Goldratt, E. M. and J. Cox. 1986.

The Goal: A Process of

Ongoing Improvement. New York: North River Press.
Summary by Chris Hourigan
University of South Florida, Spring 2001
The Goal is a very compelling novel. Novel, HUH!! Who ever heard of a novel about a
production plant? Well, Eli has made the production managers have quite an epiphany. In one
book he might have changed the whole world of cost accounting. Eli approached the production
world with a common sense view. Using just one goal, making money, he referenced every
activity to it. Eli said, "I view science as nothing more than an understanding of the way the
world is and why it is that way." You see, Eli is a physicist, and in being one, has to understand
why things work the way they do. His common sense approach is illustrated beautifully in this
novel. He has looked at cost accounting from the outside and has developed a whole new system
because of it.
Everyone from accountants to production managers to CEOs should read this book. Because of
its fundamentals, it should be part of the curriculum of every accounting program. This novel
has and continues to help the industry to make strides toward continuous improvement.
Chapter One
The first chapter gets the reader acquainted with Mr. Alex Rogo and his apparent problems with
his production plant. This is shown through a confrontation between Mr. Rogo and his boss Mr.
Peach, the Division Vice President. The dispute is over an overdue order #41427. Through their
conversation its learned that Mr. Peach will not settle for anything less than the order being
shipped today, and since the plant is neither productive nor profitable, Alex has three months to
show an improvement or the plant will be shut down!
Chapter Two
This chapter gives insight to Alexs home life. Since moving back to his hometown six months
ago, it seems adjustment isnt going well for his family. Its great for Alex, but its a big change
from the city life that his wife is used to. You also experience Mr. Rogos background through
his reflections back on his travels to eventually find himself back where he started. "Hes now
38 years old and a crummy plant manager". By the way, the order #41427 does get shipped, but
not very efficiently. All hands in the plant are working on one order with forbidden overtime to
boot.
Chapter Three
Mr. Peach calls a meeting at headquarters for all plant managers and his staff. At the meeting
everybody finds out how bad things are and are given goals to achieve for the next quarter.
Through the grapevine Mr. Rogo finds out perhaps why Mr. Peach has been acting so erratic
lately, the Division has one year to improve or its going to be sold, along with Mr. Peach.

Chapter Four
While at this meeting, Alex thinks back on a recent business trip where he ran into an old
physics professor, Jonah, at the airport. Jonah puzzles Alex with how well he knows how Alexs
plant is doing. Jonah has no knowledge of where Alex is employed. Johan predicts the
problems of high inventories and not meeting shipping dates. He also states that there is only
one goal for all companies, and anything that brings you closer to achieving it is productive and
all other things are not productive. (See What is this thing called Theory of Constraints for more
on Alex's encounter with Jonah.)
Chapter Five
Alex decides to leave the meeting at the break. He has no particular place he would like to go;
he just knows this meeting isnt for him, not today. He needs to understand what the "goal" is.
After a pizza and a six pack of beer it hits him, money. The "goal" is to make money and
anything that brings us closer to it is productive and anything that doesnt isnt.
Chapter Six
Mr. Rogo sits down with one of his accountants and together they define what is needed in
terms of achieving the goal. Net profit needs to increase along with simultaneously increasing
return on investment and cash flow. Now all that is needed is to put his specific operations in
those terms.
Chapter Seven
Alex makes the decision to stay with the company for the last three months and try to make a
change. Then he decides he needs to find Jonah.
Chapter Eight
Alex finally speaks to Jonah. He is given three terms that will help him run his plant,
throughput, inventory, and operational expense. Jonah states that everything in the plant can be
classified under these three terms. "Throughput is the rate at which the system generates money
through sales." "Inventory is all the money that the 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." Alex needs more explanation.
Chapter Nine
Alex fresh off his talk with Jonah gets word that the head of the company wants to come down
for a photo opportunity with one of Alexs robots. This gets Alex thinking of the efficiency of
these robots. With the help of the accountant, inventory control woman, and the production
manager, Alex discovers the robots increased costs, operational expenses, and therefore were
less productive. Implementing the robots increased costs by not reducing others, like direct
labor. The labor was shifted to other parts of the plant.

