National Patient Safety Goals The purpose of the National Patient Safety Goals is to improve patient safety. The goals focus on problems in health care safety and how to solve them. This is an easy-to-read document. It has been created for the public. The exact language of the goals can be found at www.jointcommission.org. Jan 04, 2018 The writer of “The Goal” is an Israeli person. Eliyahu Moshe Goldratt was not just a very good writer but he was a very good person in the field of the business as well. There are some very important theories given by him which are still in use in this modern world. Features of The Goal PDF: English os the original language of this book.
In his book ´The goal´, Eliyahu Goldratt describes a new method to optimize production environments: the Theory of Constraints (TOC). Where traditional efficiency theories are focused on maximizing machine outputs to gain advantages of large scale production, the TOC focusses on the utilization of the Bottleneck machines only, to help the organizations reach its goal: generating money to make sure the company can exist in the nearby future. In this novel, a production manager (Alex Rogo) is mentored by management guru (Jonah) to help optimizing Alex´s Plant and prevent it from closing down.In our current economic system, one only needs one type of asset to be able to exist: Money. THE GOAL of every company or plant should therefore be to keep generating money, to make sure the plant can still be there tomorrow to generate jobs and welfare. This book starts off with a lot of discussion on how the generation of money can be measured. Goldratt proposes THREE MEASURES FOR GENERATING MONEY:. Turnover, which is the speed in which money is generated by means of sales.
Inventories, which are investments the company makes to be able to produce products. Operational Expenses, the costs necessary to turn the inventories into sellable productsOne of the first Lessons Jonah teaches Alex is the myth of advantages of scale; also known as large-sclae production. When a product is not sold directly after producing it (generate turnover), production only leads to unnecessary inventories and operational expenses. When these two types of costs rise, how can the cost price of a product decline?
Luckily, Jonah also knows another method of production which will help a company to generate money in a more efficient way.The THEORY OF CONSTRAINTS is based on the possibility that the output of different machines in one production process can differ from one another. The slowest machine will always determine the speed in which products can be produced and therefore also the speed in which sales can be realtized, the turnover. This slowest machine is called the Bottleneck. The costs of one lost production hour on the bottleneck machine can calculated by determining the output of the machine (number of products) and multiply it with the sales price of the end product. The goal is one of the three booksthat inspired me the most whenI started my lean career:How is the TOC put to practice?
Goldratt describes the DRUM-BUFFER-ROPE principle to optimize efficiencies of bottlenecks. DRUM describes the speed in which machines should produce. This speed is based on both custumer demand and the bottleneck. By allowing no machine to produce faster than the bottleneckmachine, one prevents the built-up op inventories.
A BUFFER is placed before the bottleneck machine to prevent it from starving, or idling, for material. One hour of not producing costs the company one hour of sales which can be produced in one hour. The ROPE represents a maximum amount of Work In Process (WIP) in the line. During a hiking trip, Alex discovers that the difference in speed in which the kids walk lead to growing distance between the first and the last kid in line. This distance represents the Inventory in a factory.
By binding the boys together with a rope, the faster boys are forced to walk slower and the maximum distance between the first and the last boy is managed. By determining the length of the rope, the so called WIP-cap, one can prevent different workstations from overproducing.The Drum-buffer-rope principle helps the organization to maximize PRODUTION THROUGHPUT. A possible measure for throughput of a factory is the Lead time, which is the total time a product spents in the factory, from raw materials to end product. Goldratt describes four types of time:. Change-over times, the time a product(part) has to wait before it can continue being produced. Process time, the time necessary to alter the products and add value to it#. Queue time, the time a product spends waiting for other products in the same batch which need to be processed on a machine.
Waiting time, the time a product spends waiting for other parts or materials.These different times of time are interrelated. Reducing batch size by 50% for instance, can lead to twice as many change-over-times but at the same time also to a reduction of waiting-times by 50% on different workstations. Reducing Batch sizes is thus not per definition an improvement, but needs to be evaluated for every situation.Goldratt´s Theory of Constraints describes managing production processes by managing bottleneck machines. It is possible though, that a process has multiple bottlenecks. The three measures Turnover, inventories and Operational Expenses are optimized when the productivity of the bottleneck machines are maximized, while for all other machines, the batches and inventories are kept as low as possibleThis way of optimizing production processes requires a different method of measuring efficiency. One example is the cost per part produced, which is traditionally increased when change over times increase. A second example is the result of lowering ´assets´ on the balance sheet when inventories are reduced.Implementing Goldratt´s tools, as well as Lean Tools, ask for a radical change in organizations, both in terms of production management as well as accounting.Continue to:SOURCE:Goldratt, E.M, 1986, The Goal - a Process of Continuous Improvement, Great Barrington (MA): The North River Press Publishing Corporation ( ).
