The Goal: A Process of Ongoing Improvement, page 21
"It averages around a thousand dollars a unit,’’ says Lou.
"And you’re worried about spending a dollar or two at the bottlenecks to make them more productive?’’ he asks. "First of all, what do you think the cost of, let’s say, the X machine is for one hour?’’
Lou says, "That’s well established. It costs us $32.50 per hour.’’
"And heat-treat?’’
"That’s $21 per hour,’’ says Lou.
"Both of those amounts are incorrect,’’ says Jonah.
"But our cost data—’’
"The numbers are wrong, not because you have made a calculating error, but because the costs were determined as if these work centers existed in isolation,’’ says Jonah. "Let me explain: when I was a physicist, people would come to me from time to time with problems in mathematics they couldn’t solve. They wanted me to check their numbers for them. But after a while I learned not to waste my time checking the numbers—because the numbers were almost always right. However, if I checked the assumptions, they were almost always wrong.’’
Jonah pulls a cigar out of his pocket and lights it with a match.
"That’s what’s going on here,’’ he says between puffs. "You have calculated the cost of operating these two works centers according to standard accounting procedures . . . without considering the fact that both are bottlenecks.’’
"How does that change their costs?’’ asks Lou.
"What you have learned is that the capacity of the plant is equal to the capacity of its bottlenecks,’’ says Jonah. "Whatever the bottlenecks produce in an hour is the equivalent of what the plant produces in an hour. So . . . an hour lost at a bottleneck is an hour lost for the entire system.’’
"Right, we’re with you,’’ says Lou.
"Then how much would it cost for this entire plant to be idle for one hour?’’ asks Jonah.
"I really can’t say, but it would be very expensive,’’ admits Lou.
"Tell me something,’’ asks Jonah. "How much does it cost you to operate your plant each month?’’
Lou says, "Our total operating expense is around $1.6 million per month.’’
"And let’s just take the X machine as an example,’’ he says. "How many hours a month did you say it’s available for production?’’
"About 585,’’ says Ralph.
"The actual cost of a bottleneck is the total expense of the system divided by the number of hours the bottleneck produces,’’ says Jonah. "What does this make it?’’
Lou takes out his calculator from his coat pocket and punches in the numbers.
"That’s $2,735,’’ says Lou. "Now wait a minute. Is that right?’’
"Yes, it’s right,’’ says Jonah. "If your bottlenecks are not working, you haven’t just lost $32 or $21. The true cost is the cost of an hour of the entire system. And that’s twenty seven hundred dollars.’’
Lou is flabbergasted.
"That puts a different perspective on it,’’ says Stacey.
"Of course it does,’’ says Jonah. "And with that in mind, how do we optimize the use of the bottlenecks? There are two principal themes on which you need to concentrate . . .
"First, make sure the bottlenecks’ time is not wasted,’’ he says. "How is the time of a bottleneck wasted? One way is for it to be sitting idle during a lunch break. Another is for it to be processing parts which are already defective—or which will become defective through a careless worker or poor process control. A third way to waste a bottleneck’s time is to make it work on parts you don’t need.’’
"You mean spare parts?’’ asks Bob.
"I mean anything that isn’t within the current demand,’’ he says. "Because what happens when you build inventory now that you won’t sell for months in the future? You are sacrificing present money for future money; the question is, can your cash flow sustain it? In your case, absolutely not.’’
"He’s right,’’ admits Lou.
"Then make the bottlenecks work only on what will contribute to throughput today... not nine months from now,’’ says Jonah. "That’s one way to increase the capacity of the bottlenecks. The other way you increase bottleneck capacity is to take some of the load off the bottlenecks and give it to non-bottlenecks.’’
I ask, "Yeah, but how do we do that?’’
"That’s why I was asking those questions when we were out in the plant,’’ he says. "Do all of the parts have to be processed by the bottleneck? If not, the ones which don’t can be shifted to nonbottlenecks for processing. And the result is you gain capacity on your bottleneck. A second question: do you have other machines to do the same process? If you have the machines, or if you have a vendor with the right equipment, you can offload from the bottleneck. And, again, you gain capacity which enables you to increase throughput.’’
I come into the kitchen for breakfast the next morning and sit down to a big steaming bowl of my mother’s oatmeal . . . which I have hated ever since I was a kid. I’m staring at the oatmeal (and the oatmeal is staring back) when Mom/Grandma asks, "So how did everything go last night?’’
I say, "Well, actually, you and the kids were on the right track at dinner.’’
"We were?’’ asks Dave.
"We need to make the Herbies go faster,’’ I say. "And last night Jonah pointed out some ways to do that. So we learned a lot.’’
