The Goal: A Process of Ongoing Improvement, Third Revised Edition

by Eliyahu M. Goldratt

  try to gain some momentum by cleaning the board and writing in

  big letters "A process of on-going improvement."

  It doesn't help much. We sit in silence for a while staring at

  the board.

  "Comments?" I ask at last. And, as expected, it's Bob who

  voices everybody's feeling.

  "I'm sick and tired of these big words. Everywhere I go, I

  hear the same thing." He stands up, goes to the board, and mim-

  icking a first grade teacher he intones "A process ... of ...

  on-going . . . improvement."

  Sitting back down he adds, "Even if I wanted to forget it I

  can't. Hilton Smyth's memos are all spotted with this phrase. By

  the way Alex, these memos keep on coming, and more often than

  before. In the name of savings, at least saving paper, can't you do

  something to stop it?"

  "In due time. But let's keep at it. If nothing comes out of

  these discussions, then the only useful thing that I will be able to

  do as the division manager will be to stop some memos. Come on

  Bob, spit out your frustrations."

  It doesn't take much to encourage Bob to voice his true opin-

  ion. "Every plant in our company, has already launched at least

  four or five of those pain-in-the-neck improvement projects. If

  you ask me, they lead only to indigestion problems. You go down

  there, to the floor, and mention a new improvement project and

  you'll see the response. People have already developed allergies

  to the phrase."

  E.M. Goldratt

  The Goal: A Process of Ongoing Improvement

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  "So, what are you suggesting should be done?" I pour some

  more fuel on his flames.

  "To do what we have done here," he roars back. "We, here,

  have not done any of these. We have not launched even one

  formal improvement project. But look at what we have achieved.

  No talks, no big words, but if you ask me, what we've achieved

  here is the real thing."

  "You're right," I try to calm the volcano that I have awak-

  ened. "But Bob, if we want to do the same in the entire division we must pinpoint what exactly the difference is between what we

  have done and what everyone else has tried to do."

  "We haven't launched so many improvement projects," he

  says.

  "That is not accurate," Stacey responds. "We have taken

  many initiatives: in shop floor procedures, in measurements, in

  quality, in local processes, not to mention the changes that we

  have made in the way we release material to production." Raising

  her hand to stop Bob from interrupting, she concludes: "True,

  we didn't call them improvement projects, but I don't believe the

  crucial difference is that we didn't bother to title them."

  "So why do you think we have succeeded where so many

  have failed?" I ask her.

  "Simple," Bob jumps in. "They talked, we did."

  "Who is playing with words now," I shut him off.

  "I think that the key," Stacey says in a thoughtful tone, "is in the different way we interpreted the word 'improvement'."

  "What do you mean?" I ask her.

  "She is absolutely right!" Lou beams. "It's all a matter of measurements."

  "For an accountant," Bob speaks to the room, "Everything is a matter of measurements."

  Lou stands up and starts to pace the room. I rarely see him

  so excited.

  We wait.

  At last he turns to the board and writes:

  THROUGHPUT INVENTORY OPERATING EXPENSE

  Then he turns back to us and says, "Everywhere, improve-

  ment was interpreted as almost synonymous to cost savings. Peo-

  E.M. Goldratt

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  pie are concentrating on reducing operating expenses as if it's

  the most important measurement."

  "Not even that," Bob interrupts. "We were busy reducing

  costs that didn't have any impact on reducing operating ex-

  penses."

  "Correct," Lou continues. "But the important thing is that

  we, in our plant, have switched to regard throughput as the most

  important measurement. Improvement for us is not so much to

  reduce costs but to increase throughput."

  "You are right," Stacey agrees. "The entire bottleneck con-

  cept is not geared to decrease operating expense, it's focused on

  increasing throughput."

  "What you are telling us," I say slowly, trying to digest it, "is that we have switched the scale of importance."

  "That's precisely what it is," Lou says. "In the past, cost was the most important, throughput was second, and inventory was a

  remote third." Smiling at me he adds, "To the extent that we

  regarded it as assets. Our new scale is different. Throughput is

  most important, then inventory—due to its impact on

  throughput and only then, at the tail, comes operating expenses.

  And our numbers certainly confirm it," Lou provides the evi-

  dence. "Throughput and inventory had changed by several tens

  of percent while operating expenses went down by less than two

  percent."

  "This is a very important lesson," I say. "What you claim is that we have moved from the 'cost world' into the 'throughput

  world'."

  After a minute of silence I continue, "You know what, it re-

  ally highlights another problem. Changing the measurements'

  scale of importance, moving from one world into another, is with-

  out a doubt a culture change. Let's face it, that is exactly what we

  had to go through, a culture change. But how are we going to

  take the division through such a change?"

