The Goal: A Process of Ongoing Improvement (19 page)

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?’’
"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.

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.