The Goal

by E M Goldratt

  Then Ralph says, "We went ahead and made a list for both heat-treat and the NCX-10 as to which parts they each have to process and in what order-again, the same sequence of latest order to least late. In a day or two we can generate the list by computer and stop burning the midnight oil."

  "Fantastic, Ralph. I think both you and Stacey have done a super job," I tell him. Then I turn to Ted and Mario. "Now, all you gentlemen have to do is have your foremen start at the top of the list and work their way down."

  "That sounds easy enough," says Ted. "I think we can han- dle that."

  "You know, we may have to go track some of these down," says Mario.

  "So you'll have to do some digging through the inventory," says Stacey. "What's the problem?"

  Mario frowns and says, "No problem. You just want us to do what's on this list, right?"

  "Yep, it's that simple," I say. "I don't want to see either of you working on something not on that list. If the expediters give you any problem, tell them to come see me. And be sure you stick to the sequence we've given you."

  Ted and Mario both nod.

  I turn to Stacey and say, "You do understand how important it is for the expediters not to interfere with this priority list, don't you?"

  Stacey says, "Okay, but you have to promise me you won't change it because of pressure from marketing."

  "My word of honor," I tell her. Then I say to Ted and Mario, "In all seriousness, I hope you two guys know that heat-treat and the NCX-10 are the most important processes in the whole plant. How well you manage those two could very well determine whether this plant has a future."

  "We'll do our best," says Ted.

  "I can assure you that they will," says Bob Donovan.

  Right after that meeting, I go down the hall to the personnel relations for a meeting with Mike O'Donnell, the union local president. When I walk in, my personnel manager, Scott Dolin, is

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  gripping the armrests of his chair with white knuckles, while O'Donnell is talking at the top of his voice.

  "What's the problem here?" I ask.

  "You know very well what the problem is: your new lunch rules in heat-treat and n/c machining," says O'Donnell. "They're in violation of the contract. I refer you to Section Seven, Para- graph Four..."

  I say, "Okay, wait a minute, Mike. It's time we gave the union an update on the situation of the plant."

  For the rest of the morning I describe for him the situation the plant is in. Then I tell him some of what we've discovered and explain why the changes are necessary.

  Wrapping up, I say, "You understand, don't you, that it's probably only going to affect about twenty people at the most?"

  He shakes his head.

  "Look, I appreciate you trying to explain all this," he says. "But we got a contract. Now if we look the other way on one thing, what's to say you won't start changing whatever else you don't like?"

  I say, "Mike, in all honesty, I can't tell you that down the road aways, we won't need to make other changes. But we're ultimately talking about jobs. I'm not asking for cuts in wages or concessions on benefits. But I am asking for flexibility. We have to have the leeway necessary to make changes that will allow the plant to make money. Or, very simply, there may not be a plant in a few months."

  "Sounds like scare tactics to me," he says finally.

  "Mike, all I can say is, if you want to wait a couple of months to see if I'm just trying to scare everyone, it'll be too late."

  O'Donnell is quiet for a moment.

  Finally, he says, "I'll have to think about it, talk it over and all that. We'll get back to you."

  By early afternoon, I can't stand it anymore. I'm anxious to find out how the new priority system is working. I try calling Bob Donovan, but he's out in the plant. So I decide to go have a look for myself.

  The first place I check is the NCX-10. But when I get to the machine, there's nobody to ask. Being an automated machine, it runs a lot of the time with nobody tending it. The problem is that when I walk up, the damn thing is just sitting there. It isn't run- ning and nobody is doing a set-up. I get mad.

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  I go find Mario.

  "Why the hell isn't that machine working?" I ask him.

  He checks with the foreman. Finally he walks back to me.

  "We don't have the materials," he says.

  "What do you mean, you don't have materials," I shout. "What do you call these stacks of steel everywhere?"

  "But you told us to work according to what's on the list," says Mario.

  "You mean you finished all the late parts?"

  "No, they did the first two batches of parts," says Mario. "When they got to the third part on the list, they looked all around and couldn't find the materials for it in the queue. So we're shut down until they turn up."

  I'm ready to strangle him.

  "That's what you wanted us to do, right?" says Mario. "You wanted us to do only what was on the list and in the same order as listed, didn't you? Isn't that what you said?"

  Finally I say, "Yes, that is what I said. But didn't it occur to you that if you couldn't do one item on the list you should go on to the next?"

  Mario looks helpless.

  "Well, where the hell are the materials you need?" I ask him.

  "I have no idea," he says. "They could be any of half-a-dozen places. But I think Bob Donovan might have somebody looking for them already."

  "Okay, look," I tell him. "You have the setup people get this machine ready for whatever is the next part on that list for which you do have the materials. And keep this hunk of junk running."

  "Yes sir," says Mario.

  Fuming mad, I start back to the office to have Donovan paged, so I can find out what went wrong. Halfway there, I pass some lathes and there he is, talking to Otto the foreman. I don't know how civil the tone is. Otto appears to be dismayed by Bob's presence. I stop and stand there waiting for Bob to finish and notice me. Which happens directly. Otto walks over and calls his machinists together. Bob comes over to me.

