Future Supply Chains: on Cloud Nine with Cloud Computing

Last month, Pfizer, one of the major global pharmaceutical giants, completed transforming its complex and sensitive supply chain into a robust, more efficient and well-insulated one by moving it to “the cloud”. Needless to say, Pfizer isn’t the first company to do it. Philips, DHL, Nestle and Hewlett Packard are some of the other organizations who are already enjoying the fruits of mounting their respective supply chains on “the cloud”, and many more are likely to follow suit.

Let’s start by understanding the definition of cloud computing or “the cloud”. The National Institute of Standards and Technology (NIST), U.S. Department of Commerce, defines cloud computing as follows:
“Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

The above definition is a brief, but somewhat exhaustive description in itself about the underlying benefits and attributes of this technology. It is widely believed that cloud computing could be the answer to the following woes of the modern supply chains:

1. Increasing Complexity: Globalization and internet have made it possible for organizations to build huge, global supply chains. But to manage them is a whole different game. And as these networks get more complicated and bulky, they might even fail to meet the very purpose they were built for. “The cloud” enables seamless sharing of information between the many partners (vendors, suppliers, buyers etc.), hence allowing them to function in sync with each other and take quick decisions to maximize profitability and efficiency of the whole supply chain.
2. High Set Up Costs: Cloud computing allows one to do away with the otherwise essential expenses - procurement of expensive software, building and maintaining infrastructure and hiring people to operate the system. So it is much cheaper and easier to set up. Besides, it allows the popular “pay as you use” model. All of this while providing any time access to the services.
3. Problems with Legacy Apps: The traditional on-premise enterprise software solutions are called legacy applications. Though in many cases, they might be good enough to handle the supply chain challenges at the present, the pace of change is high in this field. And upgrading legacy apps can be very tedious. Modern cloud based solutions are built to be highly configurable and adaptable in anticipation of rapid changes in the business.
4. Rising Competition: The famous adage “Organizations don’t compete, supply chains do” could have never been more correct. Since cloud computing is known to enhance the efficiency and productivity of the supply chain, it provides a significant edge over the competition. It has already been established that this technology will only accelerate the speed with which new products and service reach the markets.
5. Low Flexibility: Each organization or business has its own requirements that it expects its supply chain to meet. Going back to the case of Pfizer, it is worth mentioning that the company competes in two distinct drug markets – “patented” and “generic”. While the former calls for speedy and agile delivery strategies, even at higher costs, eg. overnight air delivery, the latter favours highly optimized logistics and tight control over inventory. Cloud computing ensures that the supply chain is flexible and adaptable enough to cater to such varied needs of the organization.


Now that we have listed almost all the benefits that come with “the cloud”, a few words of caution wouldn’t hurt.
1. Implementing cloud technology might require a lot of time (Pfizer took 18 months). More importantly, the decision to go for it usually involves several partners in the supply chain, which makes it vulnerable to even minor conflicts between these parties.
2. It should not be taken for granted that cloud computing would fit all the requirements of any supply chain or organization. Meticulous research is advisable.
3. Security of data could be a problem in cloud-based supply chain. This factor has gained even more prominence with some recent events which indicate the importance of securing one’s intellectual property.

In conclusion, it can be said that for most organizations, switching to cloud-based supply chain is a matter of “when” rather than “if”.


References
1. http://www.supplychaindigital.com/outsourcing/cloud-computing-in-the-supply-chain
2. http://www.logisticsmgmt.com/article/cloud_computing_and_supply_chain_a_natural_fit_for_the_future/
3. http://www.ft.com/intl/cms/s/0/1608e5d6-fc59-11e1-ac0f-00144feabdc0.html#axzz2AfeOg9o8
4. http://csrc.nist.gov/publications/nistpubs/800-145/SP800-145.pdf


This article has been written by Akshay Agarwal. He is a PGP student of Indian Institute of Management, Raipur and has done his B.Tech from Indian Institute of Technology, Guwahati. He can be reached at pgp11004.akshay@iimraipur.ac.in.

