The Goal

by E M Goldratt

  "Hi. Can we talk?" she asks.

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  "Sure. Come on in," I say.

  She seems disturbed about something. She's avoiding my eyes as she sits down.

  I say, "Listen, about Friday night, I'm sorry about what hap- pened when you dropped me off."

  Stacey says, "It's okay. Did your wife come back?"

  "Uh, well, no, she didn't. She's staying with her parents for a little while," I say.

  "Was it just because of me?" she asks.

  "No, we've been having some problems lately."

  "Al, I still feel kind of responsible," she says. "Look, why don't I talk to her."

  "No, you don't have to do that," I say.

  "Really, I think I ought to talk to her," says Stacey. "What's her number?"

  I finally admit to myself it might be worth a try. So I give the Barnett's number to Stacey. She writes it down, and promises to call sometime today. Then she continues to sit there.

  "Was there something else?" I ask.

  "I'm afraid there is," she says.

  She pauses.

  "So what is it?"

  "I don't think you're going to like this," she says. "But I'm pretty sure about it..."

  "Stacey," I say. "What?"

  "The bottlenecks have spread."

  "What do you mean 'the bottlenecks have spread'?" I ask. "Is there a disease out there or something?"

  "No, what I mean is we have a new bottleneck-or maybe even more than one; I'm not sure yet. Here, let me show you," she says as she comes around the side of the desk with some computer print-outs she's brought. "These are listings of parts that are queued up at final assembly."

  She goes over the lists with me. As always, the bottleneck parts are still in short supply. But lately there have been shortages of some non -bottleneck parts as well.

  She says, "Last week we had a case in which we had to build an order for 200 DBD-50's. Out of 172 different parts, we were missing 17. Only one of them was a red-tagged part. The rest were green tags. The red part came out of heat-treat on Thurs-

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  day and was ready by Friday morning. But the others are still missing."

  I lean back in my chair and pinch the bridge of my nose.

  "Dammit, what the hell is going on out there? I had assumed the parts that have to go through a bottleneck would reach as- sembly last. Is there a materials shortage on those green-tagged parts? Some kind of vendor problem?" I ask her.

  Stacey shakes her head. "No, I haven't had any problems with purchasing. And none of the parts have any processing by outside contractors. The problem is definitely internal. That's why I really think we have one or more new bottlenecks."

  I get up from my desk, walk around the office.

  "Maybe with the increase in throughput, we've loaded the plant to a level that we've run out of capacity on some other resources in addition to heat-treat and the NCX-10," Stacey sug- gests quietly.

  I nod. Yes, that sounds like a possibility. With the bottlenecks more productive now, our throughput has gone up and our backlog is declining. But making the bottlenecks more productive has put more demand on the other work centers. If the demand on another work center has gone above one hundred percent, then we've created a new bottleneck.

  Of the ceiling, I ask, "Does this mean we're going to have to go through the whole process of finding the bottlenecks all over again? Just when it seemed like we were on our way out of this mess..."

  Stacey folds the print-outs.

  I tell her, "Okay, look, I want you to find out everything you can-exactly which parts, how many, what products are affected, which routings they're on, how often they're missing, all that stuff. Meanwhile, I'm going to try to get hold of Jonah to see what he has to say about all this."

  After Stacey leaves, and Fran does the calling to locate Jonah. I stand by the window in my office and stare at the lawn while I think. I took it as a good sign that inventory levels had declined after we implemented the new measures to make the bottleneck- more productive. A month ago we were wading through parts on the non-bottleneck routings. There were piles and piles, and the piles kept growing. But some of the stocks have dwindled over the past couple of weeks of product assembly. Last week, for the first time since I've been at this plant, you could actually walk

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  over to the assembly line without having to turn sideways to squeeze between the stacks and bins of inventory. I thought it was good. But now this happens.

  "Mr. Rogo," says Fran through the intercom speaker. "I've got him on the line."

  I pick up the phone. "Jonah? Hi. Listen, we've got trouble here."

  "What's wrong?" he asks.

  After I tell him the symptoms, Jonah asks what we've done since his visit. So I relate all the history to him-putting Q.C. in front of the bottlenecks, training people to give special care to bottleneck parts, activating the three machines to supplement the NCX-10, the new lunch rules, assigning certain people to work only at the bottlenecks, increasing the batch sizes going into heat- treat, implementing the new priority system in the plant...

  "New priority system?" asks Jonah.

  "Right," I say, and then I explain about the red tags and green tags, and how the system works.

  Jonah says, "Maybe I'd better come have another look."

  I'm at home that night when the phone rings.

  "Hi," says Julie's voice when I answer.

  "Hi."

  "I owe you an apology. I'm sorry about what happened on Friday night," she says. "Stacey called me here. Al, I'm really embarrassed. I completely misunderstood."

  "Yeah, well... it seems to me there's a lot of misunder- standing between us lately," I say.

  "All I can say is I'm sorry. I drove down thinking you'd be glad to see me."

  "I would have been if you'd stayed," I say. "In fact, if I'd known you were coming, I would have come home after work."

  "I know I should have called," she says, "but I was just in one of those moods."

