releasing material two weeks before it was due at the bottleneck. Then it turned out that that's too much, so I cut it to one week and everything was okay. Now it's not okay.'
'So increase it back,' Bob says.
'I can't,' Ralph sounds desperate. 'It will increase our lead time beyond what we currently promise.'
'What's the difference?' Bob roars. 'In any event we're slid- ing on our promises.'
'Wait, wait,' I cut into their quarrel. 'Before we do anything drastic, I want to understand better. Ralph, let's go back to your picture. As Bob pointed out, we do hold some stock in front of the bottleneck. Now let's suppose that Murphy hits somewhere before the bottleneck, then what?'
'Then,' Ralph says patiently, 'the flow of parts to the bottle- neck stops, but the bottleneck, using the stock that accumulated right in front of it, continues to work. Of course that eats into the stock and so, if we don't build enough stock to start with, the bottleneck might go down.'
'Something doesn't match.' Stacey says. 'According to what you just said, we have to guarantee the uninterrupted work of the bottleneck by building stock that will last more than the time to overcome Murphy on the upstream resource.'
'Correct,' says Ralph.
'Don't you see that it can't be the explanation?' Stacey says.
'Why?' Ralph doesn't get it, and neither do I.
'Because the time to overcome a problem upstream did not change, we haven't faced any major catastrophies lately. So if the stock was sufficient to protect the bottlenecks before, it must be sufficient now as well. No Ralph, it's not a matter of insufficient stocks, it's simply new wandering bottlenecks.'
'I guess you're right.'
Maybe Ralph is convinced by Stacey's argument, but I'm not.
'I think that Ralph might be right after all,' I say. 'We just have to carry his line of thought a little further. We said that when one of the upstream resources goes down, the bottleneck starts to eat into its stock. Once the problem is corrected, what do all the upstream resources have to do? Remember, if there is one thing that we can be sure of, it's that Murphy will strike again.'
'All upstream resources,' Stacey answers, 'now have to re- build the inventory in front of the bottleneck, before Murphy hits
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again. But what's the problem? We released enough material for them.'
'It's not the material that concerns me,' I say. 'It's the ca- pacity. You see, when the problem that caused the stoppage is overcome, the upstream resources not only have to supply the current consumption of the bottleneck, at the same time they have to rebuild the inventory.'
'That's right,' Bob beams. 'That means that there are times when the non-bottlenecks must have more capacity than the bot- tlenecks../Vo
'Yes,' Ralph says. 'But now the question is, how much spare capacity do we need?'
'No, that is not the question,' I gently correct him. 'Just as your previous question, 'how much inventory do we need?' is not the real question either.'
'I see,' Stacey says thoughtfully. 'It's a trade-off. The more inventory we allow before the bottleneck, the more time is avail- able for upstream resources to catch up, and so, on average, they need less spare capacity. The more inventory the less spare ca- pacity and vice versa.'
'Now it's clear what's happening,' Bob continues. 'The new orders have changed the balance. We took more orders, which by themselves didn't turn any resource into a new bottleneck, but they did drastically reduce the amount of spare capacity on the non-bottlenecks, and we didn't compensate with increased inven- tory in front of the bottleneck.'
Everybody agrees. As usual, when the answer finally emerges it's plain common sense.
'Okay Bob,' I say. 'What do you think you should do now?'
He takes his time. We wait.
Finally he turns to Ralph and says, 'We have outstanding promises for very short delivery times on only a small percent of our order intake. Can you identify those orders on an on-going basis?'
'No problem,' answers Ralph.
'Okay,' Bob continues. 'For those orders, continue to re- lease material one week in advance. For all others, increase it to
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two weeks. Let's hope that that will be enough. Now, we have to rebuild the inventory in front of the bottlenecks and in front of assembly. Stacey, take all the necessary steps to put the plant, and I mean all the non- bottlenecks, to work throughout the weekend. Don't accept any excuses, it's an emergency. I'll notify sales that until further notice they should not promise any delivery in less than four weeks from receipt of the order. It will jeopardize their new campaign, but that's life.'
Right in front of our eyes the baton has been passed. It's obvious who is the boss now. I feel proud and jealous at the same time.
'Bob has taken over very nicely,' Lou says as we enter my office. At least this front is covered.'
'Yes,' I agree. 'But I hate to put him in a position where his first independent actions are so negative.'
'Negative?' Lou asks. 'What do you mean by negative?'
'All the actions he is forced to take are leading in the wrong direction.' I answer. 'Of course, he doesn't have any choice, the alternative is much worse, but still...'
'Alex, I'm probably thicker than usual today, but I really don't understand. What do you mean by 'leading in the wrong direction?' '
'Don't you see?' I'm irritated by the whole situation. 'What is the unavoidable result of telling sales that they should quote four weeks' delivery? Remember, just two weeks ago we went out of our way to persuade them to quote two weeks. They didn't have much confidence then. Now, it will cause them to drop the entire sales campaign.'
'What else can we do?'
'Probably nothing. But this doesn't change the end result; future throughput is down.'
'I see,' says Lou. 'On top of it, overtime is up significantly; putting the plant to work on the weekend will consume the entire overtime budget for the quarter.'
'Forget the budget,' I say. 'When Bob has to report it, I'll be the divisional president. The increased overtime is increasing op- erating expense. The point is that throughput will be down, op- erating expense will be up and increasing the buffers means that inventory will be up. Everything is moving in the opposite direc- tion of what it should.'
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'Yup,' he agrees.
'Somewhere, I've made a mistake,' I say. 'A mistake that now is causing us to pull back. You know Lou, we still don't know what we're doing. Our ability to see what's in front of us resem- bles that of moles. We're reacting rather than planning.'
'But you've got to agree that we are reacting much better than before.'
'That's not a real comfort Lou, we're also moving much faster than before. I feel as if I'm driving looking only in the rear view mirror, and then, when it's almost too late, we make last minute course corrections. It's not good enough. It is definitely not good enough.'
