The paper contains two parts: the first part is devoted to the book review of Eliyahu Goldratt The Goal that relates the issues of contemporary business management. The improvement of productivity is important to any organization. Also, it is important to effectively compete in the market using available resources for production pursuing the main objective of any business – to make money.
The second part of the paper is devoted the analysis of a real situation in the company which was improved using principles and approaches described in the book.
The Goal. Eliyahu M. Goldratt. (3nd. ed.). New York: North River Press, 2004. 384 pages.
The book The Goal is a practical guidance of business transformation. It was written as a novel telling the story of Alex Rogo, a plant manager, who had serious problems with manufacturing performance. Alex was making desperate attempts of saving the plant having ninety days at his disposal while his marriage decayed. He met his teacher, Johan, who helped him think unconventionally to resolve the problem.
In whole, the book contains useful information regarding effective management based on the theory of constraints. The recommendations developed by Goldratt help analyze the problem and elaborate effective measures of solving the issues faced by companies management.
The author of the book, Eliyahu Goldratt, is a world known Israeli philosopher, physicist and inventor. He developed his special non-traditional approach to management and business which made him a popular consultant known all over the world. Goldratt was recognized as a leader whose ideas helped thousand managers save their business and improve performance. He is considered to be an effective educator to a great number of world corporations whose recommendations helped managers of many corporations to efficiently compete in the global market. Some of them, for example, Proctor & Gamble, General Motors, Ford Corporation, AT&T, were transformed in accordance with Goldratt’s ideas.
The book consists of forty chapters which tell the reader the gist of the problem (chapters 1-13), plot development (chapters 13-20) and how the issues were resolved (chapters 20-40). In the very first chapters narrate the reader about the main character, Mr. Alex Rogo, a plant manager at UniCo, who found himself in a very unpleasant situation: the plant was losing money while the figures showed that he was running an efficient company and his wife left him because he paid little attention to their family. He had to apply measures in a short term to improve the situation, otherwise the situation was about to end up with closing the plant and a large-scale dismissal.
Fortunately, he met his teacher from college, Johan, who helped him analyze the problem and identify the main goal of the plant. Johan gave Alex three measurements which were operational expenses, throughput and inventory to identify where the problem is located. The three recommendations Johan gave to Alex were quite opposite of what Alex learned from his previous experience in business. Johan told Alex about the importance of statistical analysis and dependent events. Meanwhile, the tension in the Alex’s family was increasing. Johan told Alex about the concepts of bottlenecks with regard to the particular situation in the plant. They made several experiments with supplying parts to the bottlenecks. They achieved an increase in productivity meanwhile facing another problem.
Johan visited the plant and considered the situation carefully making recommendation regarding the improvement of the situation. As a result, the plant was not shut down and the members of the team who contributed into the saving of the plant were promoted as well as Alex who was promoted to the position of the division leader.
The main conclusions for those who faced similar situation were as follows: the goal of the company must be identified, measurements are necessary to be defined to have an idea of how business was run, critical thinking helps seek out solutions including experiments and unconventional approaches, teamwork is very important because it offers more ideas, it is important not to give up whatever happens and try to improve the situation by all means available seeking for suitable solution.
The five steps process of improvement of constraints was an important plan of resolving any problem. It includes identification of constraints in a particular company, figuring out the opportunity of making more products using available capacity, making adjustments to non-constraint resources, taking the workload off constraint items using other non-constraint resources for production, identification of other constraints starting over the steps listed again.
I would recommend this book to those who face constraints at their companies, i.e. management of every company. The ideas exposed in the book can be useful for middle-level, top managers and university teachers. In whole, the book is written in an easily readable manner offering unconventional opinion to resolve an issue. The book made me think about the constraints my company faces. Also I pondered over my family life because the ideas exposed in the book could help improve family life as well because the principles of both work and family life are similar. The main idea which was useful to me in particular was that hard work and strong belief can help improve all aspects of life. Also, I have found the five steps of analyzing the problem very useful in all fields of life, not only in business. The book stimulates to think about ongoing improvement. It inspires to think about further improvement after previous objectives were achieved.
However, I would remove unnecessary dialogs which sometimes hamper clear exposition. Also, the information can be delivered more clearly because sometimes I had to re-read passages several times to catch the meaning. It would be nice if main formulae, definitions and strategies are listed at the end of the book in the form of conclusion or summary not to search in the book for main ideas.
Donner Company Analysis
Donner Company is one of the US manufacturers of printed circuit boards competing with 750 other US manufacturers in the industry. The industry faced growth when the use of electronic appliances increased. The company developed new production processes and received several patents for their products to compete more effectively in the market.
Despite of employment of new design and advanced production techniques, the firm faced several issues related to productivity, operations and delivery.
The First Issue
The problem related productivity is connected with production bottleneck. The company faced the problem distributing workload when having individual customer orders and urgent orders which are to be completed in four days. The problem was faced daily and it was caused by the workload shifting from the first operation to the second operation without pattern. The lack of pattern causes production bottleneck (Donner Company Case Study, 2009).