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. Note: The first edition of The Goal was publishedin 1984. The first revised edition was published in 1986 and included 31chapters. The second revised edition was published in 1992 and included 40chatpers.The Goal is a very compelling novel. Who ever heard of a novel about a production plant? Well, Eli hasmade the production managers have quite an epiphany.
In one book he might havechanged the whole world of cost accounting. Eli approached the production worldwith a common sense view. Using just one goal, making money, he referenced everyactivity to it. Eli said, 'I view science as nothing more than anunderstanding of the way the world is and why it is that way.'
You see, Eliis a physicist, and in being one, has to understand why things work the way theydo. His common sense approach is illustrated beautifully in this novel. He haslooked at cost accounting from the outside and has developed a whole new systembecause of it.Everyone from accountants to production managers to CEO’s should read thisbook. Because of its fundamentals, it should be part of the curriculum of everyaccounting program. This novel has and continues to help the industry to makestrides toward continuous improvement.Chapter OneThe first chapter gets the reader acquainted with Mr.
Alex Rogo and hisapparent problems with his production plant. This is shown through aconfrontation between Mr. Rogo and his boss Mr. Peach, the Division VicePresident. The dispute is over an overdue order #41427. Through theirconversation it’s learned that Mr.
Peach will not settle for anything lessthan the order being shipped today, and since the plant is neither productivenor profitable, Alex has three months to show an improvement or the plant willbe shut down!Chapter TwoThis chapter gives insight to Alex’s home life. Since moving back to hishometown six months ago, it seems adjustment isn’t going well for his family.It’s great for Alex, but it’s a big change from the city life that his wifeis used to.
You also experience Mr. Rogo’s background through his reflectionsback on his travels to eventually find himself back where he started. 'He’snow 38 years old and a crummy plant manager'.
By the way, the order #41427does get shipped, but not very efficiently. All hands in the plant are workingon one order with forbidden overtime to boot.Chapter ThreeMr.
Peach calls a meeting at headquarters for all plant managers and hisstaff. At the meeting everybody finds out how bad things are and are given goalsto achieve for the next quarter.
Through the grapevine Mr. Rogo finds outperhaps why Mr. Peach has been acting so erratic lately, the Division has oneyear to improve or it’s going to be sold, along with Mr. Peach.Chapter FourWhile at this meeting, Alex thinks back on a recent business trip where heran into an old physics professor, Jonah, at the airport. Jonah puzzles Alexwith how well he knows how Alex’s plant is doing. Jonah has no knowledge ofwhere Alex is employed.
Johan predicts the problems of high inventoriesand not meeting shipping dates. He also states that there is only one goal forall companies, and anything that brings you closer to achieving it is productiveand all other things are not productive. (Seefor more on Alex's encounter with Jonah.)Chapter FiveAlex decides to leave the meeting at the break. He has no particular place hewould like to go; he just knows this meeting isn’t for him, not today. Heneeds to understand what the 'goal' is. After a pizza and a six packof beer it hits him, money. The 'goal' is to make money and anythingthat brings us closer to it is productive and anything that doesn’t isn’t.Chapter SixMr.
Rogo sits down with one of his accountants and together they define whatis needed in terms of achieving the goal. Net profit needs to increase alongwith simultaneously increasing return on investment and cash flow. Now all thatis needed is to put his specific operations in those terms.Chapter SevenAlex makes the decision to stay with the company for the last three monthsand try to make a change.
Then he decides he needs to find Jonah.Chapter EightAlex finally speaks to Jonah. He is given three terms that will help him runhis plant, throughput, inventory, and operational expense. Jonah states thateverything in the plant can be classified under these three terms. 'Throughput isthe rate at which the system generates money through sales.' 'Inventory isall the money that the system has invested in purchasing things which it intendsto sell.' 'Operational expense is all the money the systemspends in order to turn inventory into throughput.'
