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The Goal (Goldratt E M)

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Lou edges in and and says, "Excuse me, but you're not actu- ally 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 chang- ing requirements. Their attitude is usually, 'Do it this way be- cause 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 quanti- ties to improve efficiency.

"Tell me again how this improves your efficiency," says Jo- nah.

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 differ- ently: 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 back- log 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, "espe- cially 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 Con- trol, 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 bot- tleneck 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 qual- ity control in a different way."

I ask, "You mean we should put Q.C. in front of the bottle- necks?"

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 inspec- tors?"

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