  I go to pour myself another cup of coffee. Bob joins me.

  "You know, Alex, something is still missing. I have the feeling

  that the entire approach we took was different."

  "In what way?" I ask.

  "I don't know. But one thing I can tell you, we haven't de-

  clared any improvement project, they grow from the need. Some-

  how it was always obvious what the next step should be."

  "I guess so."

  E.M. Goldratt

  The Goal: A Process of Ongoing Improvement

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  We spend good time. We bring up the actions we took and

  verify that each one actually has been guided by our new scale.

  Bob is very quiet until he jumps to his feet.

  "I nailed the bastard!" he shouts, "I have it!"

  He goes to the board, grabs a marker and put a heavy circle

  around the word 'improvement.' "Process of on-going improve-

  ment," he booms. "Lou and his fixation on measurements forced

  us to concentrate on the last word. Don't you realize that the real

  sneaky SOB is the first one?" and he draws several circles around

  the word 'process.'

  "If Lou has a fixation about measurements," I say somewhat

  irritated, "then you certainly have a fixation about processes.

  Let's hope your fixation will turn up to be as useful as his."

  "Sure thing, boss. I knew that the way we handled it was

  different. That it wasn't just a matter of scales."

  He returned to his seat still beaming.

  "Do you care to elaborate?" Stacey inquires in
a soft voice.

  "You haven't got it?" Bob is surprised.

  "Neither did we." We all looked perplexed.

  He looks around and when he realizes that we are serious he

  asks, "What is a process? We all know. It's a sequence of steps to

  be followed. Correct?"

  "Yes . . ."

  "So, will anybody tell me what the process is that we should

  follow? What is the process mentioned in our 'process of on-go-

  ing improvement'? Do you think that launching several improve-

  ment projects is a process? We haven't done that, we have fol-

  lowed a process. That's what we have done."

  "He's right," says Ralph in his quiet voice.

  I stand up and shake Bob's hand. Everybody is smiling at

  him.

  Then Lou asks, "What process have we followed?"

  Bob doesn't hurry to answer. At last he says, "I don't know,

  but we definitely followed a process."

  To save embarrassment I hurriedly say, "Let's find it. If we

  followed it, it shouldn't be too difficult to find. Let's think, what is

  the first thing we did?"

  Before anybody has a chance to answer Ralph says, "You

  know, these two things are connected."

  "What things?"

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  "In the 'cost world' as Alex called it, we are concerned pri-

  marily with cost. Cost is drained everywhere, everything cost us

  money. We had viewed our complex organization as if it were

  composed out of many links and each link is important to con-

  trol."

  "Will you please get to the point?" Bob asks impatiently.

  "Let him talk," Stacey is no less impatient.

  Ralph ignores them both and calmly continues, "It's like

  measuring a chain according to its weight. Every link is impor-

  tant. Of course, if the links are very different from each other

  then we use the principle of the twenty-eighty rule. Twenty per-

  cent of the variables are responsible for eighty percent of the

  result. The mere fact that we all know the Pareto principle shows

  us to what extent Lou is right, the extent to which we all were in

  the cost world."

  Stacey puts her hand on Bob's to prevent him from interfer-

  ing.

  "We recognize that the scale has to be changed," Ralph con-

  tinues. "We choose throughput as the most important measure-

  ment. Where do we achieve throughput? At each link? No. Only

  at the end of all operations. You see, Bob, deciding that

  throughput is number one is like changing from considering

  weight to considering strength."

  "I don't see a thing," is Bob's response.

  Ralph doesn't let go, "What determines the strength of a

  chain?" he asks Bob.

  "The weakest link, wise guy."

  "So if you want to improve the strength of the chain, what

  must your first step be?"

  "To find the weakest link. To identify the bottleneck!" Bob

  pats him on the back. "That's it! What a guy!" And he pats him

  again.

  Ralph looks a little bent, but he is glowing. As a matter of

  fact, we all are.

  After that it was easy. Relatively easy. It wasn't too long be-

  fore the process was written clearly on the board:

  E.M. Goldratt

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  STEP 1. Identify the system's bottlenecks.

  (After all it wasn't too difficult to identify the oven and

  the NCX10 as the bottlenecks of the plant.)

  STEP 2. Decide how to exploit the bottlenecks.

  (That was fun. Realizing that those machines should not

  take a lunch break, etc.)

  STEP 3. Subordinate everything else to the above decision.

  (Making sure that everything marches to the tune of the

  constraints. The red and green tags.)

  STEP 4. Elevate the system's bottlenecks.

  (Bringing back the old Zmegma, switching back to old,

  less "effective" routings. . . .)

