In a situation like Alex Rogo’s, the Plant Manager for the Bear ington Division of Uni Co Corporation, who has been given three months by his boss to either show a profit or face shutdown, one can be tempted to consider an easy option – quit now and look for another job while your reputation is still intact. The temptations for Alex to consider this option are many – his plant has not shown any profit for quite some time, orders are often shipped months late, the inventory position is so bad that the aisles of the plant floor are crammed with in-process parts, almost all jobs are designated as “rush” and upon all this his marriage is on the precise because he has been spending all his time in the plant. However, Alex decides to take the problems head on. In this quest, he is helped by his old Physics professor, Jonah. Rather than giving him ready made answers like a consultant, Jonah forces Alex to think by confronting him with pointed questions designed to help him bring out his intuitive skills. When Alex tells Jonah how he was able to increase productivity by thirty-six percent in one department alone with the use of robots, Jonah points it out to Alex how the robots could not possibly have contributed to the company’s goal – and that in fact in terms of its overall goal, Alex must actually be running a very unproductive plant.
Prodded on by Jonah, Alex comes to the conclusion that as a first step, he first and foremost has to ensure that his plant makes money. With a continuous barrage of questions from his teacher, Alex and his team learn how to define measurements so that they better reflect the money making goal of a manufacturing organization. Proceeding systematically, they discover the facts which point to how the bottleneck machine in their plant, or in any plant for that matter, determines the throughput and that the capacity of the entire plant is actually equal to the capacity of the bottleneck. They then devise a system whereby the bottleneck (a machine called NCX-10, in this case) is kept busy for the maximum amount of time possible – this they do by first ensuring that the NCX-10 is kept running even during lunch breaks and later on by ensuring an adequate buffer in front of the bottleneck so that it would not be idle for want of parts. In the meantime they also save time on another suspected bottleneck, the heat treatment, by relocating the downstream quality inspection process to before the heat treatment so that defective parts would not waste the bottleneck resource. After about a month during which they make other changes like flagging of bottleneck parts, forming dedicated crews for heat treatment and the NCX-10, outsourcing some heat treatment jobs to outside vendors and making engineering changes to some parts, Alex and his team manage to ship a record number of customer orders.
However they then perceive a new problem in which their bottlenecks have spread. Jonah steps in again at this point and shows them their erroneous policy of continuously releasing material just to keep the non-bottleneck machines busy all the time. This policy has caused an explosion of the work-in-process. To correct this situation, they work out how much of new material to release so that there is only about a few days of inventory in front of the bottlenecks even though this means that non-bottleneck machines would remain idle at times. Jonah assures them that this is perfectly acceptable and makes sense because ultimately only the bottleneck machine would define their plant throughput. After another good showing, Alex is assured by his boss that if he can show a further fifteen percent increase in his bottom line then the threat of closure of the plant would be withdrawn.
Here Alex realizes that he may now be constrained by the market. On Jonah’s suggestion he cuts batch sizes on all his non-bottleneck machines to half and requests his marketing department to quote four week delivery times. The rationale behind this is that the extra time used in setups would come from the already available idle time of the non-bottlenecks while smaller batch sizes would cut waiting time of parts produced by the non-bottlenecks and allow for faster response time to customer’s orders. These measures turn out to further improve the plants performance and Alex is offered a promotion for a work well done. Through the saga of the turnaround of Alex’s plant, Gold ratt has shown us that the immediate goal of a manufacturing system is to be profitable by reducing operating expenses and inventory while simultaneously increasing throughput i. e.
any one of these three measures improved in isolation cannot bring a business to its core goal of being, and remaining, profitable. However the real goal is actually more than this – it is more important to develop a process of thinking that starts with the fundamental concepts and tries to determine the cause-effect relationship between different phenomena. This forms the backbone of the scientific approach when trying to gain an understanding of some intrinsic order. Given the om ni-presence of two phenomena, dependency and variability, in manufacturing environments, it is vital that the system’s actual constraint be identified – which may or may not be physical. All other policies have to be built so that they work within the constraint.
That is to say that the non-constrained resources have to be used to maximize the performance of the constrained resource. The next step is to try and improve the constraint itself, if possible. Alex Rogo is successful in turning around his plant because he unwittingly, or by design, follows this same ordered thinking process wherein he goes from first defining his fundamental measures and then exploring the effects of different parts of his plant on these measures. He is then able to identify his constraints and effect changes that allow him to maximize his plants performance within the constraint. Later when he finds that his constraint is no longer physical but has become something intangible beyond his plant, he identifies it correctly as a market constraint and tries to improve it by encouraging his sales staff to come up with new orders.
And if all this wasn’t enough, Alex has also managed to save his marriage!