter 21

Alex is thinking about dating again while he’s at home. He thinks of a few women he might ask out, but then realizes there’s only one woman he wants to date. He calls Julie and asks her if she’d like to go out with him on Saturday night, and she says yes.

Alex is meeting with the union representative, Mike O’Donnell. He tells Alex that he won’t let him move the lunch hour around because if they give in to one demand, then others will follow. Alex points out that moving the lunch hour is part of a larger scheme to keep his plant from closing down.

That afternoon, Alex sees that the NCX-10 is idle again. He confronts the machinist and finds out that they’re not processing orders because they’re waiting on raw materials to show up for higher priority items. Bob explains that he’s trying to prioritize overdue orders, but there’s no way for the machinists to tell which parts are important and which ones aren’t.

Alex and his team decide they need to come up with a better system for identifying high-priority projects. They spend several days coming up with a color-coded tagging system, which is then explained to the entire staff at Friday meetings. This new system will help them prioritize between pieces that have the same colored tags.

Alex and O’Donnell agree to change the lunch breaks. The union won’t fight it because Alex showed them that he’s willing to compromise. On Saturday, Alex washes his car, dresses up, and picks Julie up from her parents’ house to take her on a date.

Chapter 22

Alex’s staff is happy with their new system, which has helped increase production and reduce the backlog of orders. They’ve also increased capacity by six percent because they’re putting quality control before bottlenecks. Alex realizes that it’s not enough, so he asks his staff for more recommendations on how to keep improving their system and adds a yellow tag to differentiate between parts that have already been processed by bottleneck machines and those that haven’t.

Bob calls Alex and tells him that he has something exciting to show him. When Bob shows up, he is unloading a large machine from his truck. He explains that this machine can perform the same function as three other machines they had previously used, thus increasing their capacity for work by one of their bottlenecks.

Chapter 23

Alex was on a date with Julie on Saturday night. They had fun together, and they’ve been meeting up 2-3 times per week since then. Alex is tired but happy about the arrangement. At that moment, Ted Spencer angrily told him that Ralph was causing trouble for him by asking for unnecessary data. Alex asked Ralph about it, and Ralph said he noticed bottlenecks in the heat treating machine because of other duties being performed by employees who were supposed to be working on the machines. So he simply wanted to collect some data so they could see where their losses are stemming from due to bottlenecks in production time/money etc…

Alex and Bob talk about the problem of idle time on both machines. Alex decides that they should assign foremen to attend both machines. However, this will cause a drop in individual efficiency numbers. Bob agrees to do it but warns Alex that it won’t look good on paper. The next day, Bob presents his plan for machinists to work with other machinists so they can help each other out when needed and avoid idle time on either machine.

Bob came up with a new plan to improve the company. He noticed that one foreman, Mike Haley, consistently managed to process 10 percent more parts through the heat-treating machines than anyone else. Alex visited Mike during his shift and learned how he pre-sorted batches of parts before they were treated in order to save some time loading each furnace. He also thought about building a table which could be loaded into the furnace by a forklift and suggested this idea as well; it would save several hours of labor every day. Alex thanked Mike for his ideas and told him that they’d turn them into official processes so other workers could benefit from them too.

In addition, since heat-treating is only required for parts that are already brittle from the cutting and shaping process, Bob can eliminate about 20% of all heat-treated parts by simply adjusting their cutting methods.

Chapter 24

On Friday, Alex’s management staff comes into his office with a bottle of champagne and Styrofoam cups. They celebrate their last month of progress because they’ve done well on several fronts: throughput has improved, work-in-process inventory has decreased, and late orders have been resolved. Bill Peach calls Alex to congratulate him on the good month. Johnny Jons told Peach that Alex’s plant has been resolving many late orders recently.

That night, Alex and his staff celebrate their victory in the bar. Alex is too drunk to drive home so Stacey gives him a ride. She tells him that he looks happier than he has been in a long time. However, Alex can barely walk because he’s very drunk. Stacey helps him up the steps of his house but they both fall inside when she tries to catch his weight as it pulls them down together. Julie comes home and sees them lying on the floor together and thinks that her husband is having an affair with Stacey! She screams at him for cheating on her again, gets back into her car, and drives away again without letting Alex explain himself or saying goodbye to anyone else (particularly not Mr Bloom). The next day, Alex calls Julie’s parents to say sorry about what happened but Ada says that Julie won’t talk to him anymore because she still thinks that he cheated on her with Stacey even though it was just an accident caused by all of them drinking too much alcohol at the party last night (i.e., “they were all drunk”).

