The Goal: A Process of Ongoing Improvement, page 20
"Alex, how do you know it’s impossible?’’ he asked.
I told him, "We’ve only got two months left before my boss goes to the board of directors with his recommendation. If we had more time, maybe we could do something, but with only two months....’’
"Two months is still enough time to show an improvement,’’ he said. "But you have to learn how to run your plant by its constraints.’’
"Jonah, we’ve analyzed the situation thoroughly—’’
He said, "Alex, there are two ways that the ideas I’m giving you won’t work. One is if there isn’t any demand for the products your plant makes.’’
"No, we have a demand, although it’s shrinking as our prices go up and service deteriorates,’’ I said. "But we still have a sizeable backlog of orders.’’
"I also can’t help you if you’re determined not to change. Have you made up your mind to do nothing and let the plant close?’’
"It’s not that we want to give up,’’ I told him. "It’s that we don’t see any other possibilities.’’
"Okay then. Have you tried to take some of the load off the bottlenecks by using other resources?’’ he asked.
"You mean offloading? We can’t. These are the only two resources of their type in the plant.’’
He paused for a moment and finally he said, "All right, one more question: Does Bearington have an airport?’’
And so here he is tonight, walking out of Gate Two. He changed his flight to Los Angeles to make a stop here for the evening. I walk up to him and shake his hand.
"How was your flight?’’ I ask him.
"Have you ever spent time in a sardine can?’’ he says, then adds, "I shouldn’t complain. I’m still breathing.’’
"Well, thanks for coming,’’ I tell him. "I appreciate you changing your plans, although I’m still not sure you can help us.’’
"Alex, having a bottleneck—’’
"Two bottlenecks,’’ I remind him.
"Having two bottlenecks doesn’t mean you can’t make money,’’ he says. "Quite the contrary, in fact. Most manufacturing plants do not have bottlenecks. They have enormous excess capacity. But they should have them—one on every part they make.’’
He reads the puzzled look on my face.
"You don’t understand, but you will,’’ he said. "Now I want you to give me as much background on your plant as you can.’’
All the way from the airport, I talk non-stop about our predicament. When we reach the plant, I park the Mazda in front of the offices. Waiting for us inside are Bob, Lou, Stacey and Ralph. They’re standing around the vacant receptionist’s desk. Everyone is cordial, but as I make the introductions I can tell the staff is waiting to see if this Jonah guy—who bears no resemblance to any consultant they’ve ever seen walk through the door—really knows what he’s doing. Jonah stands in front of them and begins to pace as he talks.
"Alex called me today because you perceive a problem with the bottlenecks you’ve discovered in your plant,’’ says Jonah. "Actually, you are experiencing a combination of several problems. But first things first. From what Alex has told me, your most immediate need is to increase throughput and improve your cash flow. Am I right?’’
"That sure would be a big help,’’ says Lou. "How do you think we might be able to do that?’’
"Your bottlenecks are not maintaining a flow sufficient to meet demand and make money,’’ he says. "So there is only one thing to do. We have to find more capacity.’’
"But we don’t have the money for more capacity,’’ says Lou.
"Or the time to install it,’’ says Bob.
"I’m not talking about more capacity from one end of the plant to the other,’’ says Jonah. "To increase the capacity of the plant is to increase the capacity of only the bottlenecks.’’
"You mean make them into non-bottlenecks,’’ says Stacey.
"No,’’ he says. "Absolutely not. The bottlenecks stay bottlenecks. What we must do is find enough capacity for the bottlenecks to become more equal to demand.’’
"Where’re we going to find it?’’ asks Bob. "You mean it’s just layin’ around out there?’’
"In effect, yes,’’ says Jonah. "If you are like most manufacturers, you will have capacity that is hidden from you because some of your thinking is incorrect. And I suggest that first of all we go into your plant and see for ourselves exactly how you are managing your two bottlenecks.’’
"Why not,’’ I say. "After all, no one visits this plant and escapes without a tour.’’
The six of us put on the safety glasses and hats and go into the plant. Jonah and I head the column as we walk through the double doors into the orange light. It’s about halfway into second shift now and somewhat quieter than it is on day turn. That’s good because it lets us hear each other better when we talk. I point out various stages of production to Jonah as we walk. I notice Jonah’s eyes measuring the stacks of inventory piled everywhere. I try to hurry us along.
"This is our NCX-10 n/c machine,’’ I tell Jonah as we arrive at the big machine.
"And this is your bottleneck, correct?’’ asks Jonah.
"One of them,’’ I say.
"Can you tell me why isn’t it working right now?’’ asks Jonah.