  "I guess you shouldn't have waited for me," I tell her.

  She says, "I just kept thinking you'd be home any minute. And the whole time, your mother kept giving me the evil eye. Finally she and the kids went to bed, and about an hour later I fell asleep on the sofa and slept until you came in."

  "Well... you want to be friends again?"

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  I can hear her relief.

  "Yes, I would," she says. "When will I see you?" I suggest we try Friday all over again. She says she can't wait that long. We compromise on Wednesday.

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  Deja vu. At the airport next morning, I again greet Jonah as he walks out of Gate Two.

  By ten o'clock, we're in the conference room at the plant. Sitting around the table are Lou, Bob, Ralph and Stacey. Jonah paces in front of us.

  "Let's start with some basic questions," he says. "First of all, have you determined exactly which parts are giving you the problem?"

  Stacey, who is sitting at the table with a veritable fortress of paper around her and looking as if she's ready for a siege, holds up a list.

  She says, "Yes, we've identified them. In fact, I spent last night tracking them down and double checking the data with what's on the floor out there. Turns out the problem covers thirty parts."

  Jonah asks, "Are you sure you released the materials for them?"

  "Oh, yes," says Stacey. "No problem there. They've been released according to schedule. But they're not reaching final assembly. They're stuck in front of our new bottleneck."

  "Wait a minute. How do you know it's really a bottleneck?" asks Jonah.

  She says, "Well, since the parts are held up, I just figured it had to be..."

  "Before we jump to conclusions, let's invest half an hour to go into the plant so we can find out what's happening," Jonah says.

  So we parade into the plant, and a few minutes later we're standing in front of a group of milling machines. Off to one side are big stacks
of inventory marked with green tags. Stacey stands there and points out the parts that are needed in final assembly. Most of the missing parts are right here and all bear green tags. Bob calls over the foreman, a hefty guy by the name of Jake, and introduces him to Jonah.

  "Yeah, all them parts been sittin' here for about two, three weeks or more," says Jake.

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  "But we need them now," I say. "How come they're not being worked on?"

  Jake shrugs his shoulders. "You know which ones you want, we'll do 'em right now. But that goes against them rules you set up in that there priority system."

  He points to some other skids of materials nearby.

  "You see over there?" says Jake. "They all got red tags. We got to do all of 'em before we touch the stuff with green tags. That's what you told us, right?"

  Uh- huh. It's becoming clear what's been happening.

  "You mean," says Stacey, "that while the materials with green tags have been building up, you've been spending all your time on the parts bound for the bottlenecks."

  "Yeah, well, most of it," says Jake. "Hey, like we only got so many hours in a day, you know what I mean?"

  "How much of your work is on bottleneck parts?" asks Jo- nah.

  "Maybe seventy-five or eighty percent," says Jake. "See, ev- erything that goes to heat-treat or the NCX-10 has to pass through here first. As long as the red parts keep coming-and they haven't let up one bit since that new system started-we just don't have the time to work on very many of the green-tag parts."

  There is a moment of silence. I look from the parts to the machines and back to Jake again.

  "What the hell do we do now?" asks Donovan in echo to my own thoughts. "Do we switch tags? Make the missing parts red instead of green?"

  I throw up my hands in frustration and say, "I guess the only solution is to expedite."

  "No, actually, that is not the solution at all," Jonah says, "be- cause if you resort to expediting now, you'll have to expedite all the time, and the situation will only get worse."

  "But what else can we do?" asks Stacey.

  Jonah says, "First, I want us to go look at the bottlenecks, because there is another aspect to the problem."

  Before we can see the NCX-10, we see the inventory. It's stacked as high as the biggest forklift can reach. It's not just a mountain, but a mountain with many peaks. The piles here are even bigger than before we identified the machine as a bottle- neck. And tied to every bin, hanging from every pallet of parts is

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  a red" tag. Somewhere behind it all, its own hugeness obscur ed from our view, is the NCX-10.

  "How do we get there from here?" asks Ralph, looking for a path through the inventory.

  "Here, let me show you," says Bob.

  And he leads us through the maze of materials until we reach the machine.

  Gazing at all the work-in-process around us, Jonah says to us, "You know, I would guess, just from looking at it, that you have at least a month or more of work lined-up here for this machine. And I bet if we went to heat-treat we would find the same situation. Tell me, do you know why you have such a huge pile of inventory here?"

  "Because everyone ahead of this machine is giving first pri- ority to red parts," I suggest.

  "Yes, that's part of the reason," says Jonah. "But why is so much inventory coming through the plant to get stuck here?"

  Nobody answers.

  "Okay, I see I'm going to have to explain some of the basic relationships between bottlenecks and non-bottlenecks," says Jo- nah. Then he looks at me and says, "By the way, do you remem- ber when I told you that a plant in which everyone is working all the time is very in efficient? Now you'll see exactly what I was talking about."

  Jonah walks over to the nearby Q.C. station and takes a piece of chalk the inspectors use to mark defects on the parts they reject. He kneels down to the concrete floor and points to the NCX-10.