On Monday, Stacey told Alex that she felt bad about what happened and would call Julie to explain. She also said that bottlenecks were spreading because they increased the throughput of the plant, which led to shortages in non-bottleneck parts. In addition, they had decreased their inventory of spare and unused parts, leading to new delays. Alex sighed and asked Stacey to figure out exactly which parts were coming up short. He then told Fran to track down Jonah again. Looking at the piles of inventory on his desk made him feel better for some reason; it seemed like a good sign that there was less than before. When Jonah picked up his phone later on, Alex explained his problem with bottlenecks again and asked if he could visit the plant again soon so Jonah could see for himself how things worked over there (he didn’t mention why).

Julie calls Alex to apologize for assuming the worst about him. She came home unannounced and surprised him, but he wasn’t there. He tells her that if she’d told him she was coming home, he would’ve come straight home after work instead of staying at work late. They both decide to keep seeing each other and working things out between them.

Chapter 25

Alex picks up Jonah from the airport once again, and they both go to visit Stacey, Bob, Ralph, and Lou at the plant. Stacey explains that there are now new bottlenecks in their assembly line. Alex suggests that these might not be real bottlenecks because there’s still a lot of parts waiting to be processed by the NCX-10 machine. They walk out into the plant and see that this is true; there’s a huge pile of parts waiting for processing on this machine. When talking to one of the machinists working at another station, they discover that since bottleneck parts get priority over other non-bottleneck parts (and thus never have any chance of being processed), most work done by other machines is only performed on bottlenecked items.

Jonah realizes that Alex doesn’t quite understand what he meant earlier. He draws a diagram on the floor to explain his point, saying that bottlenecks are inevitable in any plant and they can be good or bad. If all non-bottleneck machines keep running all the time just to appear efficient, then there will inevitably be shortages of parts and excess inventory. Therefore, throughput is reduced and it’s not a very efficient operation.

Bob doesn’t agree with Alex’s point of view because he thinks that it is more important to keep efficiency high. However, Alex considers the issue from another perspective: there are too many warehouses filled with excess inventory, which is a waste of money. Ralph summarizes their discussion by saying that they should work within the constraints rather than trying to override them.

Jonah told Alex and his staff that they were creating too many parts, which created bottlenecks in the manufacturing process. They needed to produce only as much as they could turn into products. When he got back to the conference room, Jonah asked them to think about how they would solve this problem.

Chapter 26

In the evening, Alex sits at his dining room table at home trying to figure out how to keep the entire manufacturing system working. His wife Sharon asks him what he is doing and when he explains it to her she says she can help. He agrees and Dave joins them as well. Then they think back on their hiking trip and ask themselves if there’s a way for everyone in their group hike at the same speed so that no one gets left behind or slowed down by someone else not keeping up with the group.

Sharon suggests that to keep the line together, they should make Herbie be a drummer who keeps everyone in time. Dave suggests that they tie a rope around everyone so no one falls behind or ahead of the others. Alex realizes that it wouldn’t even have to be tied to them; just those at the front and back would do.

After putting the kids to bed, Alex thinks about Julie and the ongoing challenges at the plant. They will try to regulate their speed with computers and data instead of ropes and drums, just like Sharon suggested in a conversation earlier that day.

Alex and his team need to balance their supply of raw material. Ralph can now predict how long it takes any item in the process to go from beginning to end, while Jonah confirms that they no longer need outside factors (the bottleneck) regulating their pace. Ralph will create a prototype for the data system, and Alex drives Jonah back home on time for his commercial flight.”

The next morning, Bob points out that even if they switch to a new plan, the plant will still have people standing around doing nothing. Stacey points out that they’re already paying the employees anyway, so it doesn’t matter whether those employees are working or not. Alex decides to go ahead with this plan because their plant’s throughput isn’t high enough for them to keep running at full capacity and remain competitive in the long run.