Alex needs more explanation.Chapter NineAlex fresh off his talk with Jonah gets word that the head of the companywants to come down for a photo opportunity with one of Alex’s robots. Thisgets Alex thinking of the efficiency of these robots. With the help of theaccountant, inventory control woman, and the production manager, Alex discoversthe robots increased costs, operational expenses, and therefore were lessproductive. Implementing the robots increased costs by not reducing others, likedirect labor. The labor was shifted to other parts of the plant.Chapter TenAfter explaining everything, Alex and his staff (Bob from production, Loufrom accounting and Stacey from inventory control) hammered out the meaning ofthroughput, inventory and operational expense untilsatisfied.
Lou, states the relationships as follows. 'Throughput is moneycoming in. Inventory is the money currently inside the system. And operationalexpense is the money we have to pay out to make throughput happen.' Bob isskeptical that everything can be accounted for with three measurements.
Louexplains that tooling, machines, the building, the whole plant are allinventory. 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 themachines.
But how can they do that without lowering efficiencies? Another callto Jonah is placed and Alex is off to New York that night.Chapter ElevenThe meeting with Jonah is brief.
Alex tells Jonah of the problems at theplant and the three months in which to fix them. Jonah says they can be fixed inthat time and then they go over the problems the plant has. First, Jonah tellsAlex to forget about the robots. He also tells Alex that 'A plant inwhich everyone is working all the time is very inefficient.' Jonah suggestthat Alex question how he is managing the capacity in the plant and consider theconcept of a balanced plant. According to Jonah, this 'is a plant where thecapacity of each and every resource is balanced exactly with demand from themarket.'
Alex thinks a balanced plant is a good idea. Jonah says no,'the closer you come to a balanced plant, the closer you are tobankruptcy.' Then Jonah leaves Alex with another riddle, whatdoes the combination of 'dependent events' and 'statistical fluctuations'have to do with your plant? Both of those seem harmless and should workthemselves out down the production line.Chapter TwelveThis short chapter tries to capture the essence of the problems the job is causingat home with the extra workload. The marriage is very strained because of thedevotion Alex needs to give to the plant.Chapter ThirteenStuck for the weekend as troop master, Alex discovers the importance of'dependent events' in relation to 'statisticalfluctuations'.
Through the analogy between a single file hike through thewilderness and a manufacturing plant, Alex sees that there are normally limitsto making up the downside of the fluctuations with the following 'dependentevents'. Even if there were no limits, the last event must make up for allthe others for all of them to average out.Chapter FourteenFinally, through the dice game or match bowl experiment, it becomes clear that with abalanced plant and because of 'statistical fluctuations' and'dependent events' throughput goes down and inventory along withoperating expenses goes up.
A balanced plant is not the answer. (See the ).Chapter FifteenFully understanding the 'dependent events', Alex puts the slowestkid in the front of the hike and he relieves him of extra weight he has beencarrying in his backpack. This balances the fluctuations and increases the kid’sproductivity, which increased the throughput of the team.Chapter SixteenWell, after the camping trip the boys arrive home to find the mother hasdisappeared. All the stress of his job was too much for her so she left.
Now thekids and the job are all Alex’s responsibility. This was supposed to be aweekend for Alex and his wife, but when the hike came up it seemed to be thelast straw for her.Chapter SeventeenAlex tries to portray his new revelation to his team at the plant. Nobodyseems interested. But the walk in the woods becomes apparent when it is put tothe test for an overdue order in the plant. Now even the production supervisor agrees. Now what?Chapter EighteenIn this chapter Jonah introduces Alex to the concept of bottlenecks andnon-bottlenecks.
Jonah defines these terms as follows. 'A bottleneck is anyresource 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 demandplaced on it.' Jonah explains that Alex should not try to balance capacitywith demand, but instead balance the flow of product through the plant.Later, Alex and his team recognize the bottlenecks, the areas where capacitydoesn’t equal demand, like the slow kid Herbie on the hike. With this discovery goesthe ideas related to reorganizing the plant like Alex did with the hike.
Production is aprocess and it cannot be moved around so easily. Many processes rely on theprevious 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 NineteenWell, Jonah makes a visit to the plant. Jonah tells Alex that a plant withoutbottlenecks would have enormous excess capacity. Every plant should havebottlenecks. Alex is confused.
What is needed is to increase the capacity of theplant? The answer is more capacity at the bottlenecks. More machines to do the bottleneckoperations might help, but how about making them run more effectively.
Jonahtells them that they have hidden capacity because some of their thinking isincorrect. Some ways to increase capacity at the bottlenecks are not to have any down time within the bottlenecks, make sure they are onlyworking on quality products so not to waste time, and relieve the workload byfarming some work out to vendors.
