The Goal - Summary

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Since with this three important measurements, it is not necessary to run plant all the time. All the stations will produce according to the rate with which they can produce saleable products so rate of production will be decided by the process which has the lowest capacity. All other process either feed to its capacity or take feed from its capacity to make THROUGHPUT.

With these concepts he start to manage the constraints and plant gradually become profitable.

SOLUTIONS FOR UNICO:

Unico was basically trying to improve efficiencies at every operation. They thought that producing more will make them more profitable as the basic function of a manufacturing company is to manufacture products. If you end up manufacturing more products then you are more successful in achieving your goal. When you make, producing more products, your goal then you will experience losses because of higher inventories.

Higher plant utilization to ensure reduction in labor cost and Factory over heads result in extra costs which turn plant into a loss. When there is a drop in efficiency or plant utilization you start producing more without caring about whether produced material will going to be sold or not. The solution to these problems Unico are facing lies in changing the mindset of management by changing the goal of the company. If the goal of company change to generate money through sales, then it will change strategy of the company. When competitive strategy changes to generate more money than entire supply chain strategy can also be change to provide supply chain surplus.

Unico then will focus on designing their operations to increase rate of sales. To increase rate of sales they will then focus on identifying bottlenecks which governs the throughput rate and then effort will be made to eliminate those bottlenecks. Since entire process is based on dependent events and statistical fluctuations inside and outside the organization so eliminating one bottleneck will not going to make Unico a balanced plant but some other bottleneck will arise, so it will be a continuous process of eliminating bottle necks and increasing through put and simultaneously reducing operational expenses to achieve ultimate GOAL of company.

KEY LEARNINGS:

- The goal of a manufacturing company is not to produce more but to generate more money.

- Higher efficiencies can mislead to higher inventories and consequently higher costs.

- Throughput of a manufacturing firm is the money it generate from sales rather than rate of production.

- Operation of a product or service consists of series of processes which are linked with each other

- The capacity of operation depends on the capacity of process which is bottleneck in the system.

- Using non bottle neck 100% of the time does not produce 100% utilization.

- Capacity and priority must be considered together

- Focus should be on balancing the material flow rather than balancing demand with capacity.

- Bottleneck process should never be starved off and also there should not be huge inventories before bottleneck

- Subordinate everything to the constraint or bottleneck.

- New bottlenecks will generate after eliminating previous ones so there will always be an ongoing possibility of improving throughput.

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