"Well, now, isn’t that good news,’’ says my mother.
She pours a cup of coffee for herself and sits down at the table. It’s quiet for a moment. Then I notice that Mom and the kids are eyeing each other.
"Something wrong?’’ I ask.
"Their mother called again last night while you were gone,’’ says my mother.
Julie has been calling the kids regularly since she left. But for whatever reason of her own, she still won’t tell them where she is. I’m debating whether to hire a private detective to find out where she’s hiding.
"Sharon says she heard something when she was on the phone talking,’’ says my mother.
I look at Sharon.
"You know that music Grandpa always listens to?’’ she says.
I say, "You mean Grandpa Barnett?’’
"Uh-huh, you know,’’ she says, "the music that puts you to sleep, with the—what are they called?’’
"Violins,’’ says Dave.
"Right, the violins,’’ says Sharon. "Well, when Mom wasn’t talking, I heard that on the phone last night.’’
"I heard ’em too,’’ says Dave.
"Really?’’ I say. "That’s very interesting. Thank you both for noticing that. Maybe I’ll give Grandma and Grandpa Barnett another call today.’’
I finish my coffee and stand up.
"Alex, you haven’t even touched your oatmeal,’’ says Mom.
I lean down and kiss her on the cheek. "Sorry, I’m late for school.’’
I wave to the kids and hurry to grab my briefcase.
"Well, I’ll just have to save it so you can eat it tomorrow,’’ says my mother.
20
Driving to the plant, I pass the motel where Jonah stayed last night. I know he’s long gone—he had a 6:30 A.M. flight to catch. I offered to pick him up this morning and drive him to the airport, but (lucky for me) he refused and said he’d take a cab.
As soon as I get to the office, I tell Fran to set up a meeting with the staff. Meanwhile, I start to write down a list of the actions Jonah suggested last night. But Julie comes to mind and won’t leave. I close my office door and sit down at my desk. I find the number for Julie’s parents and dial it.
The first day after Julie left, her parents called to ask me if I had heard anything. They haven’t called back since. A day or two ago, I tried getting in touch with them to find out if they had heard anything. I called in the afternoon and I talked to Julie’s mother, Ada. She said she didn’t know where Julie was. Even then, I didn’t quite believe her.
Now Ada answers again.
"Hi, this is Alex,’’ I tell her. "Let me talk to Julie.’’ Ada is flustered. "Well, um, ah... she isn’t here.’’ "Yes, she is.’’
I hear Ada sigh.
"She is there, isn’t she,’’ I say.
Finally Ada says, "She does not want to talk to you.’’ "How long, Ada? How long has she been there? Were you ying to me even that Sunday night when I called?’’ "No, we were not lying to you,’’ she says indignantly. "We had no idea where she was. She was with her friend, Jane, for a few days.’’
"Sure, and what about the other day when I called?’’ "Julie simply asked me not to say where she was,’’ says Ada, "and I shouldn’t even be telling you now. She wants to be by herself for a while.’’
"Ada, I need to speak with her,’’ I say.
"She will not come to the phone,’’ says Ada.
"How do you know until you’ve asked?’’
The phone on Ada’s end is put down on the table. Footsteps fade away and return a minute later.
"She says she’ll call you when she’s ready,’’ says Ada. "What does that mean?’’
"If you hadn’t neglected her all these years, you wouldn’t be in this situation,’’ she says.
"Ada—’’
"Good-bye,’’ she says.
She hangs up the phone. I try calling back right away, but there is no answer. After a few minutes, I force my mind back to getting ready to talk to the staff.
At ten o’clock, the meeting starts in my office.
"I’d like to know what you think about what you heard last night,’’ I say. "Lou, what was your reaction?’’
Lou says, "Well...I just couldn’t believe what he was saying about an hour of a bottleneck. I went home last night and thought it over to see if it all made sense. And, actually, we were wrong about a lost hour of a bottleneck costing $2,700.’’
"We were?’’ I ask.
"Only eighty percent of our products flow through the bottlenecks,’’ says Lou as he takes a piece of note paper from his shirt pocket. "So the truer cost ought to be eighty percent of our operating expense, and that comes to $2,188 an hour—not $2,735.’’
"Oh,’’ I say. "I suppose you’re right.’’
Then Lou smiles.
"Nevertheless,’’ he says, "I have to admit it was quite an eyeopener to look at the situation from that perspective.’’
"I agree,’’ I say. "What about the rest of you?’’
I go from person to person around the office asking for reactions, and we’re all pretty much in agreement. Even so, Bob seems hesitant about committing to some of the changes Jonah was talking about. And Ralph isn’t sure yet where he fits in. But Stacey is a strong advocate.