Jonah wants to know how much it cost when thebottlenecks (X and heat treat) machines are down. Lou says $32 per hour for theX machine and $21 per hour for heat treat. How much when the whole plant isdown? 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 anhour, the true cost is around $2,735, the cost of the entire system. Every minute of downtimeat a bottleneck translates into thousands of dollars of loss throughput, because without the partsfrom the bottleneck, you can’t sell the product.
Therefore, you cannotgenerate throughput.Chapter TwentyAlex organizes the bottlenecks to work on only overdue orders from the mostoverdue to the least. He then finds his wife.
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She is at her parent’s house.Through their conversation it is learned that she still needs to be away from everybody, even the kids.Chapter Twenty-OneThe crew works out some of the details for keeping the bottlenecks constantlybusy. In the process they find that they need another system to inform theworkers what materials have priority at non-bottlenecks. Red and green tags arethe answer. Red for bottleneck parts to be worked on first as to not hold up thebottleneck machine, and green for the non-bottleneck parts. That concludesanother week. The true test will be next week.Chapter Twenty-TwoGreat, twelve orders were shipped.
Alex is pleased, but he definitely needsmore. He puts his production manager on it. His production manager rounds upsome old machines to complement what one of the bottlenecks does. Things are looking up.Chapter Twenty-ThreeThey are becoming more and more efficient, but lag time arouse with the twobottlenecks because of workers being loaned out to other areas and not being atthe bottlenecks when needed to process another order. It seems there was nothingto 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 atother areas between batches. Alex decides to dedicate a foreman at each locationall the time. Then one of those dedicated foreman, the night foreman, discoversa way to process more parts by mixing and matching orders by priority,increasing efficiency by ten percent.
Finally, one process being sent through abottleneck could be accomplished through another older way and therefore free uptime on the bottleneck.Chapter Twenty-FourNow that the new priority system is in place for all parts going through thebottlenecks, inventory is decreasing. That’s a good thing right? But lowerinventory revealed more bottlenecks. This intrigues Jonah so he’s coming to take a look.Chapter Twenty-Five'There aren’t any new bottlenecks', says Jonah. What actually hashappened is a result of some old thinking. Working non-bottlenecks to maximumcapacity on bottleneck parts has caused the problem.
All parts are stacked up infront of the bottlenecks and others are awaiting non-bottleneck parts for finalassembly. 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 themexactly what they need and when they need it.Chapter Twenty-SixRalf, the computer wiz, says he can come up with a schedule for bottleneckparts and when they should be released. This will alleviate any excess inventoryin front of the bottlenecks, but what about the non-bottlenecks? Jonah says withthe same data out of the bottlenecks to final assembly, you should be able topredict non-bottleneck parts as well. This will make some time, but there areenough parts in front of the bottlenecks to stay busy for a month.Chapter Twenty-SevenThere is another corporate meeting. Peach doesn’t praise Alex like Alexthinks he should.
Alex decides to talk with him in private. Peach agrees tokeep 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-EightFifteen Percent!! Fifteen Percent!!
Just then Jonah called to let Alex knowthat he will not be available to speak with in the next few weeks. Alex informshim of the new problem of more inventories and less throughput.
Jonah suggestsreducing 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 quickerresponse times and less lead times for orders. Sounds good.Chapter Twenty-NineAlex is propositioned with a test. They can greatly increase sales, currentand future, if they can ship a thousand products in two weeks. Impossiblewithout committing the plant to nothing but the new order? How aboutsmaller batch sizes. Cut them in half again.
Then promise to ship 250 each weekfor four weeks starting in two weeks. The customer loved it.Chapter Thirty.
Seventeen percent!! That’s great, but it’s not derived from the old costaccounting model. The auditors sent down to the plant from Division find just12.8% improvement. Most of it accounts from the new order. Which by the way, theowner of the company that placed the order came down personally to shakeeverybody’s hand in the plant and to give a contract to them for not athousand parts but ten thousand. Anyway, tomorrow is the day of reckoning at division.Chapter Thirty-OneWell the meeting at Division started out rough.
Alex thought he would bemeeting with Mr. Peach and other top executives. Instead, he met with theirunderlings. He decides to try and convince them it doesn’t work. Just beforeleaving he decides to see Mr.
It’s a good thing he did, because he justgot promoted to Mr. Peach’s position.