Indeed, the NCX-10 is stopped at the moment.
I say, "Well... ah, good question. Bob, why isn’t the NCX-10 running?’’
Bob glances at his watch.
"Probably because the set-up people went on break about ten minutes ago,’’ says Bob. "They should be back in about twenty minutes.’’
"There is a clause in our union contract which stipulates there must be a half-hour break after every four hours of work,’’ I explain to Jonah.
He asks, "But why should they take their break now instead of when the machine is running?’’
Bob says, "Because it was eight o’clock and—’’
Jonah holds up his hands and says, "Wait a minute. On any nonbottleneck machine in your plant, no problem. Because, after all, some percentage of a non-bottleneck’s time should be idle. So who cares when those people take their breaks? It’s no big deal. But on a bottleneck? It’s exactly the opposite.’’
He points to the NCX-10 and says, "You have on this machine only so many hours available for production—what is it . . . 600, 700 hours?’’
"It’s around 585 hours a month,’’ says Ralph.
"Whatever is available, the demand is even greater,’’ says Jonah. "If you lose one of those hours, or even half of it, you have lost it forever. You cannot recover it someplace else in the system. Your throughput for the entire plant will be lower by whatever amount the bottleneck produces in that time. And that makes an enormously expensive lunch break.’’
"But we have a union to deal with,’’ says Bob.
Jonah says, "So talk to them. They have a stake in this plant. They’re not stupid. But you have to make them understand.’’
Yeah, I’m thinking; that’s easier said than done. On the other hand...
Jonah is walking around the NCX-10 now, but he’s not just looking at it alone. He’s looking at other equipment in the plant. He comes back to us.
"You’ve told me this is the only machine of its type in the plant,’’ says Jonah, "But this is a relatively new machine. Where are the older machines that this one replaced? Do you still have those?’’
Bob says vaguely, "Well, some of them we do. Some of them we got rid of. They were practically antiques.’’
"Do you have at least one of each type of the older machines necessary to do what this X-what-ever-it-is machine does?’’ Jonah asks.
Lou edges in and and says, "Excuse me, but you’re not actually suggesting we use that old equipment, are you?’’
"If it’s still operational, then yes, I might suggest it,’’ says Jonah.
Lou’s eyes blink.
He says, "Well, I’m not sure what that would do to our cost profile. But I have to tell you that those old machines are going to be much more expensive to operate.’’
Jonah says, "We’ll deal with that directly. First, I just want to know if you have the machines or not.’’
For the answer, we turn to Bob—who chuckles.
"Sorry to disappoint you all,’’ he says, "but we got rid of an entire class of machine that we’d need to supplement the NCX-10.’’
"Why did we go do a dumb thing like that?’’ I ask.
Bob says, "We needed the floor space for that new pen to hold inventory.’’
I say, "Oh.’’
"It seemed like a good idea at the time,’’ says Stacey.
Moving right along to heat-treat, we gather in front of the furnaces.
The first thing Jonah does is look at the stacks of parts and ask, "Are you sure all this inventory requires heat-treat?’’
"Oh, absolutely,’’ says Bob.
"There are no alternatives in the processing ahead of this department that would prevent the need for heat-treat on at least some of these parts?’’ he asks.
We all look at each other.
"I guess we’d have to consult with engineering,’’ I say. Bob rolls his eyes.
"What’s the matter?’’ I ask.
"Let’s just say our friends in engineering aren’t as responsive as they could be,’’ says Bob. "They’re not too happy about changing requirements. Their attitude is usually, ‘Do it this way because we said so.’’’
To Jonah, I say, "I’m afraid he does have a point. Even if we can get them to cooperate, it might take a month of Sundays for them to approve it.’’
Jonah says, "Okay, let me ask you this: are there vendors in the area who can heat-treat parts for you?’’
"There are,’’ says Stacey, "but going outside would increase our cost-per-part.’’
The expression on Jonah’s face says he’s getting a little bored with this stonewalling. He points at the mountains of parts.
"How much money is represented in that pile?’’ he asks.
Lou says, "I don’t know... maybe ten or fifteen thousand dollars in parts.’’
"No, it isn’t thousands of dollars, not if this is a bottleneck,’’ says Jonah, "Think again. It’s considerably more.’’
Stacey says, "I can go dig up the records if you like, but the cost won’t be much more than what Lou said. At the most, I’d guess we’ve got about twenty thousands dollars in material—’’
"No, no,’’ says Jonah. "I’m not just talking about the cost of materials. How many products are you going to sell to customers as soon as you can process this entire pile?’’
The staff and I talk among ourselves for a moment.
"It’s kind of hard to say,’’ says Bob.