  "Here is your bottleneck," he says, "the X-what-ever-it-is ma- chine. We'll simply call it 'X.' "

  He writes an X on the floor. Then he gestures to the other machines back down the aisle.

  "And feeding parts to X are various non-bottleneck ma- chines and workers," he says. "Because we designated the bottle- neck as X, we'll refer to these non-bottlenecks as 'Y' resources. Now, for the sake of simplicity, let's just consider one non-bottle- neck in combination with one bottleneck..."

  With the chalk, he writes on the floor:

  Y -" X

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  Product parts are what join the two in a relationship with each other, Jonah explains, and the arrow obviously indicates the flow of parts from one to the other. He adds that we can consider any non-bottleneck feeding parts to X, because no matter which one we choose, its inventory must be processed at some subse- quent point in time by X.

  "By the definition of a non-bottleneck, we know that Y has extra capacity. Because of its extra capacity, we also know that Y will be faster in filling the demand than X," says Jonah. "Let's say both X and Y have 600 hours a month available for production. Because it is a bottleneck, you will need all 600 hours of the X machine to meet demand. But let's say you need only 450 hours a month, or 75 percent, of Y to keep the flow equal to demand. What happens when Y has worked its 450 hours? Do you let it sit idle?"

  Bob says, "No, we'll find something else for it to do."

  "But Y has already satisfied market demand," says Jonah.

  Bob says, "Well, then we let it get a head start on next month's work."

  "And if there is nothing for it to work on?" asks Jonah.

  Bob says, "Then we'll have to release more materials."

  "And that is the problem," says Jonah. "Because what hap- pens to those extra hours of production from Y? Well, that inven- tory has to go somewhere. Y is faster than X. And by keeping Y active, the flow of parts to X must be greater than the flow of parts leaving X. Which means..."

  He walks over to the work-in-process mountain and makes a sweeping gesture.

  "You end up with all this in front of the X machine," he says. "And when you're pushing in more material than the system can convert into throughput, what are you getting?"

  "Excess inventory," says Stacey.

  "Exactly," says Jonah. "But what about another combina- tion? What happens when X is feeding parts to Y?"

  Jonah writes that on the floor with the chalk like this...

  X -" Y

  "How much of Y's 600 hours can be used productively here?" asks Jonah.

  "Only 450 hours again," says Stacey.

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  "That's right," says Jonah. "If Y is depending exclusively upon X to feed it inventory, the maximum number of hours it can work is determined by the output of X. And 600 hours from X equates to 450 hours for Y. After working those hours, Y will be starved for inventory to process. Which, by the way, is quite acceptable."

  "Wait a minute," I say. "We have bottlenecks feeding non- bottlenecks here in the plant. For instance, whatever leaves the NCX-10 will be processed by a non-bottleneck."

  "From other non-bottlenecks you mean. And do you know what happens when you keep Y active that way?" asks Jonah. "Look at this."

  He draws a third diagram on the floor with the chalk.

  In this case, Jonah explains, some parts do not flow through a bottleneck; their processing is done only by a non-bottleneck and the flow is directly from Y to assembly. The other parts do flow through a bottleneck, and they are on the X route to assem- bly where they are mated to the Y parts into a finished product.

  In a real situation, the Y route probably would consist of one non-bottleneck feeding another non-bottleneck, feeding yet an- other non-bottleneck, and so on, to final assembly. The X route might have a series of non-botjtlenecks feeding a bottleneck, which in turn feeds a chain of more non-bottlenecks. In our case, Jonah says, we've got a group of non-bottleneck machines down- stream from X which can process parts from either the X or the Y route.

  "But to keep it simple, I've diagr
ammed the combination with the fewest number of elements-one X and one Y. No mat- ter how many non-bottlenecks are in the system, the result of

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  activating Y just to keep it busy is the same. So let's say you keep both X and Y working continuously for every available hour. How efficient would the system be?"

  "Super efficient," says Bob.

  "No, you're wrong," says Jonah. "Because what happens when all this inventory from Y reaches final assembly?"

  Bob shrugs and says, "We build the orders and ship them."

  "How can you?" asks Jonah. "Eighty percent of your prod- ucts require at least one part from a bottleneck. What are you going to substitute for the bottleneck part that hasn't shown up yet?"

  Bob scratches his head and says, "Oh, yeah... I forgot." "So if we can't assemble," says Stacey, "we get piles of inven- tory again. Only this time the excess inventory doesn't accumu- late in front of a bottleneck; it stacks up in front of final assem- bly."

  "Yeah," says Lou, "and another million bucks sits still just to keep the wheels turning."

  And Jonah says, "You see? Once more, the non-bottleneck does not determine throughput, even if it works twenty-hour hours a day."

  Bob asks, "Okay, but what about that twenty percent of products without any bottleneck parts? We can still get high effi- ciencies with them."

  "You think so?" asks Jonah.

  On the floor he diagrams it like this...

  This time, he says, the X and Y operate independently of one another. They are each filling separate marketing demands.

  "How much of Y's 600 hours can the system use here?" asks Jonah.

  "All of 'em," says Bob.

  "Absolutely not," says Jonah. "Sure, at first glance it looks as if we can use one hundred percent of Y, but think again."