The Goal - Book Review

Book Review of "Goal" 1. What is the problem? Alex Rogo was a plant manager at the Barrington Plant of Uniware, a division of UniCo. One day Bill Peach, division vice president visited his plant and found that there were lots of problems with schedule arrangement, quality, cost & inventory control in his plant. These problems had already made the organization lose money. At last Bill gave Alex three months to improve, otherwise, the plant would be closed. Three months?! That was all Alex Rogo was able to think about. Alex had to start to consider what was the goal of the manufacturing organization. What on earth was the GOAL of the manufacturing organization? Was it better customer service? Larger market share? Lower cost? High quality? just survival? Alex was always trying to find the answer. Finally he got the idea that the GOAL of a manufacturing organization was to make money. Next step for Alex was to find a way to measure if the manufacturing organization makes money or not. One way was Bottom Line Measurement, which was submitted by Mr. Lou, the plant controller. The bottom line measurement contains three components. They are Net Profit, Return on Investment (ROI) and Cash Flow. Net profit is absolute value the organization earns. ROI is a ratio, which can tell the relationship between return and investment. And organization can not survive without enough cash flow. To make money is to increase net profit, while simultaneously increase ROI and cash flow. The other measurement was developed by Jonah, who once taught Alex mathematical models when Alex was a student. This measurement is also composed by three elements, which are Throughout, Inventory and Operational Expense. Throughput is the rate at the system generates money through sales. Inventory is all the money that system has invested in purchasing things which it intends to sell. Operational expense is all the money the system spends in order to turn inventory into throughput. The goal for making money