  STEP 5. If, in a previous step, a bottleneck has been broken go

  back to step 1.

  I look at the board. It's so simple. Plain common sense. I'm

  wondering, and not for the first time, how come we didn't see it

  before, when Stacey speaks up.

  "Bob is right, we certainly followed this process, and we cy-

  cled through it more than once—even the nature of the bottle-

  necks we had to deal with changed."

  "What do you mean by the 'nature of the bottlenecks?' " I

  ask.

  "I mean a major change," she says. "You know, something

  serious like the bottleneck changing from being a machine to

  being something totally different, like insufficient market de-

  mand. Each time that we've gone through this five-step cycle the

  nature of the bottleneck has changed. First the bottlenecks were

  the oven and the NCX10, then it was the material release system

  —remember the last time when Jonah was here?—then it was the

  market, and I'm afraid that very soon it'll be back in production."

  "You're right," I say. And then, "It's a little odd to call the market or the system of material release a bottleneck. Why don't

  we change the word, to . . ."

  "Constraint?" Stacey suggests.

  We correct it on the board. Then we just sit there admiring

  our work.

  "What am I going to do to continue the momentum?" I ask

  Julie.

  "Never satisfied, huh?" and then she adds passionately,

  E.M. Goldratt

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  "Alex, why do you drive yourself so hard? Aren't the five steps

  that you developed enough of an achievement for one day?"

  "Of course it's enough. It's more than enough. Finding the

  process that everybody is looking for, the way to proceed system-

  atically on the line of on-going improvement, is quite an achieve-

  ment. But Julie, I'm talking about something else. How can we

  continue to improve the plant rapidly?"

  "What's the problem? It seems that everything is sailing for-

  ward quite smoothly."

  I sigh, "Not exactly, Julie. I can't push aggressively for more

  orders because we're afraid that any additional sales will create

  more bottlenecks and throw us back into the nightmare of expe-

  diting. On the other hand, I can't ask for a major expansion in

  hiring or machines; the existing bottom line results don't justify it

  yet."

  "My impatient husband," she laughs. "It looks like you sim-

  ply have to sit tight and wait until the plant generates enough

  money to justify more investments. In any event darling, very

  shortly it will be Donovan's headache. It's about time you allowed

  others to worry."

  "Maybe you're right," I say, not totally convinced.

  E.M. Goldratt

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  Captured by Plamen T.

  309

  37

  "Something is wrong," Ralph says after we've made our-

  selves comfortable. "Something is still missing."

  "What?" Bob says
aggressively, all geared up to protect our

  new creation.

  "If step 3 is right . . ." Ralph is speaking very slowly, "if we have to subordinate everything to the decision that we made on

  the constraint, then . . ."

  "Come on Ralph," Bob says. "What's all this 'if we have to

  subordinate'? Is there any doubt that we must subordinate the

  non-constraints to the constraints? What are the schedules that

  you generate on your computers if not the act of subordinating

  everything to our decision about the bottlenecks' work?"

  "I don't doubt that," Ralph says apologetically. "But when

  the nature of the constraint has changed, one would expect to see

  a major change in the way we operate all non-constraints."

  "That makes sense," Stacey says encouragingly. "So what is

  bothering you?"

  "I don't recall that we did such changes."

  "He's right," Bob says in a low voice. "I don't recall it either."

  "We didn't," I confirm after a while.

  "Maybe we should have?" Bob says in a thoughtful voice.

  "Let's examine it," I say. And then, "When was the first time the constraint changed?"

  "It happened when some green-tag parts started arriving at

  assembly too late," Stacey says without hesitation. "Remember

  our fear that new bottlenecks were popping up?"

  "Yes," I say. "And then Jonah came and showed us it wasn't

  new bottlenecks, but that the constraint had shifted to being the

  way we released work to the plant."

  "I still remember the shock," Bob comments, "of restricting the release of material, even though the people had practically

  nothing else to work on."

  "And our fear that 'efficiencies' would drop," Lou com-

  ments. "In retrospect, I'm amazed that we had the courage to do

  it."

  E.M. Goldratt

  The Goal: A Process of Ongoing Improvement

  Captured by Plamen T.

  310

  "We did it because it made perfect sense," I say. "Reality

  certainly proved us right. So Ralph, in that case at least, we did

  affect all the non-constraints. Should we move on?"

  Ralph doesn't answer.

  "Something's still troubling you?" I inquire.

  "Yes," he says, "but I can't put my finger on it."

  I wait for him.

  Finally Stacey says, "What's the problem, Ralph? You, Bob,

  and I generated the work list for the constraints. Then you had

  the computer generate release dates for all material, based on

  that list. We definitely changed the way we operated a non-con-