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  • Good Book on Manufacturing Management: The Goal

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22 Aug 2010

Good Book on Manufacturing Management: The Goal

  • By Bill Conerly
  • In Books, Business Strategy
  • 1 comment

The lessons of Eliyahu Goldratt's The Goal are broader than manufacturing management, but that's the context for the lessons. The book is fairly old, first published in 1984, and I'm not sure how I missed it.
TheGoal It's a very good read. The book is actually a novel, though shelved in the Business Management section of most bookstores. And in fact, it's got a clear business lesson. The author has used the fiction format effectively, though. He poses a problem for the protagonist, gives a little information, and invites the reader to solve the problem. Gradually, we see the point, and much more effectively than if we were presented with bullet points and diagrams.

The Goal introduced the world to Goldratt's Theory of Constraints. Here's the simple version: imagine a factory. Every factory has a bottleneck that limits production. Think of the bottleneck as a machine, though it could be any process, such as packing the finished product in shipping boxes. The value of operating the bottleneck is equal to its production rate (X widgets per hour) times the value of the final product (NOT the value of the widget produced by the bottleneck).

Example: you are making a $1000 electronic product. Each product needs an on-off switch, which you manufacture. If your switch machine is the bottleneck, then the value of each switch produced is $1000!It is the switch that enables the sale of the final product. With this insight, two operating practices are derived: 1) resources to support the bottleneck are tremendously valuable. For instance, adding a worker to ensure that the switch machine never lacks raw materials is worthwhile, given the high value of its output. 2) resources used in non-bottleneck processes are value-less, at least at the margin. Making another power supply does not add to your ability to sell another product, if the limiting factor is the on-off switch.

This all makes sense to me, who is definitely not a manufacturing guy, but it apparently flies in the face of some cost accounting practices commonly used in manufacturing.

Overall, it's a worthwhile read, with applicability to many other businesses.

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  1. Art
    October 4, 2010

    Hi Mr.Conerly, we would be interested in interviewing you for our website, take a look at our website http://www.operationsmanager.com and please contact us through our contact form or my email.
    Art
    Manager
    http://www.OperationsManager.com

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