  I say, "You know about what's going on-"

  "Yes, I know," he says. "That's why I'm here."

  "What's the problem?"

  "Nothing, no problem," he says. "Just standard operating procedure."

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  It turns out, as Bob explains to me, that the parts they were waiting for at the NCX-10 have been sitting there for about a week. Otto has been running other batches of parts. He didn't know about the importance of the parts destined for the NCX-10. To him they looked like any other batch-and a rather unimpor- tant one judging from the size. When Bob got here, they were in the middle of a big, long run. Otto didn't want to stop... until Donovan explained it to him, that is.

  "Dammit, Al, it's just like before," Bob says. "They get set up and they start running one thing, and then they have to break in the middle so we can finish something else. It's the same damn thing!"

  "Now hold on," I say. "Let's think about this for a second." Bob shakes his head. "What is there to think about?" "Let's just try to reason this through," I say. "What was the problem?"

  "The parts didn't arrive at the NCX-10, which meant the operators couldn't run the batch they were supposed to be run- ning," says Bob in kind of a sing-song way.

  "And the cause was that the bottleneck parts were held up by this non-bottleneck machine running non-bottleneck parts," I say. "Now we've got to ask ourselves why that happened."

  "The guy in charge here was just trying to stay busy, that's all," says Bob.

  "Right. Because if he didn't stay busy, someone like you would come along and jump all over him," I say.

  "Yeah, and if I didn't, then someone like you would jump all over me," says Bob.

  "Okay, granted. But even though this guy was busy, he wasn't helping to move toward the goal," I say.

  "Well..."

  "He wasn't, Bob! Look," I say. I point to the parts destined for the NCX-10. "We need those parts now, not tomorrow. The non-bottle
neck parts we may not need for weeks, or even months -maybe never. So by continuing to run the non-bottleneck parts, this guy was actually interfering with our ability to get an order out the door and make money."

  "But he didn't know any better," says Bob.

  "Exactly. He couldn't distinguish between an important batch of parts and an unimportant one," I say. "Why not?"

  "Nobody told him."

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  "Until you came along," I say. "But you can't be everywhere, and this same kind of thing is going to happen again. So how do we communicate to everybody in the plant which parts are im- portant?"

  "I guess we need some kind of system," says Bob.

  "Fine. Let's go work on one right away so we don't have to keep putting up with this crap," I say. "And before we do any- thing else, let's make sure that people at both of the bottlenecks know to keep working on the order with the highest priority number on the list."

  Bob has a final chat with Otto to make sure he knows what to do with the parts. Then the two of us head for the bottlenecks.

  Finally we're walking back to the office. Glancing at Bob's face, I can tell he's still bothered by what happened.

  "What's wrong? You look unconvinced about all this," I say.

  "Al, what's going to happen if we repeatedly have people break up process runs to run parts for the bottlenecks?" he asks.

  "We should be able to avoid idle time on the bottlenecks," I say.

  "But what's going to happen to our costs on the other 98 percent of the work centers we got here?" he asks.

  "Right now, don't worry about it. Let's just keep the bottle- necks busy," I say. "Look, I'm convinced you did the right thing back there. Aren't you?"

  "Maybe I did the right thing," he says, "but I had to break all the rules to do it."

  "Then the rules had to be broken," I say. "And maybe they weren't good rules to begin with. You know we've always had to break up process runs for expediency to get orders shipped. The difference between then and now is that now we know to do it ahead of time, before the external pressure comes. We've got to have faith in what we know."

  Bob nods in agreement. But I know he'll only believe the proof. Maybe I'm the same, if I'm honest about it.

  A few days pass while we develop a system to cure the prob- lem. But at eight o'clock on Friday morning, at the beginning of first shift, I'm in the cafeteria watching the employees wander in. With me is Bob Donovan.

  After our earlier misunderstanding, I decided that the more people who know about the bottlenecks and how important they are, the better off we'll be. We're holding fifteen-minute meetings

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  with everyone working in the plant, both foremen and hourly people. This afternoon, we'll do the same thing with people working second shift, and I'll come in late tonight to talk to the third shift as well. When we've got everybody this morning, I get up in front of them and talk.

  "All of you know that this plant has been in a downward slide for some time. What you don't know is that we're in the position to begin to change that," I tell them. "You're here in this meeting because we're introducing a new system today... a system which we think will make the plant more productive than it's been in the past. In the next few minutes, I'm going to explain briefly some of the background that made us develop this new system. And then Bob Donovan is going to tell you how it works."

  Trying to keep meetings to fifteen minutes doesn't give us the time to tell them very much. But using the analogy of an hourglass, I do explain briefly about the bottlenecks and why we have to give priority to parts on the heat-treat and NCX-10 rout- ings. For the things I can't take time to tell them, there is going to be a newsletter, which will replace the old plant employee paper, and which will report developments and progress in the plant.

