The Goal: A Process of Ongoing Improvement

STEP 1. Identify the system’s bottlenecks. (After all it wasn’t too difficult to identify the oven and the NCX10 as the bottlenecks of the plant.) STEP 2. Decide how to exploit the bottlenecks. (That was fun. Realizing that those machines should not take a lunch break, etc.) STEP 3. Subordinate everything else to the above decision. (Making sure that everything marches to the tune of the constraints. The red and green tags.) STEP 4. Elevate the system’s bottlenecks. (Bringing back the old Zmegma, switching back to old, less “effective” routings. . . .) STEP 5. If, in a previous step, a bottleneck has been broken go back to step 1.

What you have learned is that the capacity of the plant is equal to the capacity of its bottlenecks,” says Jonah.

So this is the goal: To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow.

I smile and start to count on my fingers: One, people are good. Two, every conflict can be removed. Three, every situation, no matter how complex it initially looks, is exceedingly simple. Four, every situation can be substantially improved; even the sky is not the limit. Five, every person can reach a full life. Six, there is always a win-win solution. Shall I continue to count?

Since the strength of the chain is determined by the weakest link, then the first step to improve an organization must be to identify the weakest link.

The entire bottleneck concept is not geared to decrease operating expense, it’s focused on increasing throughput.

utilizing” a resource means making use of the resource in a way that moves the system toward the goal. “Activating” a resource is like pressing the ON switch of a machine; it runs whether or not there is any benefit to be derived from the work it’s doing.

For the ability to answer three simple questions: ‘what to change?’, ‘what to change to?’, and ‘how to cause the change?’ Basically what we are asking for is the most fundamental abilities one would expect from a manager.

What I’m telling you is, productivity is meaningless unless you know what your goal is,” he says.

Putting it precisely, activating a resource and utilizing a resource are not synonymous.

More importantly, our software worked. I don't just mean that it didn't bump, or that it performed according to the written specifications, or that it was efficient in producing reports. It really worked

Well, I don’t. Not absolutely. But adopting "making money’’ as the goal of a manufacturing organization looks like a pretty good assumption. Because, for one thing, there isn’t one item on that list that’s worth a damn if the company isn’t making money.

They’re measurements which express the goal of making money perfectly well, but which also permit you to develop operational rules for running your plant,” he says. “There are three of them. Their names are throughput, inventory and operational expense.

I’m talking about a production employee who is idle because there is no product to be worked on.” “Yes, that’s always bad,” I say. “Why?” I chuckle. “Isn’t it obvious? Because it’s a waste of money! What are we supposed to do, pay people to do nothing? We can’t afford to have idle time. Our costs are too high to tolerate it. It’s inefficiency, it’s low productivity—no matter how you measure it.” He leans forward as if he’s going to whisper a big secret to me. “Let me tell you something,” he says. “A plant in which everyone is working all the time is very inefficient.

What is the real goal? Nobody here has even asked anything that basic.

Alex, the goal is not to reduce operational expense by itself. The goal is not to improve one measurement in isolation. The goal is to reduce operational expense and reduce inventory while simultaneously increasing throughput,” says Jonah.

productivity is the act of bringing a company closer to its goal. Every action that brings a company closer to its goal is productive. Every action that does not bring a company closer to its goal is not productive.

In summary, both Ford and Ohno followed four concepts (from now on we’ll refer to them as the concepts of flow): Improving flow (or equivalently lead time) is a primary objective of operations. This primary objective should be translated into a practical mechanism that guides the operation when not to produce (preventsoverproduction). Ford used space; Ohno used inventory. Local efficiencies must be abolished. A focusing process to balance flow must be in place. Ford used direct observation. Ohno used the gradual reduction of the number of containers and then gradual reduction of parts per container. The

Bob comes into the office with a smear of grease on his white shirt over the bulge of his beer gut, and he’s talking nonstop about what’s going on with the breakdown of the automatic testing machines. “Bob,” I tell him, “forget about that for now.

We do have lots of measurements that are supposed to tell us if we’re productive. But what they really tell us are things like whether somebody down there “worked” for all the hours we paid him or her to work. They tell us whether the output per hour met our standard for the job. They tell us the “cost of products,” they tell us “direct labor variances,” all that stuff. But how do I really know if what happens here is making money for us, or whether we’re just playing accounting games? There must be a connection, but how do I define it?

If we reduce batch sizes by half, we also reduce by half the time it will take to process a batch. That means we reduce queue and wait by half as well. Reduce those by half, and we reduce by about half the total time parts spend in the plant. Reduce the time parts spend in the plant, and. . . . “Our total lead time condenses,” I explain. “And with less time spent sitting in a pile, the speed of the flow of parts increases.” “And with faster turn-around on orders, customers get their orders faster,” says Lou. “Not only that,” says Stacey, “but with shorter lead times we can respond faster.” “That’s right!” I say. “If we can respond to the market faster, we get an advantage in the marketplace.” “That means more customers come to us because we can deliver faster,” says Lou. “Our sales increase!” I say.

An expert is not someone that gives you the right answer, it is someone that asks you the right question

One

For most work centers every such switch necessitates spending time to do the required setup. Since the containers, by design, called for a relatively small number of parts the production batches that they dictated were, many times, ridiculously smaller relative to the setup required. Initially for many work centers the time required for setups was more than the time required for production, resulting in a significant drop in throughput. It is no wonder that Ohno faced enormous resistance—so much so that Ohno wrote that his system was referred to as the ‘abominable Ohno system’ from the late 1940’s to the early 1960’s.8 Ohno (and his superiors) certainly had an extraordinary determination and vision to continue to push for the implementation of a system, that for any person who looked at it from a local perspective, as most shop personnel must have, simply didn’t make sense.

Whenever the constraint is broken it changes conditions to the extent that it is very dangerous to extrapolate from the past.” “As a matter of fact,” Stacey adds, “even the things that we put in place in order to elevate the constraint must be reexamined.

This overconcern about the ‘proper way to arrange things’ manifests itself in other harmful ways.” “What do you mean?” Lou asks me. “I mean the merry-go-round that we’re all too familiar with; arranging the company according to product lines and then changing it according to functional capabilities—and vice versa. Deciding that the company is wasting too much money on duplicated efforts and thus moving to a more centralized mode. Ten years later, we want to encourage entrepreneurship and we move back to decentralization. Almost every big company is oscillating, every five to ten years from centralization to decentralization, and then back again.

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.

But the important thing is that we, in our plant, have switched to regard throughput as the most important measurement. Improvement for us is not so much to reduce costs but to increase throughput.” “You are right,” Stacey agrees. “The entire bottleneck concept is not geared to decrease operating expense, it’s focused on increasing throughput.” “What you are telling us,” I say slowly, trying to digest it, “is that we have switched the scale of importance.” “That’s precisely what it is,” Lou says. “In the past, cost was the most important, throughput was second, and inventory was a remote third.” Smiling at me he adds, “To the extent that we regarded it as assets. Our new scale is different. Throughput is most important, then inventory—due to its impact on throughput and only then, at the tail, comes operating expenses.

A propósito, el sentido común no es tan común, y el más alto elogio que podamos hacer de una cadena de conclusiones lógicas se llama «sentido común». Si hacemos esto, habremos sacado a la ciencia de su torre de marfil académica y la habremos colocado donde debe estar: al alcance de cada uno de nosotros, aplicable a lo que vemos a nuestro alrededor.

measurements which express the goal of making money perfectly well, but which also permit you to develop operational rules for running your plant,” he says. “There are three of them. Their names are throughput, inventory and operational expense.