Critique of the Goal

Critique of the Goal

1. In The Goal, “Throughput is the rate at which the system generates money through sales.” The traditional definition of throughput is the rate of production or the rate that something can be proceed. The new definition “through sales” makes more sense to me, because if just producing but not selling products, they do not belong to throughput indeed.

“Inventory is all the money that the system has invested in purchasing things which it intends to sell.” In traditional definitions, inventory usually includes labor costs. However, in the new definition, the labor cost belongs to operational expense rather than inventory. At the same time, “Operational expense is all the money the system spends in order to turn inventory into throughout.” I think the new definitions of these two are more reasonable to me, because it eliminates the confusion over whether a dollar spent is an investment or an expense.

1. According to The Goal, “A bottleneck is any resource whose capacity is equal to or less than the demand placed upon it.” Bottlenecks were being used to control the flow through the system and into the market. For examples, in maritime industry, if there are usually enough ships and cargos ready to ship. However, there are not enough berths in ports. This is because ships need stop at berths to do loading, which usually takes at least hours. At the same time, ports are not easy to build and really limited by locations. Therefore, ports cannot provide enough berths for ships to loading. Ships have to wait for free berths. Therefore, ports become bottleneck in here.
2. What are the production scheduling principles (at least 4) discussed in The Goal?

1. Not balance capacity with demand but balance the flow of product through the plant with demand from the market. “Balance flow, not capacity”.
2. “The level of utilization of a non-bottleneck is not determined by its own potential, but by some other constraints in the system.”
3. “Putting it precisely, activating a resource and utilizing a resource are not synonymous.”
4. “The capacity of the plant is equal to the capacity of its bottlenecks. An hour lost at a bottleneck is an hour lost for the entire system.”
5. “Bottlenecks govern both throughput and the accumulation of inventory.”

1. Provide an explanation of the pitfalls (at least 4 distinct ones), as discussed in The Goal, of using cost accounting data for manufacturing decision making.

1. Cost accounting cannot show the real productivity. It focuses on costs control rather than value delivered. Therefore, decreasing costs in cost accounting does not mean it is good for company’s productivity.
2. In cost accounting, inventory is an asset. Inventory is evaluated based on the raw materials. However, inventory should include added-value in production process.
3. Cost accounting assumes that utilization and activation are the same. Therefore, saving time and costs on Non-bottlenecks will shows up as savings in account. However, it doesn’t help the throughput in real, which means no savings actually.
4. It also assumes that all of the workers in the plant are always going to be fully occupied. However, it is not true. Therefore, in reality, it may be highly possible that selling more products does not need increasing labor costs.