Less is More: Not Just a Retail Phenomenon

One of the major advantages of organized retail, apart from low prices, is the vast array of choices it provides to the consumers. In the last few years, the rapid increase in the number of super-markets and mega-markets in the country has been accompanied by an explosion in the varieties of every imaginable merchandise that populates their shelves.

But like many other transformations that retail sector has been undergoing, a rather unexpected one has been gaining grounds, and it is not so recent. Retail giants like Walmart are already cutting down the huge number of choices offered in their stores, favouring only selected varieties which are generally preferred by the customers. But how does this make any sense? As it turns out, organized retail players all over the world are facing heat due to at least one of the following factors:

1.    Rising real estate prices,

2.    Expenses of managing a large number of SKUs, their supply chains and inventories,

3. Loss of opportunity of tapping consumers in urban centers where space is a scarcity and huge shopping centers cannot be established and

4. Loss of opportunity to tap communities of consumers in rural areas, which are too small to sustain a super or mega market.

These are also the significantly responsible reasons for the losses being incurred by almost all the organized retail players in India. Stocking a large number of products and their varieties calls for huge real estate investments, and that has been made very difficult by the sky-rocketing real estate prices. Towns and villages are usually dominated by unorganized retailers as they have been so far neglected by the organized players.

Another important aspect is related to the consumers. It has been found that though providing some variety boosts customer satisfaction, going too far might lead to “customer confusion”. Too many choices overwhelm the customers and lower their buying intent. The solution lies in bringing to them a few, “well-researched” types of products instead of too many varieties. This is the simple concept of “Less is More”. So, in a nutshell, this enables the organized retailers to achieve the following:

1.       Better customer satisfaction,

2.      Lesser number of SKUs to manage and hence simpler inventory,

3.      Ability to establish small-sized stores with low real estate investments and

4.      Ability to establish small-sized stores in urban centers as well as in rural areas.

It follows that Walmart’s decision of opening dozens of scaled-down stores in the near future is not surprising at all. It is interesting that some Indian retail giants have already been following this model. One close example could be the Mumbai based D-Mart. Future Group also runs a chain of small stores called KB's Fair Price, apart from the giant Big Bazaar stores.

“Less is More” has far wider implications than what appears from this article so far. For example, in a recent interview with The Economic Times, the MD and CEO of Bajaj Auto Mr. Rajiv Bajaj stressed upon the relevance of this idea to the competitive motorcycle market. Apparently, this has allowed Bajaj to gain a strong position in the market in the last few years. Though the top position is still held by Hero Motocorp, Bajaj Auto has stunned everyone by becoming the most profitable motorcycle manufacturer. The company claimed 58% of the total profits generated by the industry in 2010-11.

As the companies go “on diet” to become more efficient and move faster than the competition, the focus will now shift on selecting the “right diet” or the best choices to be provided to the customers.

References
1. Why Less is More for Holiday Shopping - Forbes

2. In Store Aisles, Less is More but Customers can still be Particular - The Globe and Mail
3. Less is More for Walmart, Other Retailers - CSPnet.com

4. Strategy is Nothing but Specialization: Rajiv Bajaj, MD & CEO, Bajaj Auto - The Economic Times
5. Retail Chains Witness Growth but Widened Losses; Rs. 987 Cr Hit During 2010-11 - The Economic Times
6. Aditya Birla Retail Plans to Shut Down More than 3 Dozen Stores and Lay off More than 150 Staff - The Economic Times

The writer of this article, Akshay Agarwal is a PGP student of Indian Institute of Management, Raipur and has done his B.Tech from Indian Institute of Technology, Guwahati.

Book Review Competition: The Toyota Way

Among the various exciting events in Equinox ’12, the OPEP club, on 6^th March, organized Critique, a book review competition for the international bestseller “The Toyota Way” authored by Dr. Jeffrey Liker. The participation was overwhelming as students from various reputed B-schools across the country sent their entries soon after the organizers invited them over a month back.