"We’re not sure all the parts in that pile would translate into immediate sales,’’ says Stacey.
"Oh really? You are making your bottlenecks work on parts that will not contribute to throughput?’’ asks Jonah.
"Well... some of them become spare parts or they go into finished goods inventory. Eventually it becomes throughput,’’ says Lou.
"Eventually,’’ says Jonah. "And, meanwhile, how big did you say your backlog of overdue orders is?’’
I explain to him that sometimes we inflate the batch quantities to improve efficiency.
"Tell me again how this improves your efficiency,’’ says Jonah.
I feel myself starting to turn red with the memory of earlier conversations.
"Okay, never mind that for now,’’ says Jonah. "Let’s concern ourselves strictly with throughput. I’ll put my question differently: how many products are you unable to ship because you are missing the parts in that pile?’’
That’s easier to determine because we know what our backlog is. I tell him how many millions we’ve got in backlog and about what percent of that is held up on account of bottleneck parts.
"And if you could finish the parts in that pile, you could assemble and ship the product?’’ he asks.
"Sure, no problem,’’ says Bob.
"And what is the selling price of each unit?’’
"About a thousand dollars a unit on the average,’’ says Lou, "although it varies, of course.’’
"Then we are not dealing with ten or fifteen or even twenty thousand dollars here,’’ says Jonah. "Because we are dealing with how many parts in that pile?’’
"Perhaps, a thousand,’’ says Stacey.
"And each part means you can ship a product?’’
"Generally, yes,’’ she says.
"And each product shipped means a thousand dollars,’’ says Jonah. "A thousand units times a thousand dollars is how much money?’’
In unison, our faces turn toward the mountain.
"One million dollars,’’ I say with awe.
"On one condition!’’ says Jonah. "That you get these parts in and out of heat-treat and shipped as a finished product before your customers get tired of waiting and go elsewhere!’’
He looks at us, his eyes shifting from face to face.
"Can you afford to rule out any possibility,’’ he asks, "especially one that is as easy to invoke as a change in policy?’’
Everyone is quiet.
"By the way, I’ll tell you more about how to look at the costs in a moment. But one more thing,’’ says Jonah. "I want to know where you do quality inspection on bottleneck parts.’’
I explain to him that most inspection is done prior to final assembly.
"Show me,’’ says Jonah.
So we go to an area where we do quality inspections. Jonah asks about bottleneck parts that we reject. Immediately, Bob points to a pallet stacked with shiny steel parts. On top of them is a pink sheet of paper, which indicates rejection by Quality Control, or Q.C. as it’s known. Bob picks up the job jacket and reads the forms inside.
"I’m not sure what’s wrong with these, but they must be defective for some reason,’’ says Bob.
Jonah asks, "Did these parts come through a bottleneck?’’
"Yeah, they did,’’ says Bob.
"Do you realize what the rejection by Q.C. has done to you?’’ asks Jonah.
"It means we have to scrap about a hundred parts,’’ says Bob.
"No, think again,’’ says Jonah. "These are bottleneck parts.’’
It dawns on me what he’s getting at.
"We lost the time on the bottleneck,’’ I say.
Jonah whirls toward me.
"Exactly right!’’ he says. "And what does lost time on a bottleneck mean? It means you have lost throughput.’’
"But you’re not saying we should ignore quality, are you?’’ asks Bob.
"Absolutely not. You can’t make money for long without a quality product,’’ says Jonah. "But I am suggesting you use quality control in a different way.’’
I ask, "You mean we should put Q.C. in front of the bottlenecks?’’
Jonah raises a finger and says, "Very perceptive of you. Make sure the bottleneck works only on good parts by weeding out the ones that are defective. If you scrap a part before it reaches the bottleneck, all you have lost is a scrapped part. But if you scrap the part after it’s passed the bottleneck, you have lost time that cannot be recovered.’’
"Suppose we get sub-standard quality downstream from the bottleneck?’’ says Stacey.
"That’s another aspect of the same idea,’’ says Jonah. "Be sure the process controls on bottleneck parts are very good, so these parts don’t become defective in later processing. Are you with me?’’
Bob says, "Just one question: where do we get the inspectors?’’
"What’s wrong with shifting the ones you already have to the bottlenecks?’’ asks Jonah.
"That’s something we can think about,’’ I tell him.
"Good. Let’s go back to the offices,’’ says Jonah.
We go back to the office building and meet in the conference room.
"I want to be absolutely sure you understand the importance of the bottlenecks,’’ says Jonah. "Every time a bottleneck finishes a part, you are making it possible to ship a finished product. And how much does that mean to you in sales?’’