The workload depends on circuit design and the size of the order. Besides, when manufacturing circuit boards according to individual design, some operations are omitted and some of them require rework, urgent orders in particular. The workers are shifted from one operation to another according to operation demand. The workers are continuously transferred from one workstation to another without any effect. As a result, some of the workstations are idle while other ones are overloaded causing a delay in delivery of artwork modifications. Also, the work is often disturbed by the calls made by customer’s engineers who encountered a problem with design. The supervisor of the company faced the problem when having bulk orders while short orders (up to eight items) are managed successfully.
The Second Issue
The company also encountered another problem with productivity because some machines stand idle while others are overloaded. Besides, reworking parts of poor quality, customer returns and parts of wrong design is not included into the calculation of labor hours. The time for moving between workstations is added to idle time and cuts production time. The company needs to revise its job strategy and improve the operations mentioned.
The improvements of operations and implementation of new productivity methods are impossible because of the pressure caused by the demand for output. An additional stress caused by constant shifting from one machine to another raised difficulties in making experiments and implementation of new ideas. On the contrary, implementation of new ideas has added confusion and mess into the production process. As a result, the workers were reassigned again and the orders were delayed. The productivity of the company was negatively influenced due to the innovations (Donner Company Case Study, 2009).
The Third Issue
The company also failed to meet due dates of products delivery. The returns of products made by the customers had increased for 2% comparatively to the preceding period. In addition, a delay in product delivery had increased up to 9 days in average. The failure to deliver products in time caused sales losses. The company delivers poor quality products that often results in customer returns that require reworking. Thus, a reject rate of the company in the preceding period made up 6% which was cause by frequent reworking, incomplete operations and reprocessing of products. The delay of production led to increase in reworking of circuit boards which resulted in decrease in shipments. The company had to hire additional workforce to fill the deficiency in the production division. However, additional employees will require training and practice to become skilled (Donner Company Case Study, 2009).
It was also identified that a delivery man of the company whose obligations include tracking orders, delay investigation, determination of urgent orders, calling clients and warning them regarding the delay in delivery, securing supplies that are missed, was overloaded with work.
Solutions and Recommendations
The first thing the company should do is to regain sales because the revenue depends on sales. The goal of any business is to make revenues, thus, the primary solution is to resolve the issue with operations system. The production bottleneck is tied to excessive workload. Therefore, the company should accept the orders which it is able to fill. Filling only feasible orders will help the company deliver them in time. Besides, it will also help focusing on a particular assignment that ensures the quality of the products and efficient time distribution for making the required output. This measure will help significantly reduce employees’ idle time as they would receive a particular assignment to complete having enough time and resources. The shifting of workers can also be reduced in this way because of feasible number of orders given and resources provided for each of them.
The next recommendation concerns the increase of productivity. An increase in productivity could be achieved by separation of production process into two parts: the first unit will be occupied with customers’ orders; the second unit will be engaged with reworking the parts returned by the customers, parts of poor quality, and parts that need redesigning. The major number of workers will be assigned to the unit which is responsible for new orders processing. Fewer workers will be engaged in redesigning and reworking of returns. The separation of these two processes will result in two distinct advantages: the jobs of the two units would be done at the same time reducing employees’ idle time as well. This would allow workers to focus on completing a particular task thus ensuring the quality of circuit boards, increasing company productivity and making timely delivery of products more realistic.
The obligations of delivery man were divided between two employees – delivery man and the assistant. Thus, one of them will be responsible for new orders; the other would be able to handle the tasks connected with processing rework. Thus, the orders must be scheduled between them.
Also, in this particular situation with Donner Company, an implementation of Six Sigma or Total Quality Management approaches is possible. Six Sigma approach is useful when there is a need to eliminate shortcomings of different processes because it involves analysis of data collected (Goldratt, 2004).
Total Quality Management is an approach which requires participation of all company departments in the process of improvement. This approach allows for creating a culture of quality where the efforts of every member of a team are directed at customer satisfaction (Stevenson, 2008).
The approaches that were suggested would help Donner Company develop new strategies that would stimulate an increase of productivity, encourage employees’ creativity unconventional thinking, improve quality of products, and delivery. As an additional measure, SWOT analysis is to be carried out. SWOT analysis may help identify key strategies of further development which would be built on core strengths of the company; eliminate the influence of weaknesses and deter possible threats. SWOT analysis offers necessary information to the management of the company regarding its strengths, weaknesses, opportunities and threats which is helpful when identify or changing current strategy. It also helps developing strategic plans and elimination of competition threats. This recommendation would help the company to handle its operations problems. Besides, any strategy needs to be revised when internal or external environment of the company is changing.
In the first part of the paper a book review was represented. The book review contains the information about the author of the book, brief description of the book and summary of main ideas represented in the book.
The case of Donner Company was considered taking into account a particular situation of the company. Three issues related productivity, operations and delivery were analyzed with appropriate recommendations developed. The main concepts outlined in the book The Goal by Eliyahu Goldratt and applied to resolve the issues Donner Company had encountered. The recommendations were developed separately for the three issues outlined.
Goldratt, E. (2004). The goal. (3rd ed.). New York: North River Press.
Operations Management – Case Study of Donner Company. (2009).
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Stevenson, W. J. (2008). Operations management. New York: McGraw-Hill/Irwin.