Among the many entries received, the best three were shortlisted and the students were invited to present their book reviews at IIM Raipur Campus in the presence of a judging panel and the students participating in Equinox ‘12. The members of the panel were Prof. O. S. Vaidya, Faculty of Operations & Supply Chain Management, IIM Raipur and Prof. Naval Bajpai, Faculty of Statistics and Business Research, IIM Raipur.

The finalists presented their understanding of and views about the wide and often less understood subject called “Lean Practices”. The basic fundamental ideas presented in the book were discussed at length. The final results of the competition are as follows:

• First Position – Akshay Agarwal, PGP 2011-2013
• Runners up – Harish Verma, PGP 2011-2013 and Mehul Bardia, PGP 2011-2013 (Jointly share runners up position)

The winning entry will be published in the forthcoming edition of Strive magazine. The book review presentations of Harish and Mehul are given below.

Book Review: The Toyota Way by Harish Verma

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Book Review: The Toyota Way by Mehul Bardia

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Why Operations ?

Let’s start with some of the myths regarding a career in Operations Management. Many people wrongly associate it with years of toiling in a manufacturing plant in a remote location. Though this perception cannot be completely denied, the picture really isn’t as gloomy as it seems. First, there are various career choices (other than manufacturing) in Operations Management, which we will discuss shortly. Second, an experience of working on the shop-floor for just a few years in the beginning adds a lot of value to the manager, thus enabling a more comfortable work environment and steeper career growth for rest of the life.

Another very famous belief is that operations managers are paid less as compared to their marketing or finance counterparts. Again, it might be true for some of the career choices, but it cannot be generalized. Also, once a person rises above a certain level on the corporate ladder, the aforementioned disparities between the compensations tend to disappear.

On a positive note, a career in Operations Management is considered to be the most fulfilling, i.e. high on job satisfaction. It has also been observed that opportunities and growth in this field are less affected by recessions.

Some of the major subjects taught in Operations Management are:

·         Operations Management – This course focuses on understanding of different ways to create an efficient and effective production and service operations.

·         Manufacturing System Design - This course focuses on concepts and techniques relating to manufacturing systems design eg. JIT and TOC.

·         Total Quality Management / Six Sigma – The aim of this course is to emphasise the importance of quality in the competitive world and make the participants aware of the standards available.

·         Enterprise Solutions – This course aims to understand the functionality that ERP systems deliver, and to harness this functionality for the benefit of the organization and the managers who are the users of the system.

·         Supply Chain Management – According to APICS, SCM is “design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally”. This course aims to understand the basics and develop different strategies of SCM and logistics management.

·         Project management - This course provides the skills in executing various projects, starting from project identification till project termination.

·         Operations Strategy – This course is on evaluation of manufacturing decisions from their strategic fit to the firm’s products and market.

·         Operations Research – This course aims to provide a formal quantitative approach to problem solving and an intuition about situations where such an approach is appropriate e.g. Linear Programming.

·         Management of Technology - The main objective of this course is to present the concepts, techniques and applications that will be needed to understand, anticipate, acquire, and use technology for attaining a competitive edge at the market place.

Broadly speaking, the various career options for an operations student are

1.      Manufacturing/Production Management – The key responsibilities include manufacturing process optimization, product development and re-design, production planning, inventory planning and control, forecasting, quality control, standardization, and process analysis.

2.      Service Operations – Most of the responsibilities remain same as mentioned above, but in the services sector.

3.      Consulting – Many students are hired by consultancy firms which cater to the manufacturing and/or services organizations. A sound knowledge of the relevant subject and experience are usually required.

4.      Supply Chain Management – In the recent times, this channel has gained a lot of prominence owing to its vast applications and potential. Supply chain management has a very wide scope as it encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. It also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.

