Eliyahu M. Goldratt's The Goal is an interesting and informative business book that covers many of the issues facing businesses today. These issues include bottlenecks, activating versus utilizing resources, small batch sizes, work in progress, the concept of a "Balanced Plant", "the real goals" of an organization, and the Theory of Constraints. In this novel, Al Rogo learns there are three things that a manager must be able to do in order to manage and that is to learn what to change, what to change to, and how to cause the change.
To start at the most basic level of changing mindsets, you must understand that the real goal of any organization is to make money. No company exists to lose money or to produce a product out of the goodness of their heart. Therefore, the real goal is to make money. There are three measurements which "express the goal of making money perfectly well, but which also permit (development of) operational rules for running (a) plant" (Goldratt 60). These measurements are throughput, inventory and operational expense. According to Goldratt, these are defined as follows. "Throughput is the rate at which the system generates money through sales."; "Inventory is all the money that the system has invested in purchasing things which it intends to sell"; and "Operational expense is all the money the system spends in order to turn inventory into throughput" (Goldratt 60-61).
The balanced plant concept is a mistake that managers have been trying to achieve for years. Efficiency ratios do not increase sales. There are dependant and statistical variables that impact the way the plant should be running. The balanced plant concept is based on balancing capacity with efficiency. By balancing your plant with your capacity, you are insuring bankruptcy (Go ...