Chapter Ten
After explaining everything, Alex and his staff (Bob from production, Lou from accounting and
Stacey from inventory control) hammered out the meaning of throughput, inventory and
operational expense until satisfied. Lou, states the relationships as follows. "Throughput is
money coming in. Inventory is the money currently inside the system. And operational expense
is the money we have to pay out to make throughput happen." Bob is skeptical that everything
can be accounted for with three measurements. Lou explains that tooling, machines, the
building, the whole plant are all inventory. The whole plant is an investment that can be sold.
Stacey says, "So investment is the same thing as inventory." Then they decide that something
drastic is needed to be done with the machines. But how can they do that without lowering
efficiencies? Another call to Jonah is placed and Alex is off to New York that night.
Chapter Eleven
The meeting with Jonah is brief. Alex tells Jonah of the problems at the plant and the three
months in which to fix them. Jonah says they can be fixed in that time and then they go over the
problems the plant has. First, Jonah tells Alex to forget about the robots. He also tells Alex that
"A plant in which everyone is working all the time is very inefficient." Jonah suggest that Alex
question how he is managing the capacity in the plant and consider the concept of a balanced
plant. According to Jonah, this "is a plant where the capacity of each and every resource is
balanced exactly with demand from the market." Alex thinks a balanced plant is a good idea.
Jonah says no, "the closer you come to a balanced plant, the closer you are to bankruptcy." Then
Jonah leaves Alex with another riddle, what does the combination of "dependent events" and
"statistical fluctuations" have to do with your plant? Both of those seem harmless and should
work themselves out down the production line.
Chapter Twelve
This short chapter tries to capture the essence of the problems the job is causing at home with
the extra workload. The marriage is very strained because of the devotion Alex needs to give to
the plant.
Chapter Thirteen
Stuck for the weekend as troop master, Alex discovers the importance of "dependent events" in
relation to "statistical fluctuations". Through the analogy between a single file hike through the
wilderness and a manufacturing plant, Alex sees that there are normally limits to making up the
downside of the fluctuations with the following "dependent events". Even if there were no
limits, the last event must make up for all the others for all of them to average out.
Chapter Fourteen
Finally, through the dice game or match bowl experiment, it becomes clear that with a balanced
plant and because of "statistical fluctuations" and "dependent events" throughput goes down and
inventory along with operating expenses goes up. A balanced plant is not the answer. (See
the Dice Game or Match Bowl experiment note).

Chapter Fifteen
Fully understanding the "dependent events", Alex puts the slowest kid in the front of the hike
and he relieves him of extra weight he has been carrying in his backpack. This balances the
fluctuations and increases the kids productivity, which increased the throughput of the team.
Chapter Sixteen
Well, after the camping trip the boys arrive home to find the mother has disappeared. All the
stress of his job was too much for her so she left. Now the kids and the job are all Alexs
responsibility. This was supposed to be a weekend for Alex and his wife, but when the hike
came up it seemed to be the last straw for her.
Chapter Seventeen
Alex tries to portray his new revelation to his team at the plant. Nobody seems interested. But
the walk in the woods becomes apparent when it is put to the test for an overdue order in the
plant. Now even the production supervisor agrees. Now what?
Chapter Eighteen
In this chapter Jonah introduces Alex to the concept of bottlenecks and non-bottlenecks. Jonah
defines these terms as follows. "A bottleneck is any resource whose capacity is equal to or less
than the demand placed upon it. "A non-bottleneck is any resource whose capacity is greater
than the demand placed on it." Jonah explains that Alex should not try to balance capacity with
demand, but instead balance the flow of product through the plant. Later, Alex and his team
recognize the bottlenecks, the areas where capacity doesnt equal demand, like the slow kid
Herbie on the hike. With this discovery goes the ideas related to reorganizing the plant like Alex
did with the hike. Production is a process and it cannot be moved around so easily. Many
processes rely on the previous one to be able to complete the next. Alex would need more
machines, which takes more capital, and division is not going to go for that.
Chapter Nineteen
Well, Jonah makes a visit to the plant. Jonah tells Alex that a plant without bottlenecks would
have enormous excess capacity. Every plant should have bottlenecks. Alex is confused. What is
needed is to increase the capacity of the plant? The answer is more capacity at the bottlenecks.
More machines to do the bottleneck operations might help, but how about making them run
more effectively. Jonah tells them that they have hidden capacity because some of their thinking
is incorrect. Some ways to increase capacity at the bottlenecks are not to have any down time
within the bottlenecks, make sure they are only working on quality products so not to waste
time, and relieve the workload by farming some work out to vendors. Jonah wants to know how
much it cost when the bottlenecks (X and heat treat) machines are down. Lou says $32 per hour
for the X machine and $21 per hour for heat treat. How much when the whole plant is down?
Around $1.6 million. How many hours are available per month? About 585. After a calculation,
Jonah explains that when the bottlenecks are down for an hour, the true cost is around $2,735,
the cost of the entire system. Every minute of downtime at a bottleneck translates into thousands
of dollars of loss throughput, because without the parts from the bottleneck, you cant sell the
product. Therefore, you cannot generate throughput.