What to do before joining a B-school?

A prior and basic knowledge of MS Excel can be very helpful while attending the Operations Management courses. To get better clarity on some popular concepts, a bestselling management books can be read. The two most recommended are “The Goal” by Dr. E. M. Goldratt and “The Toyota Way” by Dr. Jeffrey Liker.

It is found that to excel in this field, one needs to have good problem- solving skills, quantitative and logical thinking. Graduates in Engineering, Mathematics / Statistics and Science are expected to do well in this field. Graduates from other streams also do well provided they have good logical reasoning skills and passion for Ops.

The writer of this article, Akshay Agarwal is a PGP student of Indian Institute of Management, Raipur and has done his B.Tech from Indian Institute of Technology, Guwahati. Akshay holds a Green Belt Certification in Six Sigma. Prior to joining IIM Raipur, Akshay has worked on various Value Engineering / Cost Cutting projects at Surya Roshni. 

IIM Raipur students win Second Position in Video Making Competition organized by NITIE

Chain to Excellence (C2X), The Supply Chain Interest group of NITIE Mumbai organized Optitude, a Video Making Competition. The participants were required to make a video on ‘Role of Supply Chain in Disaster Management’.

3 Students from IIM Raipur, Akshay Agarwal, Navjeet Sidhu and Rohit Bhagat participated in the Competition and won II Prize.  The winning team was from NITIE Mumbai.

This video starts with a description of the Disaster Profile of India and emphasises the need for effective Disaster Management using facts and figures. For instance, it has been found that according to the then UN Under-Secretary for Humanitarian Affairs (Jan Egeland): “In Niger in 2005, it would have cost $1 a day to prevent malnutrition among the children if the world had responded immediately. By July 2005, it was costing $80/day to save a malnourished child’s life.”

It is important to plan beforehand as during a disaster, Infrastructure is destabilised, Demand and Supply are unpredictable, last – mile connectivity is hampered and there is lack of coordination and training amongst the Relief Agencies.

An Effective Supply Chain can aid in Pre-Disaster by imparting Training and Education, Infrastructure Planning and Pre-Positioning of Resources. During a Disaster, Relief Operations need to be carried out and Last –Mile Connectivity for supply of food and medicine needs to be ensured. Post Disaster, Infrastructure needs to be rebuilt after cleaning the debris and communities need to be re-established.

Kaizen: What Is It All About?

Introduction

Kaizen is perhaps one of the most commonly used jargons when it comes to process improvement methodologies. It is also very well known that it one of the many philosophies or practices associated with lean thinking or lean manufacturing. The name “Kaizen” originates from two Japanese words- “kai” which means “change” or “to correct” and “zen” which means “good”. Thus kaizen stands for “change for good” or “continuous improvement”, and it literally does the same. Hence the popularity and widespread application it enjoys.

Origin and History

Kaizen is believed to have originated in Japan after World War II, when the industries and the economy were trying to get back on their feet with some help from American experts. The Japanese were taught statistical control methods and various management skills. One of the training materials used in the process was a film to introduce the three "J" programs (Job Instruction, Job Methods and Job Relations). The film was titled "Improvement in 4 Steps" (Kaizen eno Yon Dankai). This marked the first introduction of kaizen to Japan. Dr. W. Edwards Deming, one of the American experts, was awarded the “2nd Order Medal of the Sacred Treasure” by the Emperor of Japan in 1960 for his contributions in teaching and popularizing kaizen in Japan. He was considered a hero in Japan and later, the Union of Japanese Science and Engineering (JUSE) instituted the annual Deming Prizes for achievement in quality and dependability of products.

What is Kaizen?

Simply stated, kaizen is a philosophy or practice that aims to bring improvements in all processes of a system. The system here may refer to industry, business, workplace, services and even household or social activities- this marks the wide outlook and huge potential of kaizen. In Japan, kaizen is a way of life. Some other very important aspects of kaizen are:

1.      It is continuous and ongoing, not a monthly or annual event.

2.      If we are to consider only the business and industry applications, kaizen involves all the employees of the organization- from the top management as well as the bottom level laborers.

