In our opinion, efficiency could be understood as the extent to which the present resources are utilized in order to produce the product. Thus, it is possible to explain what is meant when the word is used. However, it is frequently used in the text. In contrast to the concept of productivity, the term “efficiency” is not defined clearly in Goldratt’s book. Utilizing these three notions, it is possible to evaluate all the processes which take place in the factory. They are defined as “the rate at which the system generates money through sales”, “all the money that the system has invested in purchasing things which it intends to sell”, and “all the money the system spends in order to turn inventory into throughput”, respectively (Goldratt and Cox 66-67). Jonah reveals this secret to Alex during one of their conversations he explains that the notions to be used for this purpose are throughput, inventory, and operational expenses.
#THE GOAL BOOK HOW TO#
However, it still remains unclear how to apply even these three notions to measure the productivity of a particular activity that takes place in the factory’s walls. While considering this issue further, Alex understands that the amount of money made can be expressed in an explicit form by utilizing three metrics: net profit, return on investment, and cash flow. The absence of profit is what is wrong with the factory on the whole 1. Therefore, to determine whether an activity is productive, it is necessary to define the goals of this activity.Īs Alex thinks about this problem, he realizes that the goal of the UniCo’s plant he works in is not utilizing the newest technologies or capturing the largest share of the market the ultimate goal is making money. Having given this issue some consideration, Alex arrives at the conclusion that productivity of an activity measures whether the goals of the activity were achieved. Jonah, while talking to Alex, suggests that he defines this notion for himself in order to be able to see how to improve the situation in his factory. In The Goal, Goldratt exposes, among others, the concept of productivity. In this paper, we will address the notions of productivity and efficiency and explain how they work in the theory offered by Goldratt, exposing the mistake of the classical management that leads to sub-optimization. Utilizing the form of a literary work, the author exposes some common, but crucial mistakes made by the management of numerous companies of his time, that is, the attempts to increase productivity by maximizing efficiency of production in an incautious and thoughtless way. Goldratt, is, no matter how strange this might sound, a novel on management.
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