Chapter 27

At a monthly plant managers meeting, Alex reports that his plant had its first profitable month in years. His success has been greater than any of the other plants and is more financially stable. Hilton Smyth resents Alex’s success; although Bill Peach seems mildly impressed, he does not express as much interest or excitement over Alex’s progress. Furthermore, even though inventory is down and throughput has increased due to shipping faster products, their profit margins are not better because they haven’t negotiated higher shipping rates yet. In addition, no one knows if Bill Peach will keep the plant open now that it is more profitable; he hasn’t decided whether or not to close it yet. Also influencing Bill Peach’s decision about closing the plant is Hilton Smyth who doesn’t trust new ideas anymore like Bill used to do when he was younger and still isn’t sure if keeping the plant open would be beneficial for business

Alex meets with Peach after the meeting, and Peach tells him that despite their good month, he wants to see a 15-percent improvement in the next month before he’ll commit to keeping the plant open. Alex says it’s possible. He’s stunned by this demand but knows his team can do it.

Alex decides to stop by Julie’s parents’ house for a while before he goes back to the plant. Alex and Julie go for a walk in a nearby park. They talk about how nice it is to be together again, but then they argue about whether their marriage has any purpose. Julie thinks that she and Alex are committed lovers who love each other, not necessarily husband and wife. She expects Alex to come home at reasonable hours like most husbands do, but instead he puts his job first just like her father did. They fight for a little bit, but then make up when Alex drives away from the house after briefly apologizing to Julie on his way out of town.

Chapter 28

Alex gets home in the evening, just as Jonah calls from Singapore to check on their progress. Alex tells Jonah that everything is going well, but that Peach laid down a new ultimatum. Jonah thinks matching Peach’s demand is entirely feasible, though it is time for Alex to take the “next logical step.” The next morning, Alex meets with Stacey and tells her Jonah says they need to cut their batch sizes in half. Stacey realizes that would cut their inventory by 50% while also requiring twice as many setups and negotiations with material vendors to deliver twice as often. However, she acknowledges there’s a hidden benefit: reducing inventory will allow them to meet customer demands more quickly without having excess parts sitting around before being sold; therefore they’ll be able to make more money per part sold since they won’t have so much overhead due to unsold inventory.

Alex tells his staff at a meeting that Jonah says the amount of time parts spend in manufacturing goes like this. First, they have to be located and set up for processing on machines they are supposed to be processed by, then there’s the actual processing, followed by being placed onto different lines (like grocery store checkouts) until they’re put with others into a final product. A large percentage of each part’s time is spent queuing or waiting to move forward.

To improve throughput, Jonah suggests that the plant cut batch sizes in half. This will reduce queue and wait times by half as well. By cutting inventory roughly in half, they can deliver products faster than their competitors can. In addition to this, marketing should promise four-week deliveries to new clients.

Alex drives to the UniCo headquarters. He’s going there to convince Johnny Jons that they should advertise four-week deliveries instead of six weeks, so he can generate more sales. However, Jons is skeptical about Alex’s plan because it used to take Alex’s plant six months to execute orders. In order for them to promise and deliver in four weeks, Alex says that he can do it with a little help from his friends—and if they don’t make their promises come true, then Jons has agreed to buy him a new pair of Gucci loafers. After some negotiating back and forth between the two men, Jons agrees on advertising the orders as being delivered in six weeks but only if Alex delivers any orders within five weeks—otherwise he’ll have to buy Alex a new pair of shoes instead!

Chapter 29

In their house in Bearington, Alex lies awake next to Julie. It is four a.m., but he can’t stop thinking about the plant and its new manufacturing process. He won them several contracts with Johnny Jons, which has decreased batch sizes and sped up production time for everyone at the plant. There’s still idle time for non-bottlenecks, but since everything moves faster due to smaller batches, there are fewer lulls in work for workers or machines. Inventory levels are lower than ever before thanks to this system of smaller batches; however, there is bad news as well: less inventory means that if any one machine breaks down or something goes wrong during production that they’ll have no backup supplies on hand and will be forced to shut down until more parts arrive from suppliers (or whatever they decide).