3.      Usually, kaizen is used to bring about small, incremental improvements, which, if pursued for some time and in proper manner, compound to very significant results.

Primary Elements of Kaizen

The foundation of kaizen rests on the following five elements, which also represent the major aspects of this ground-breaking way of thinking:

1.      Quality Circles: Groups which meet to discuss quality levels concerning all aspects of a company's running. Such groups are usually made at different levels in an organization to ensure good and widespread participation.

2.      Improved Morale: Strong morale amongst the workforce, in kaizen, is considered as a crucial step to achieving long-term efficiency and productivity.

3.      Teamwork: Kaizen needs the inputs of all the personnel- higher management as well as workforce, while they work in a team. This culture is also fostered by this philosophy.

4.      Personal Discipline: Each team member must have the basic understanding of the process and the belief that it is for the good of the organization as well as him/her. This commitment to personal discipline ensures the sustained strength of the team over the long period in which kaizen is implemented.

5.      Suggestions for Improvement: It is important that every member contributes through suggestions for improvement. In fact, it is advisable to evaluate the performance of the employees based on the value of the suggestions they provide as well as the extent to which they implement the suggestions of their juniors.

Implementation

The main techniques used in Kaizen are PDCA, also known as Shewhart cycle or Deming cycle and 5 Whys.

PDCA stands for Plan-Do-Check-Act.

Plan: Once the expected output is known, the necessary objectives and processes are accordingly established. It is advisable to start on a small scale as a trial to verify the results.

Do: The plan is executed and data is collected for analysis according to the further steps.

Check: The expected results are compared with those obtained from “Do”. If required, these steps are repeated several times to observe the trend.

Act: The differences in the data are analyzed to get to the root causes (5 Whys could be used here) and corrective measures are taken to resolve them. This step also suggests whether or not more PDCA cycles will be required.

5 Whys is a simple method to determine the root cause of a specific problem through repeated questioning. It can be visualized through fishbone diagram or Ishikawa diagram.

Kaizen is not limited to just such techniques. In most cases, it signifies a huge change in the corporate culture. To make it a success, the higher management doesn’t only need to work with the workforce as a team but also lead them by example. It should also be ensured that the suggestions received from the workforce are either implemented as soon as possible, or rejected with complete transparency. Further, each problem has to be looked at as an opportunity to improve. Kaizen can simply be expressed as a systematic way of finding, reporting and fixing problems.

Benefits of Kaizen

Though applicable in a huge variety of contexts, some of the common benefits of kaizen are:

1.      Kaizen produces immediate and visible results. Though not very substantial, these improvements play an important role in the overall process by compounding into a large change and also by repeatedly strengthening the morale of the team members.

2.      Being a way to lean thinking, kaizen has been very instrumental in reducing wastes in various forms like inventory, overproduction, waiting times, unnecessary transportation and motion and excess quality.

3.      It also improves employee retention, production capacity, space utilization, use of capital, product quality etc.

References

http://www.graphicproducts.com/tutorials/kaizen

Wikipedia

http://www.wisegeek.com/what-is-kaizen.htm

The writer of this article, Akshay Agarwal is a PGP student of Indian Institute of Management, Raipur and has done his B.Tech from Indian Institute of Technology, Guwahati. Akshay holds a Green Belt Certification in Six Sigma.

The Significance of Procurement Category Management

In today’s competitive environment, every second of time matters and is worth its weight in gold. This fact is readily observed as there has been a lot of research in the development and introduction of various methods aimed at saving time in the industry.

One of the most important metrics that represent the extent of time utilization or loss in regards to suppliers is supplier lead time, i.e. the time between placing of order and receiving the goods. It usually includes purchase order processing time, in transit time, receiving, inspection, and any inventory processing/repackaging time.

