The Goal Book Questions

Topics: Theory of Constraints, Cost, Costs Pages: 2 (558 words) Published: January 20, 2014
1. What was the goal?
The goal is to make money. It is to increase throughput while reducing both inventory and operational expenses. Throughput is the rate at which the system generates money through 'sales'. Inventory is all the money that is invested in the system in order to purchase things which intend to be sold. And Operational Expense is the total of money that the system spends in order to turn inventory into throughput.

2. What were the company’s current problems?
There were many problems with the company. The company did not have a concrete process that was aligned with the goal. Some of the problems is increased inventories, increased operational expenses and reduced throughput. The company's focus was only on increasing efficiencies. The reason behind this to be more specific, is the installment of new robots that were used to produce more and more finished goods that were not needed in the market and in the case of products needed, there aren't any parts that were available. The plant was unbalanced as it was not balancing the capacity of its resources with the demand from the market. Another reason are bottlenecks that the plant had to deal with.

3.How did they change to address the problems?
First, they had to find the bottlenecks and non-bottlenecks. Second, the processes at bottlenecks were changed. Third, they subordinated everything to these changes and decisions. Fourth, they elevated the system constraints.

The team decided to clear the backlog orders and to give priority to some orders by labeling them in red and green tags. However, it seems that this has created another constraint in the end and they decided to stop using the tags.

Also, the accounting system had to be changed from the standard accounting they were using to throughput accounting.

4.How was the accounting system reoriented?
oThey changed the cost to be based on a current two month period. oThe cost of operating was measured based on standard...
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