Chapter Twenty
Alex organizes the bottlenecks to work on only overdue orders from the most overdue to the
least. He then finds his wife. She is at her parents house. Through their conversation it is
learned that she still needs to be away from everybody, even the kids.
Chapter Twenty-One
The crew works out some of the details for keeping the bottlenecks constantly busy. In the
process they find that they need another system to inform the workers what materials have
priority at non-bottlenecks. Red and green tags are the answer. Red for bottleneck parts to be
worked on first as to not hold up the bottleneck machine, and green for the non-bottleneck parts.
That concludes another week. The true test will be next week.
Chapter Twenty-Two
Great, twelve orders were shipped. Alex is pleased, but he definitely needs more. He puts his
production manager on it. His production manager rounds up some old machines to complement
what one of the bottlenecks does. Things are looking up.
Chapter Twenty-Three
They are becoming more and more efficient, but lag time arouse with the two bottlenecks
because of workers being loaned out to other areas and not being at the bottlenecks when needed
to process another order. It seems there was nothing to do while waiting for the bottleneck
machine to finish the batch. Therefore, in keeping with the notion that everybody needs to stay
busy, workers were at other areas between batches. Alex decides to dedicate a foreman at each
location all the time. Then one of those dedicated foreman, the night foreman, discovers a way
to process more parts by mixing and matching orders by priority, increasing efficiency by ten
percent. Finally, one process being sent through a bottleneck could be accomplished through
another older way and therefore free up time on the bottleneck.
Chapter Twenty-Four
Now that the new priority system is in place for all parts going through the bottlenecks,
inventory is decreasing. Thats a good thing right? But lower inventory revealed more
bottlenecks. This intrigues Jonah so hes coming to take a look.
Chapter Twenty-Five
"There arent any new bottlenecks", says Jonah. What actually has happened is a result of some
old thinking. Working non-bottlenecks to maximum capacity on bottleneck parts has caused the
problem. All parts are stacked up in front of the bottlenecks and others are awaiting nonbottleneck parts for final assembly. There needs to be balance. The red and green tags need to be
modified. It seems as if the bottlenecks will again control the flow, by only sending them
exactly what they need and when they need it.

Chapter Twenty-Six
Ralf, the computer wiz, says he can come up with a schedule for bottleneck parts and when they
should be released. This will alleviate any excess inventory in front of the bottlenecks, but what
about the non-bottlenecks? Jonah says with the same data out of the bottlenecks to final
assembly, you should be able to predict non-bottleneck parts as well. This will make some time,
but there are enough parts in front of the bottlenecks to stay busy for a month.
Chapter Twenty-Seven
There is another corporate meeting. Mr. Peach doesnt praise Alex like Alex thinks he should.
Alex decides to talk with him in private. Mr. Peach agrees to keep the plant open if Alex gives
him a fifteen percent improvement next month. That will be hard because that relies heavily on
demand from the marketplace.
Chapter Twenty-Eight
Fifteen Percent!! Fifteen Percent!! Just then Jonah called to let Alex know that he will not be
available to speak with in the next few weeks. Alex informs him of the new problem of more
inventories and less throughput. Jonah suggests reducing batch sizes by half. Of course, this will
take some doing with vendors, but if it can be done, nearly all costs are cut in half. Also, they
get quicker response times and less lead times for orders. Sounds good.
Chapter Twenty-Nine
Alex is propositioned with a test. They can greatly increase sales, current and future, if they can
ship a thousand products in two weeks. Impossible without committing the plant to nothing but
the new order? Wrong! How about smaller batch sizes. Cut them in half again. Then promise to
ship 250 each week for four weeks starting in two weeks. The customer loved it.
Chapter Thirty
Seventeen percent!! Thats great, but its not derived from the old cost accounting model. The
auditors sent down to the plant from Division find just 12.8% improvement. Most of it accounts
from the new order. Which by the way, the owner of the company that placed the order came
down personally to shake everybodys hand in the plant and to give a contract to them for not a
thousand parts but ten thousand. Anyway, tomorrow is the day of reckoning at division.
Chapter Thirty-One
Well the meeting at Division started out rough. Alex thought he would be meeting with Mr.
Peach and other top executives. Instead, he met with their underlings. He decides to try and
convince them it doesnt work. Just before leaving he decides to see Mr. Peach. Its a good thing
he did, because he just got promoted to Mr. Peachs position. Now Alex has to manage three
plants as the whole division. He calls Jonah desperately and asks for help. Jonah declines until
he has specific questions.