Besides, according to a survey conducted by Accenture during the recent economic recession, most procurement officers admitted that the recession had an impact on the supplier relationships and augmented supplier risk. The main reason was that the suppliers were looking for increase in their prices.

Procurement category management involves strategic development, assessment and monitoring of procurement and supplier performance in specific supplier categories. So, the basic steps for implementation are:

1.      Categorize each supplier based on the needs served by the goods supplied by the supplier. So, in other words, the suppliers supplying similar or substitutable items are placed in one category. For example, in case of a retail business, toothpastes and hair oils can be two different categories.

2.      It is also advisable to assign a person, as category manager or owner, to each category, based on the knowledge and application of the goods being procured from it.

Apart from shorter supplier lead time, the following benefits can be derived from this methodology:

1.      Since each of the categories requires similar procurement strategies and supplier relationship programs, it is far easier to manage the categories than to manage the uncategorized suppliers.

2.      It facilitates better relationships with the suppliers, which in turn improves supplier performance.

3.      It also helps in managing the spend by providing better purchasing power.

4.      It reduces supplier risk, develops a better supplier portfolio and provides better control over procurements.

In terms of supplier lead time and turnaround time, very significant differences have been observed between the organizations that are employing procurement category management and those that aren’t. According to “APQC Open Standards Benchmarking” in procurement, the supplier lead time in the former case is found to be around one-fourth of that in the latter case. Similarly, the purchase order processing time is found to be around nine times lesser for the organizations implementing procurement category management.

Procurement is undoubtedly one of the most lucrative areas to look into for cost optimization, and category management represents a well-defined and proven technique to go about it.

References:

1.      http://www.apqc.org/knowledge-base/download/229883/a%3A1%3A%7Bi%3A1%3Bs%3A1%3A%222%22%3B%7D/Category%20Management.pdf?destination=node/229883

2.      http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture_Leveraging_Category_Management_podcast_transcript.pdf

3.      http://www.driveyoursuccess.com/2011/08/using-pert-analysis-to-estimate-vendor-delivery-times.html

The writer of this article, Akshay Agarwal is a PGP student of Indian Institute of Management, Raipur and has done his B.Tech from Indian Institute of Technology, Guwahati.

Book Review: The Goal

The following Book Review has received II Prize in the Book Review Competition held at Indian Institute of Management, Raipur.

The Goal is an international bestseller business novel. It was authored by Dr. Eliyahu M. Goldratt and Mr. Jeff Cox and was first published in 1984 by The North River Press.

Dr. Goldratt was an Israeli physicist, who later became a business management guru. He has written this book as a piece of fiction. In the introduction of the book, Dr. Goldratt has stated that science can be utilized to understand and solve many industrial issues. Secondly, he has said that the main requisite for expanding the learning about anything is the courage to face inconsistencies and to question the existing popular beliefs and methods. “The Goal” also demonstrates the effectiveness of Socratic way of approaching and resolving problems, which in this story, includes the complexities of a manufacturing unit as well as marital issues. Dr. Goldratt has justified this by asserting his belief that the deductive process is the only way through which we can learn. The book aims at explaining the validity of and logic behind Dr. Goldratt’s Theory of Constraints.

The story describes the exciting journey of one Mr. Alex Rogo, in which he discovers the obvious flaws in the current industry practices, and with the help of his ex-teacher and physicist - Dr. Jonah, sets out to fix them. Alex is the plant manager at one of the manufacturing units of UniCo in a town called Bearington. UniCo has been running in losses for the last few years, and one of the major reasons for this is the unprofitability of the division to which Alex’s plant belongs. The conditions in his plant are also very tough. Everything seems to be delayed and utterly urgent. Most of the orders are running late by weeks. Everybody seems to be busy all the time, and yet, the unit is running into losses. All of this is despite the fact that this plant is equipped with the latest technology including industrial robots and computer systems.