Alex tells Julie that he can’t sleep and she intuits it’s because of work. She asks him to tell her about it, but Alex is surprised that she would be interested in his problems, which are related to accounting for parts. The way the company has traditionally done this makes it look as if they’re spending more money than they really are, although their actual expenses haven’t gone up at all because there’s less overhead now. Rather than focus on this problem, Alex decides to take Julie out for breakfast instead.

Lou tells Alex that he’s found a way to calculate cost-per-part that doesn’t artificially inflate expenses. However, it breaks with traditional accounting rules and Frost would never allow it if he knew about it. Lou and Alex agree to use the new method while hoping Frost doesn’t notice. Shortly after, Johnny calls Alex and says Bucky wants to buy from them again but they appear desperate—they’re asking for 1,000 products made in two weeks. Jons tells him that seems nearly impossible but if Alex can pull it off then Burnside will make their plant his preferred supplier.

Alex, Bob, and Ralph discuss Burnside’s order. Alex suggests that they cut their batch size in half again to save time, but Stacey points out that the parts for it are not available right now and will take 4-6 weeks to arrive from California. After negotiating with the supplier of those parts early partial shipments, Alex calls Johnny Jons back and tells him that they could ship Burnside 250 products per week for four weeks starting two weeks from now if he accepts. Jons thinks this is still a difficult order to fill.

Chapter 30

At the beginning of a new month, Alex’s team has their monthly meeting. Lou reports that they had a 17% improvement thanks to Burnside’s order, which meets Peach’s demand. The plant is turning a profit and made up for its losses in the past. The next day, Alex receives notice from Peach that he will have his performance review soon. He looks forward to showing what he has done, but when Hilton Smyth drops by unexpectedly while Alex is away at a meeting and notices some idle machines, Bob starts explaining about their new processes.

Ethan calls Alex and tells him that he spoke with Smyth, who’s no longer upset about the change in accounting methods. Also, Frost sends an auditor to look into this new method of accounting. And even though Alex continued to defend their decision by saying the new measures are clear representations of their expenses, they’re still told to return to using the old practices instead. When Lou received his meeting invitation from Frost, all he was told is that he has to stick with tradition and not deviate from what Peach wanted them do up until now rather than being questioned or punished for it because if they were sticking with these traditional measurements on a monthly progress report of 17 percent when Peach only requires 12.8 percent then something’s wrong here; therefore what they previously thought was true may not be after all.

While Lou and Alex are discussing the revised numbers, they hear a helicopter land in the parking lot. Two men climb out of it. One man is named Johnny Jons, and he’s a big deal with his own company that makes parts for helicopters. The other man is Bucky Burnside, who’s very important to Lou because he just landed an order worth 10,000 units per year from him. Alex panics when he sees them because he assumes something went wrong with his order since Bucky came to personally thank everyone in the plant for their help on this difficult project. However, before Alex can head out there to find out what happened with his order, Burnside strides into the plant and shakes hands with every single employee in sight. He congratulates Alex on getting such a hard job done so well by all those employees at once while also landing himself another long-term contract. Then Johnny Jons pulls Alex aside to tell him that not only did they get an order for 10K units per year from Burnside but also one from another huge customer as well!

Alex must go to his office in the morning, so he decides to stay with Julie at her parent’s house. Alex tells Julie that he is nervous about his performance review because of how their company uses accounting metrics. Julie says it is good for him to share this with her, and she wishes they had shared more information like this when they were dating. Both admit that they have been too focused on themselves instead of thinking about each other’s feelings during their relationship.

Julie confesses that she’s nervous about moving back home because she doesn’t want Alex to stop paying attention to her like he does now. She also knows that Dave and Sharon need their mom and dad at home, so Julie decides to move back in with Alex and the kids. They agree to share their lives more often as a family. Julie jokes with Alex about getting married again, but they decide on having a shotgun wedding in Vegas over the weekend.

Chapter 31

Alex arrives at his office to find that only Hilton Smyth and Neil Cravitz will be conducting his performance review—Bill Peach and Ethan Frost are elsewhere. Smyth tells Alex that he’ll decide whether or not to close the plant, which makes Alex angry because he feels like he’s being singled out. He begins his presentation anyway.