Chapter Thirty-Two
Alex has a nice dinner with his wife. Through the veal parmesan and cheese cake it is decided
that Alex should ask Jonah how he can get other people to understand these techniques that his
team has discovered without being condescending.
Chapter Thirty-Three
Now is the time to assemble Alexs team for Division. Surprisingly the accountant with two
years to retirement is on board, but the production manager isnt. He wants to be plant manager
to continue their efforts. Everything is totally into place at the plant but more is needed for
division.
Chapter Thirty-Four
Alex is firmly engrossed with the problems of taking over the division. With advice from his
wife he decides to enlist the help of his team at the plant. Every afternoon they will meet to
solve the problem. After the first day it is obvious , they will need them all.
Chapter Thirty-Five
The second day they are led in a discussion about the periodic table of elements, and how the
scientists actually got a table of any sort. Maybe that is how they will solve the massive
problems of division, by understanding how the scientists started with nothing and achieved
order. A way to define them by their intensive order is needed.
Chapter Thirty-Six
The team finally comes up with the process: Step one identify the systems bottlenecks; Step
two- decide how to exploit those bottlenecks; Step three- subordinate everything else to step two
decisions; Step four- evaluate the systems bottlenecks; Step five- if, in a previous step, a
bottleneck has been broken, go to step one. It seems so simple, just different.
Chapter Thirty-Seven
The team decides to revise the steps: Step one identify the systems constraints; Step two
decide how to exploit the systems constraints; Step three subordinate everything else to step
two decisions; Step four evaluate the systems constraints; Step five- warning!!! If in the
previous steps a constraint has been broken, go back to step one, but dont allow inertia to cause
a system constraint. It also has been discovered that they have been using the bottlenecks to
produce fictitious orders in an effort to keep the bottlenecks busy. That will free up twenty
percent capacity, which translates in to market share.
Chapter Thirty-Eight
Talking with the head of sales. Alex finds out that there is a market order to fill the capacity. Its
in Europe, so selling for less there will not affect domestic clients. If it can be done, will open a
whole new market. Then Alex ponders Jonahs question, to determine what management
techniques should be utilized. Alex determines how a physicist approaches a problem. Maybe
this will lead to an answer.

Chapter Thirty-Nine
Alex experiences a problem at the plant. It seems all the new orders have created new
bottlenecks. After analyzing the problem, they agreed to increase inventory in front of the
bottlenecks an tell sales to not promise new order deliveries for four weeks, twice as much as
before. This will hurt the new relationship between sales and production, but it is needed.
Production is an ongoing process of improvement, and when new problems arise they need to be
dealt with accordingly.
Chapter Forty
Finally, struggling with the answer to Jonahs question, Alex comes up with some questions on
his own: What to change? What to change to? How to cause the change? Answering these
questions are the keys to management, and the skills needed to answer them are the keys to a
good manager and ultimately the answer to Jonahs question.
______________________________________________________
Related summaries:
Corbett, T. 2000. Throughput accounting and activity-based costing: The driving factors behind each
methodology. Journal of Cost Management (January/February): 37-45. (Summary).
Goldratt, E. M. 1990. What is this thing called Theory of Constraints. New York: North River Press. (Summary).
Goldratt, E. M. 1990. The Haystack Syndrome: Sifting Information Out of the Data Ocean. New York: North River
Press. (Summary).
Goldratt, E. M. 1992. From Cost world to throughput world. Advances In Management Accounting (1): 35-53.
(Summary).
Goldratt, E. M., E. Schragenheim and C. A. Ptak. 2000. Necessary But Not Sufficient. New York: North River Press.
(Summary).
Hall, R., N. P. Galambos, and M. Karlsson. 1997. Constraint-based profitability analysis: Stepping beyond the Theory
of Constraints. Journal of Cost Management (July/August): 6-10. (Summary).
Huff, P. 2001. Using drum-buffer-rope scheduling rather than just-in-time production. Management Accounting
Quarterly (Winter): 36-40. (Summary).
Louderback, J. And J. W. Patterson. 1996. Theory of constraints versus traditional management
accounting. Accounting Education 1(2): 189-196. (Summary).
Luther, R. and B. ODonovan. 1998. Cost-volume-profit analysis and the theory of constraints. Journal of Cost
Management(September/October): 16-21. (Summary).
Rezaee, Z. and R. C. Elmore. 1997. Synchronous manufacturing: Putting the goal to work. Journal of Cost
Management (March/April): 6-15. (Summary).
Ruhl, J. M. 1996. An introduction to the theory of constraints. Journal of Cost Management (Summer): 43-48.
(Summary).
Westra, D., M. L. Srikanth and M. Kane. 1996. Measuring operational performance in a throughput
world. Management Accounting (April): 41-47. (Summary).