Now Alex has to manage three plants asthe whole division. He calls Jonah desperately and asks for help. Jonah declinesuntil he has specific questions.Chapter Thirty-TwoAlex has a nice dinner with his wife. Through the veal parmesan and cheesecake it is decided that Alex should ask Jonah how he can get other people tounderstand these techniques that his team has discovered without being condescending.Chapter Thirty-ThreeNow is the time to assemble Alex’s team for Division. Surprisingly theaccountant with two years to retirement is on board, but the production managerisn’t.
He wants to be plant manager to continue their efforts. Everything istotally into place at the plant but more is needed for division.Chapter Thirty-FourAlex is firmly engrossed with the problems of taking over the division. Withadvice 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-FiveThe second day they are led in a discussion about the periodic table ofelements, and how the scientists actually got a table of any sort. Maybe that ishow they will solve the massive problems of division, by understanding how thescientists started with nothing and achieved order. A way to define them bytheir intensive order is needed.Chapter Thirty-SixThe team finally comes up with the process: Step one – identify the system’sbottlenecks; Step two- decide how to exploit those bottlenecks; Step three-subordinate everything else to step two decisions; Step four- evaluate thesystems bottlenecks; Step five- if, in a previous step, a bottleneck has beenbroken, go to step one.
It seems so simple, just different.Chapter Thirty-SevenThe team decides to revise the steps: Step one – identify the systemsconstraints; Step two – decide how to exploit the systems constraints; Stepthree – subordinate everything else to step two decisions; Step four –evaluate the systems constraints; Step five- warning!!! If in the previous stepsa constraint has been broken, go back to step one, but don’t allow inertia tocause a system constraint. It also has been discovered that they have been using the bottlenecks toproduce fictitious orders in an effort to keep the bottlenecks busy. That willfree up twenty percent capacity, which translates in to market share.Chapter Thirty-EightTalking with the head of sales.
Alex finds out that there is a market orderto fill the capacity. It’s in Europe, so selling for less there will notaffect domestic clients. If it can be done, will open a whole new market. ThenAlex ponders Jonah’s question, to determine what management techniques shouldbe utilized. Alex determines how a physicist approaches a problem. Maybe this will lead to an answer.Chapter Thirty-NineAlex experiences a problem at the plant.
It seems all the new orders havecreated new bottlenecks. After analyzing the problem, they agreed to increase inventory infront of the bottlenecks an tell sales to not promise new order deliveries forfour weeks, twice as much as before. This will hurt the new relationship betweensales and production, but it is needed.
Production is an ongoing process ofimprovement, and when new problems arise they need to be dealt with accordingly.Chapter FortyFinally, struggling with the answer to Jonah’s question, Alex comes up with some questions on his own: What to change? What to change to? How to cause thechange? 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 answerto Jonah’s question.Related summaries:Corbett, T. Throughput accounting and activity-based costing: Thedriving factors behind each methodology. Journal of Cost Management(January/February): 37-45.Goldratt, E. What is this thing called Theory of Constraints.New York: North River Press.Goldratt, E.
The Haystack Syndrome: Sifting Information Outof the Data Ocean. New York: North River Press.Goldratt, E. From Cost world to throughput world.
Advances InManagement Accounting (1): 35-53.Goldratt, E. Schragenheim and C. Necessary ButNot Sufficient. New York: North River Press.Hall, R., N. Galambos, and M. Constraint-based profitability analysis: Stepping beyond the Theory of Constraints.Journal of Cost Management (July/August): 6-10. Using drum-buffer-rope scheduling rather than just-in-time production.
Management Accounting Quarterly (Winter): 36-40.Louderback, J. Theory of constraints versus traditional management accounting. Accounting Education 1(2):189-196.Luther, R. Cost-volume-profit analysis and the theory of constraints. Journal of Cost Management(September/October): 16-21.Martin, J.
Comparing Dupont's ROI with Goldratt's ROI. Management And Accounting Web.Martin, J. Comparing Traditional Costing, ABC, JIT, andTOC. Management And Accounting Web.Martin, J. Drum-Buffer-Rope System.
Management And Accounting Web.Martin, J. Global measurements of the theory of constraints.
Management And Accounting Web.Martin, J. Goldratt's dice game or match bowl experiment.Management And Accounting Web.Martin, J. TOC problems and introduction to linearprogramming.Management And Accounting Web.Rezaee, Z. Synchronous manufacturing: Putting thegoal to work. Journal of Cost Management (March/April): 6-15. An introduction to the theory of constraints.
Journal of Cost Management (Summer): 43-48.Westra, D., M. Srikanth and M. Measuring operational performance in a throughput world. ManagementAccounting (April): 41-47.