She sums up, saying, "I think it makes enough sense to risk the changes.’’
"Although I’m nervous about anything that increases operating expense at this point in time,’’ says Lou, "I agree with Stacey. As Jonah said, we may face a bigger risk just staying on the path we’ve been following.’’
Bob raises one of his meaty hands in preparation for a comment.
"Okay, but some of what Jonah talked about will be easier and faster to make happen than the rest,’’ he says. "Why don’t we go ahead with the easier things right away and see what kind of effect they have while we’re developing the others.’’
I tell him, "That sounds reasonable. What would you do first?’’
"I think I’d wanna move the Q.C. inspection points first, to check parts going into the bottlenecks,’’ says Bob. "The other Q.C. measures will take a little time, but we can have an inspector checking pre-bottleneck parts in no time—by the end of today if you want.’’
I nod. "Good. What about new rules for lunch breaks?’’
"We might have a squawk or two from the union,’’ he says.
I shake my head. "I think they’ll go along with it. Work out the details and I’ll talk to O’Donnell.’’
Bob makes a note on the paper pad on his lap. I stand up and step around the desk to emphasize what I’m about to say.
"One of the questions Jonah raised last night really struck home for me,’’ I tell them. "Why are we making the bottlenecks work on inventory that won’t increase throughput?’’
Bob looks at Stacey, and she looks back at him.
"That’s a good question,’’ she says.
Bob says, "We made the decision—’’
"I know the decision,’’ I say. "Build inventory to maintain efficiencies.’’ But our problem is not efficiencies. Our problem is our backlog of overdue orders. And it’s very visible to our customers and to division management. We positively must do something to improve our due-date performance, and Jonah has given us the insight on what that something has to be.
"Until now, we’ve expedited orders on the basis of who’s screamed the loudest,’’ I say. "From now on, late orders should get first priority over the others. An order that’s two weeks late gets priority over an order that’s one week late, and so on.’’
"We’ve tried that from time to time in the past,’’ says Stacey.
"Yes, but the key this time is we make sure the bottlenecks are processing parts for those late orders according to the same priority,’’ I say.
"That’s the sane approach to the problem, Al,’’ says Bob, "Now how do we make it happen?’’
"We have to find out which inventory en route to the bottlenecks is needed for late orders and which is simply going to end up in a warehouse. So here’s what we need to do,’’ I say. "Ralph, I want you to make us a list of all the overdue orders. Have them ranked in priority ranging from the most days overdue to the least days overdue. How soon can you have that for us?’’
"Well, that in itself won’t take very long,’’ he says. "The problem is we’ve got the monthlies to run.’’
I shake my head. "Nothing is more important to us right now than making the bottlenecks more productive. We need that list as soon as possible, because once you’ve got it, I want you to work with Stacey and her people in inventory control—find out what parts still have to be processed by either of the bottlenecks to complete those orders.’’
I turn to Stacey.
"After you know which parts are missing, get together with Bob and schedule the bottlenecks to start working on the parts for the latest order first, the next latest, and so on.’’
"What about the parts that don’t go through either one of the bottlenecks?’’ asks Bob.
"I’m not going to worry about those at the moment,’’ I tell him. "Let’s work on the assumption that anything not needing to go through a bottleneck is either waiting in front of assembly already, or will be by the time the bottleneck parts arrive.’’
Bob nods.
"Everybody got it?’’ I ask. "Nothing else takes priority over this. We don’t have time to take a step back and do some kind of headquarters number where everyone takes six months to think about it. We know what we have to do. Let’s get it done.’’
That evening, I’m driving along the Interstate. Around sunset, I’m looking around at the rooftops of suburban houses to either side of the highway. A sign goes by which says I’m two miles from the exit to Forest Grove. Julie’s parents live in Forest Grove. I take that exit.
Neither the Barnetts nor Julie know I’m coming. I told my mother not to tell the kids. I simply hopped in the car after work and headed down here. I’ve had enough of this hide-and-seek game she’s playing.
From a four-lane highway, I turn onto a smooth blacktop street which winds through a quiet neighborhood. It’s a nice neighborhood. The homes are unquestionably expensive and the lawns without exception are immaculate. The streets are lined with trees just getting the new leaves of spring. They are brilliant green in the golden setting sun.
I see the house halfway down the street. It’s the two-story brick colonial painted white. It has shutters. The shutters are made of aluminum and have no hinges; they are non-functional but traditional. This is where Julie grew up.
I park the Mazda by the curb in front of the house. I look up the driveway, and sure enough, there is Julie’s Accord in front of the garage.
