THE GOAL

1
THE GOAL
CHAPTERS 1-15
MANAGT 810, Fall 2006 Chwen Sheu
2
CHAP 1 BACKGROUND

• Alex Rogo, UniCo Plant Manager
• Engineering MBA education
• Family unhappy wife, 2 children

3
CURRENTLY REALITYAre there sufficient resources?

• Ultimatum from B. Beach
• Orders are always late, stacks of inventory,
  losing money
• 3 months to turn the plant around

4
CHAP 2 COST OF POOR MGMT CHAP 3 THE DIV MEETING

• Order does get shipped but
• Overtime, repair more
• Can we afford to do this?

5
CHAP 4 5 PRODUCTIVITY? GOAL?

• Jonah Is the robot really productive?
• Shipped more products? Reduced inventory?
  Decreased expenses?

• PRODUCTIVITY GOAL?
• Efficiency? Youre just playing a lot of games
  with numbers words
• Goal To make money
• Productivity Move us toward the goal

6
CHAP 6 MEAUSREMENT

• Set 1 Cash flow, ROI, Net profit
• Connection with making money
• Set 2 Throughput (T), Inventory (I), Operating
  expenses (OE)
• Why do we need this set?
• What are the traditional definitions?

7
CHAP 7 8 9 10 FAMILY, MORE WITH JONAH

• T, I OE
• Throughput the rate at which the system
  generates money through sales
• Inventory all the money that the system has
  invested in purchasing things which it intends to
  sell
• Operational Expense all the money the system
  spends in order to turn inventory into sales

8
MONEY
ROI
CF
NP
T
OE
INV
9
CHAP 11 12 MORE WITH JONAH

• A plant in which everyone is working is very
  inefficient Local optimum

• Balanced Plant
• Production/Capacity Market demand
• Closer to a Balanced Plant Closer to Bankruptcy?

• Two phenomenon
• Stat fluctuations Dependent events

10
CHAP 13 HIKING

• The Hiking Analogy
• T, I, OE?

• Why was the troop behind?

11
THE HIKING ANALOGY
W.I.P.
Throughput Inventory Operating Expenses
Walked distance Gap Effort/Energy
12
Chapter 14 Dice Game

• The Dice Game
• A balanced plant
• Throughput (TP) Number of matches moved to next
  bowl
• TP Equal to die roll, Avg number ?

• Actual TP after 10 cycles?
• What happened?

13
Chapter 15 Learning to Manage Herbie

• Dave first
• T, I, OE???
• Herbie first
• T, I, OE???

What have we learned???
14
SUMMARY LESSONS

• Family vs. Work
• Transformation process matters
• Must know about Goal Productivity
• Measurement drives behavior decisions
• Management by Constraint

15
Q A