Alex tells Cravitz that UniCo’s goal is to make money, not keep costs down. Smyth looks doubtful but Alex explains his point for the next hour and a half. Smyth thinks that Alex hasn’t done anything revolutionary and criticizes him for taking ideas from Jonah. He says he will recommend against building the plant on those grounds at Peach’s upcoming meeting. The meeting ends when Smyth leaves it frustrated after they disagree about whether or not UniCo made more money than it cost them to produce products in their new factory.

Alex leaves the meeting with Smyth, but he is determined to talk to Peach about his plant. When Alex confronts Peach about how Smyth’s report on his plant was wrong, Peach calls in Frost and Jons. They all agree that Alex’s plant is one of the most productive plants in the division, and they tell him that he will be promoted into a new position as soon as they move up the corporate ladder.

Peach recommends that Alex spend the next two months preparing for his new role. Alex returns to the plant to announce the great news, but before he does, he calls Jonah and asks him if there is anything else he can do in preparation for this promotion. Jonah tells him no and then asks what it is that Alex wants to learn from this experience. He says that since Alex will be managing a much larger organization than before, he should focus on learning how to manage both effectively and efficiently.

Chapter 32

Alex and Julie celebrate the promotion over dinner, but Alex can tell that Julie is forcing her enthusiasm. He wonders aloud whether the promotion is just “winning a point in the rat race” and says that their family suffered too much for it. Julie reassures him that they would have had problems even without the crisis at the plant. Alex decides they should toast to something else instead—the fact that they are doing what they love, not just climbing up some corporate ladder.

Julie asks Alex why they didn’t come up with Jonah’s ideas on their own, since the solutions seem so simple. Alex reflects that these are all common sense ideas, but go against traditional business wisdom. He also reflects that Jonah used a Socratic approach by asking questions and forcing him to answer them himself. To Alex, it seems more effective than simply telling someone the answers because he might just refuse to agree with them. Julie points out that only asking questions is irritating as well. Alex decides he needs to learn how to persuade others like Jonah does in his workshop if he wants his company to succeed. He wonders how a physicist understands manufacturing systems so well and plans on asking Jonah about this when they meet next week for lunch at the steakhouse downtown.

Julie: “You know what you need? You need some of those books from your friend at work—the ones I was reading last night! They really helped me understand things better—what do you think?”

Alex: “I don’t know…they seemed kind of boring; I couldn’t get into them! But hey – maybe we can find another book or something online instead…let me see what else there is available…hmmm….here’s one called ‘How To Deliver A TED Talk’…that looks good! We’ll read this together tonight!”

Chapter 33

Alex approaches Lou, intending to recruit him to division management as part of his team. Before Lou can offer the new job, he tells Alex that the plant will achieve an estimated 20-percent profit improvements for the next two months. However, Lou has discovered another serious flaw in UniCo’s traditional accounting system. Currently, although excess inventory is a liability, their methods count inventory as positive assets. Thus when they reduced their inventory it appeared like they were doing worse than before even though it was actually a good sign! He explained this to Ethan Frost and Frost was so supportive of Alex’s claims because of this discovery which led them both to believe that there are big opportunities at UniCo. However before Alex could even offer Lou the job he told him that he wants to keep reforming UniCo’s accounting methods and make recommendations for change within its systems in order to improve profitability further and reduce costs more efficiently – something which would be best done by making him Division Controller where he would have direct access to all relevant information from across all divisions including manufacturing plants such as theirs (the one we just discussed).

Next, Alex offers Bob a job on his new division staff. Bob flatly refuses; he tells Alex that after Burnside visited the plant, he realized how integral good production can be to sales and client relationships. Rather than oversee production for the entire division, Bob wants to master plant-level production systems and understand how to scale and adapt them. To continue rethinking old processes, Bob wants to be the plant manager once Alex leaves. However, they are not sure who will replace Bob in his current role.

Stacey and Ralph are called into a meeting. Stacey states that she wants to take over Bob’s role as production manager because the bottlenecks have been taken care of, but new problems arise with machines that fall behind only if sales increase at a rapid pace. She feels like she can protect the manufacturing system from derailing by implementing new measures for CCRs.

Ralph feels that he has contributed a lot to solving real problems in the past few months. He wants to develop a new data system that will help him answer specific questions, like those posed by Bob, Stacey and Lou as they design their ideas.

