Sample Book Review on Cost Accounting in the world of production

Operation Management

The goal, a book written by Eliyahu Goldratt and Jeff Cox, talks about cost accounting in the world of production. It talks about the character, Mr. Alex Rogo who is faced with a difficult situation. Alex has about three months to either improve the productivity of a production plant or risk having it shut down. Alex meets Jonah by chance in an airport lounge where they have a small talk. In the course of their discussion, Jonah asks Alex the goal of the company he works for, but Alex realizes that he does not know the goal of the company he works for (Goldratt and Cox 26). To be more productive, produce products or even to increase market share do not fall under the company’s goal.

Alex learns that to be productive, one must set goals. He leaves the meeting since the meeting is not of help to him if he cannot identify the goal of the company. After swallowing a six pack of beer and a pizza, it hits him that the goal of any company is to make money, anything that propels one towards this goal is productive and anything that does not brings you closer to money is not productive(Goldratt and Cox 26).

Alex, together with his accountants defines what things are needed to achieve the goal. He then decides to contact Jonah(Goldratt and Cox 57).He visits Jonah who gives him three terms that would improve the company’s ability to make more money(Goldratt and Cox 77). The concepts are; increased throughput, decreased inventory and reduced operating expenses (Goldratt and Cox 26. Alex is advised that the best way to improve the company’s current state is by increasing throughput.

Alex, Bob, Lou and Stacy have a discussion on the current state of the manufacturing plant. They decide that they need to make some urgent changes on the machine. Alex calls Jonah again for another meeting (Goldratt and Cox 137). Jonah tells Alex that it is not easy to balance demand and capacity. Jonah attributes these to two factors, dependent events and statistical fluctuations. Alex is told that dependent events are series of things that must occur before another starts. Statistical fluctuations states that the period events and the results do not depend on each other.

When Jonah visits the plant for the first time, he tells Alex that bottlenecks are necessary in a plant (Goldratt and Cox 150). He is told that instead of buying new machines, he should try to improve the effectiveness of the existing ones (Goldratt and Cox 201). Breakdown at any part of a bottleneck would translate to loss throughput. The team puts these new concepts into practice and things works well. Later on, the plant experiences slowed productivity. This makes Jonah to come back and see for himself what might be the problem (Goldratt and Cox 201)

Jonah realizes that Alex and his team are using non-bottlenecks to increase capacity of the bottlenecks. The team is told to balance flow of production in all areas of the plant. Mr.Peach tells Alex that he needs 15% improvement in the following month if the plant is to remain operation (Goldratt and Cox 225).

Alex is not sure how to do this but luckily, a call from Jonah saves the situation. Jonah tells Alex to reduce the batch by half and the 15% would be achieved. When Alex calls Jonah again after being promoted, Jonah refuses to respond and insists that Alex should have specific questions for Jonah to answer(Goldratt and Cox 259).When he finally comes up with the questions for Jonah, he realizes that the questions emphasizes on change and their answers are the keys to good management.

 

Work Cited

Goldratt, Eliyahu and Cox, Jeff. The Goal. Great Barrington, USA: The North River Press Publisher.2004.Print