  Anyway, I turn over the microphone to Donovan and he tells them how we're going to prioritize all materials in the plant so everybody knows what to work on.

  "By the end of today, all work-in-process on the floor will be marked by a tag with a number on it," he says and holds up some samples. "The tag will be one of two colors: red or green.

  "A red marker means the work attached to it has first prior- ity. The red tags go on any materials needing to be processed by a bottleneck. When a batch of parts with that color marker arrives at your work station, you are to work on them right away."

  Bob explains what we mean by "right away." If the employee is working on a different job, it's okay to finish what he's doing, as long as it doesn't take more than half an hour. Before an hour has passed, certainly, the red-tagged parts should be getting at- tention.

  "If you are in the middle of a setup, break the setup immedi- ately and get ready for the red parts. When you've finished the bottleneck parts, you can go back to what you were doing before.

  "The second color is green. When there is a choice between working on parts with a red marker and parts with a green marker, you work on the parts with the red marker first. So far,

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  most of the work-in-process out there will be marked by green. Even so, you work on green orders only if you don't have any red ones in queue.

  "That explains the priority of the colors. But what happens when you've got two batches of the same color? Each tag will have a number marked on it. You should always work on the materials with the lowest number."

  Donovan explains some of the details and answers a couple of questions, after which I wrap it up.

  I tell them, "This meeting was my idea. I decided to take you away from your jobs, mostly because I wanted everyone to hear the same message at the same time, so that-I hope-you'll have a better understanding of what's going on. But another reason is that I know it's been a long time since most of you have heard any good news about the plant. What you've just heard about is a beginning. Even so, the future of this plant and the security of your jobs will only be assured when we start making money again. The most important thing you can do is to work with us... and, together, we'll all be working to keep this plant work- ing."

  Late that afternoon, my phone rings.

  "Hi, this is O'Donnell. Go ahead with the new policy on lunch and coffee breaks. We won't challenge it."

  I relay the news to Donovan. And with these small victories, the week ends.

  At 7:29 on Saturday evening, I park the washed, waxed, buffed and vacuumed Mazda in the Barnett driveway. I reach for the bouquet of flowers beside me on the seat, and step out onto the lawn wearing my new courting duds. At 7:30, I ring the door- bell.

  Julie opens the door.

  "Well, don't you look nice," she says.

  "So do you," I tell her.

  And she does.

  There are a few stiff minutes spent talking with her parents. Mr. Barnett asks how everything is going at the plant. I tell him it looks like we may be on our way to a recovery, and mention the new priority system and what it will do for the NCX-10 and heat- treat. Both of her parents look at me blankly.

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  "Shall we go?" suggests Julie.

  Joking, I tell Julie's mother, "I'll have her home by ten o'clock."

  "Good," says Mrs. Barnett. "We'll be waiting."

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  22

  "There you have it," says Ralph.

  "Not bad," says Stacey.

  "Not bad? It's a lot better than not bad," says Bob.

  "We must be doing something right," says Stacey.

  "Yeah, but it isn't enough," I mutter.

  A week has passed. We're grouped around a computer ter- minal in the conference room. Ralph has extracted from the com- puter a list of overdue orders that we shipped last week.

  "Isn't enough? At least it's progress," says Stacey. "We shipped twelve orders last week. For this plant, that's not bad. And they were our twelve most overdue orders."

  "By the way, our worst overdue order is now only forty four days late," says Ralph. "As you may recall, the worst one used to be fifty eight days."

  "All ri
ght!" says Donovan.

  I step back to the table and sit down.

  Their enthusiasm is somewhat justified. The new system of tagging all the batches according to priority and routing has been working fairly well. The bottlenecks are getting their parts promptly. In fact, the piles of inventory in front of them have grown. Following bottleneck processing, the red-tagged parts have been getting to final assembly faster. It's as if we've created an "express lane" through the plant for bottleneck parts.

  After putting Q.C. in front of the bottlenecks, we discovered that about five percent of the parts going into the NCX-10 and about seven percent going into heat-treat did not conform to quality requirements. If those percentages hold true in the fu- ture, we'll effectively have gained that time for additional throughput.

  The new policy of having people cover the bottlenecks on lunch breaks has also gone into effect. We're not sure how much we've gained from that, because we didn't know how much we were losing before. At least we're doing the right thing now. But I have heard reports that from time to time the NCX-10 is idle- and it happens when there is nobody on break. Donovan is sup- posed to be looking into the causes.

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  The combination of these has allowed us to ship our most critical orders and to ship a few more of them than normal. But I know we're not going fast enough. A few weeks ago we were limping along; now we're walking, but we ought to be jogging.

  Glancing back toward the monitor, I see the eyes are upon me.

  "Listen... I know we've taken a step in the right direc- tion," I explain. "But we have to accelerate the progress. It's good that we got twelve shipments out last week. But we're still having some customer orders become past due. It's not as many, I'll grant you, but we still have to do better. We really shouldn't have any late orders."