Chapter 34

Alex and Julie drink tea together in the evening. Alex shares all of his staff’s plans with Julie, who points out that for them to have time to do what they want, he will need to run the division smoothly. She suggests that they spend two months helping him prepare for this transition.

Alex is at the plant and wants to gather information about the division. He asks his staff what he should do first, and they all agree that he needs to find out what people think their problems are in order to be a good leader. Alex points out that there will likely be a lot of information for him to look through, so how should he organize it? To demonstrate this, Alex draws shapes on the whiteboard and asks them how they would organize them. They argue over whether or not they should organize by shape or color until Alex realizes that they don’t know how he could possibly handle complex organization like that.

Chapter 35

Alex, his manager at work, asks the staff if anyone has thought of a better or more efficient way to organize their computer information. Ralph explains that when he was in college, he learned about methodologies used to organize elements. Mendeleev’s system is still widely used today because it organizes elements according to their weight and size. Since many elements have similar characteristics, Mendeleev organized them all together based on those characteristics.

Although Bob doesn’t believe Ralph’s story, everyone else thinks that Ralph is onto something. They all agree that Mendeleev’s system for organizing elements shows a pattern of the building blocks for everything in nature. If we can find an order to events in our company, then maybe we can make progress on projects and get things done faster. Alex realizes they’re trying to turn management into science just like Jonah does with his research at work. At home, Julie tells Alex that she started reading Plato’s Socratic dialogues because maybe it will help her learn how to persuade people better and win arguments with her husband and kids.

Chapter 36

The next day, Bob and Stacey deal with a new problem in their production line. Alex worries that they will continue to have problems like this one, but once the team meets again, Lou proposes a goal for them: they should create an ongoing improvement process.

Bob thinks that the phrase sounds like some sort of corporate jargon, but Lou points out that reducing expenses is not what they’ve been doing. Instead, they have tried to increase throughput by measuring the effect of each idea on inventory and operating expense, which has made their work successful. Alex realizes that this shift in thinking represents a change in culture for them and decides he needs to spread it throughout his division.

Bob believes that they’re missing something from their analysis. They created a new system, but it’s not as effective as the old one. He thinks that the word “process” is important because it gives them a framework to work within and improve upon in future iterations of this project. Bob and Alex decide to write out their process: Step 1: Identify the system’s bottlenecks (or constraints). Step 2: Decide how to exploit those bottlenecks. Step 3: Subordinate everything else in order to focus on exploiting those bottlenecks. Step 4: Elevate those bottlenecks by increasing capacity or speeding up production time for each constraint. Step 5(a): If you’ve broken through any constraints, go back to step 1 and repeat until all constraints are removed or your problems have been solved using an alternative solution

Step 5(b): If you haven’t broken through any constraints yet, go back and try another approach with different people/tools/methods

Alex is at home with his wife, Julie. He feels happy and nervous at the same time. His plant is not producing enough because he can’t increase throughput anymore without taking on so many sales that it derails the flow of his plant. Julie suggests he let Bob worry about the plant now since he will soon take charge. Alex realizes she’s right after all.

Chapter 37

At the plant, Ralph raises concerns about their process. Even though they changed some of the constraints and increased capacity, it still didn’t affect bottlenecks. Stacey realizes that with the tagging system in place, bottlenecks are still acting like bottlenecks when they don’t need to be anymore. She surmises that if she removes the tagging system, then natural flow will self-correct and resolve her Capacity Constraint Resources problem.

Bob notes that it’s good they’re shipping ahead of schedule, because the market is a bottleneck. Lou agrees but wonders why the NCX-10s are still working at capacity. Stacey admits she’s ordered extra units to keep the bottleneck machines operating at full capacity and adds a warning about Step 5: “Don’t let inertia become your system’s constraint.”

Step 3: Translate into Your Target Language

Translate from English to your target language. This step will help you identify any problems with translation or interpretation in Step 2. It will also give you an idea of how much work adapting this content might be for someone else who doesn’t know as much about the subject matter as you do!

Everyone is satisfied except for Lou. He realizes that with this new process, all the metrics they’ve used to measure progress need to be reexamined. However, Alex is excited because he thinks he can leverage the excess capacity Stacey artificially filled and take over the market. He wants Lou and Ralph to go talk with Johnny Jons about it tomorrow morning.