On the other hand, a parallel storyline depicts the marital problems faced by Alex with his wife Julie. This highlights the difficulties faced by managers, especially those who are obsessed with their work, in their personal lives. Alex is repeatedly accused by Julie of not paying enough attention towards her and their children.

The story begins at a point when Mr. Bill Peach, the division vice president, asks Alex to make his plant profitable within three months. In case of failure, the plant was to be shut down by the management. Alex has the option to look for another job, but he decides to do whatever he can to save the plant. Here, he recollects a conversation he had with Dr. Jonah, when the latter, through a few simple questions, convinced Alex that the hi-tech robots in his plant are not contributing to the actual goal of the company. He also encouraged Alex to figure out the true goal of his organization. Faced with grave difficulties, Alex figures out that the true goal of the company is to make money. Equipped with this newly-found answer, he immediately gets in touch with Jonah and asks for his help and guidance.

Jonah explains to Alex that for generating profits, only three components of the system need to be in order. They are:

1.       Throughput: this refers to the money generated by sales and needs to be maximized.

2.       Inventory: this refers to the money invested by the system in purchasing things that it intends to sell, and must be minimized.

3.       Operational Expenses: this refers to the money spent by the system in converting inventory into throughput, and must be minimized.

Alex takes into confidence four people working in the plant - Bob Donovan (Production Manager), Ralph Nakamura (runs data processing for the plant), Stacey Potazenik (inventory control manager) and Lou (Plant controller). They discuss the three new points of measure, and conclude that they make great sense. Thereafter, Jonah, through telephone conversations and even personal visits to the plant, explains to them that the traditional points of measure such as efficiency of individual equipments, wages, etc. do not represent the true state of the system. And the reason for this is the combination of the two phenomena that exist in every plant – dependent processes and statistical fluctuations.

Alex gets a closer and better look at this concept during a forest hike with his son and other kids, where he realizes that the speed of the whole line depends on the speed of the slowest kid (bottleneck or constraint), and to improve the speed of the line, the slowest kid must be enabled to move faster. Alex, with his team, sets out to apply these principles in the plant. They successfully manage to discover bottlenecks in the system and accordingly used them to improve the throughput and reduce the inventories and operational expenses.

Needless to say, they observe huge improvements in the plant as the pending orders start shipping at a fast rate. Moreover, they successfully deliver a very large order from an important client and get themselves a long term contract as well as the faith of the marketing manager Johnny Jons.

Following a similar route and constantly debating and understanding the principles taught by Jonah, Alex and his team finally figured out the precise steps for the process of improvement:

1.       Identify the system’s constraint(s).

2.       Decide how to exploit the constraint(s).

3.       Subordinate everything else to the above decision.

4.       Elevate the system’s constraint(s).

5.       If, in a previous step, a constraint has been broken, go back to step 1, but do not allow inertia to cause a system’s constraint.

Socratic approach has been given a lot of emphasis in the book. At one point, Jonah tells Alex that he would not provide him with straight solutions, as it would be detrimental to his understanding of the concepts. Instead, Jonah gives Alex the basic principles and some relevant questions, which helps him in figuring out the solutions himself. Besides, this approach has also been adopted by Alex to resolve the marital issues with Julie, by looking for an answer to the question: what is the goal of their marriage?

Overall, “The Goal” is a very interesting and entertaining novel, which, at the same time, provides a basic and simple understanding of the Theory of Constraints. This theory, despite being plain common sense, seems far from the conventional approach of manufacturing. Moreover, the implications of these principles are applicable in many other fields and industries.

The writer of this article, Akshay Agarwal is a PGP student of Indian Institute of Management, Raipur and has done his B.Tech from Indian Institute of Technology, Guwahati.
The Book Review of the Winner of the Book Review Competition will be published in the Half Yearly Magazine. To request a copy of the magazine, mail us at opep@iimraipur.ac.in