Chapter 38

Alex wakes up early and drives to the headquarters of his company. He thinks about how he will convince Johnny Jons, the CEO of their company, that they should sell 10 million dollars more worth of products. Alex meets with Dick Pashky, who is one of their best marketers. Alex explains that he has extra capacity in his plant and wants them to sell 10 million dollars more in products. However, Johnny laughs at him because they are already selling as much as possible for all customers. They do have French clients who want to buy from them but are asking for prices that are too low compared to what other companies charge.

Alex and Lou tell Jons that they can produce their products at a lower cost than what it costs them to make the product. Johns doesn’t understand how this could work, but tells Dick to bring the paperwork for Alex and Lou so he can hear them out. After several hours of calculating costs, Alex says that he wants to use this deal as an opportunity to break into the European market. He also asks for a guarantee from Johns that they’ll deliver their products within 3 weeks of purchase by Johns’ company. Jons thinks it’s crazy, but after seeing their math, agrees with the proposal. On his way home, Lou calculates that if all goes well on this project, his division will make $1 million profit! They are all thrilled about making money together. Despite being excited about making money in such a creative way (a new venture), Alex still feels like there is much more work ahead before he can run his own division successfully

Alex remembers Julie’s point that Jonah is a scientist and Ralph’s mention of Mendeleev. He wonders if there isn’t some connection between science and business. At the plant, everyone is busy preparing for the French contract except him. Now that things are running smoothly, he has nothing to do. He misses being needed at work because everything is going so well without his help now that he doesn’t have much to contribute anymore. With nothing better to do, Alex decides to go to the library and read some science books about how Newtonian physics relates to business in order see if there’s anything valuable from those connections with which he can assist his current employer on their upcoming project with France.

Alex and Julie drink tea together. Alex tells her about his physics books, which he read in college. He says that scientists look for simple if-then relationships between phenomena, instead of collecting a lot of data. This is also how Socrates studies human behavior—by looking for unusual connections between things and people. Alex isn’t sure what to do with this realization, though.

Chapter 39

In the morning, Bill Peach calls Alex to ask him to come into headquarters. Hilton Smyth’s plant is losing money because his traditional metrics look good. Ethan Frost believes that they need to change their accounting methods and wants Alex’s help. He is surprised by this request but agrees to go in anyway.

Alex is excited about the new orders coming in but his excitement turns to concern when Stacey and Bob tell him that they are falling behind. Alex, along with Ralph, realize that the new flood of orders has changed everything at their plant. They have to change things around so that it works better. Bob takes charge by ordering Stacey to change priorities and declaring that they will have to work with marketing until this crisis passes. Alex feels both proud of himself for helping solve problems as well as jealous because he wants a job like Bob’s someday.

Alex and Lou discuss Bob’s new leadership style. Alex is impressed with the changes, but Lou thinks it could lead to overtime and broken promises to marketing. They wonder if something has gone wrong or if they’re just reacting instead of planning ahead, but Lou still sees it as progress.

Chapter 40

Lou and Alex drive home from headquarters together, as they have every day for the last two weeks. They’ve been meeting with Peach to get a true idea of how poorly the division is performing, and so far, Bob Donovan’s plant is the only one that has not yet been in jeopardy. The two bicker about whether this means anything or if it’s just due to luck.

Alex thinks that they are just collecting data, but Lou says that it’s not inherently bad. The problem is that their measurements are still bad—plants have been making products and counting them as income rather than inventory. People don’t want to accept new metrics because it would expose how poorly they’re doing financially by showing the number of products lost instead of sold. Lou wants to see if the five-step process can help with this too, but Alex has plans for the evening.

Lou and Alex are two employees who work in a factory. Lou believes that the issue is bad metrics, but Alex thinks it’s something else. They argue about this for some time before they realize that there might be more than one problem with their process. What seems to be happening is that they have physical constraints on their production line, but organizational issues like selfishness and greed could also be contributing to the problems at hand.

Alex realizes that they’re still trying to figure out the same issues Jonah was working on. He knows that he’ll have to do his own research and come up with his own solutions, but Lou tells him he’s proud of him for figuring it all out.

The Goal: A Process of Ongoing Improvement Book Summary, by Eliyahu M. Goldratt

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