The Goal

215

activate Y above the level of X, doing so results only in excess inventory, not in greater throughput.

'Yes, and if we follow that thought to a logical conclusion,' says Jonah, 'we can form a simple rule which will be true in every case: the level of utilization of a non-bottleneck is not determined by its own potential, but by some other constraint in the system.'

He points to the NCX-10.

'A major constraint here in your system is this machine,' says Jonah. 'When you make a non-bottleneck do more work than this machine, you are not increasing productivity. On the contrary, you are doing exactly the opposite. You are creating excess inventory, which is against the goal.'

'But what are we supposed to do?' asks Bob. 'If we don't keep our people working, we'll have idle time, and idle time will lower our efficiencies.'

'So what?' asks Jonah.

Donovan is taken aback. 'Beg pardon, but how the hell can you say that?'

'Just take a look behind you,' says Jonah. 'Take a look at the monster you've made. It did not create itself. You have created this mountain of inventory with your own decisions. And why? Because of the wrong assumption that you must make the work- ers produce one hundred percent of the time, or else get rid of them to 'save' money.'

Lou says, 'Well, granted that maybe one hundred percent is unrealistic. We just ask for some acceptable percentage, say, ninety percent.'

'Why is ninety percent acceptable?' asks Jonah. 'Why not sixty percent, or twenty-five? The numbers are meaningless un- less they are based upon the constraints of the system. With enough raw materials, you can keep one worker busy from now until retirement. But should you do it? Not if you want to make money.'

Then Ralph suggests, 'What you're saying is that making an employee work and profiting from that work are two different things.'

'Yes, and that's a very close approximation of the second rule we can logically derive from the four combinations of X and Y we talked about,' says Jonah. 'Putting it precisely, activating a resource and utilizing a resource are not synonymous.'

He explains that in both rules, 'utilizing' a resource means

216

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 de- rived from the work it's doing. So, really, activating a non-bottle- neck to its maximum is an act of maximum stupidity.

'And the implication of these rules is that we must n o t seek to optimize every resource in the system,' says Jonah. 'A system of local optimums is not an optimum system at all; it is a very ineffi- cient system.'

'Okay,' I say, 'but how does knowing this help us get the missing parts unstuck at the milling machines and moved to final assembly?'

Jonah says, 'Think about the build-up of inventory both here and at your milling machines in terms of these two rules we just talked about.'

'I think I see the cause of the problem,' Stacey says, 'We're releasing material faster than the bottlenecks can process it.'

'Yes,' says Jonah. 'You are sending work onto the floor whenever n o n -bottlenecks are running out of work to do.'

I say, 'Granted, but the milling machines are a bottleneck.'

Jonah shakes his head and says, 'No, they are not-as evi- denced by all this excess inventory behind you. You see, the mill- ing machines are not intrinsically a bottleneck. You have turned them into one.'

He tells us that with an increase in throughput, it is possible to create new bottlenecks. But most plants have so much extra capacity that it takes an enormous increase in throughput before this happens. We've only had a twenty percent increase. When I had talked to him by phone, he thought it unlikely a new bottle- neck would have occurred.

What happened was that even as throughput increased, we continued loading the plant with inventory as if we expected to keep all our workers fully activated. This increased the load dumped upon the milling machines and pushed them beyond their capacity. The first-priority, red-tagged parts were pro- cessed, but the green-tagged parts piled up. So not only did we get excess inventory at the NCX-10 and at heat-treat, but due to the volume of bottleneck parts, we clogged the flow at another work center and prevented non-bottleneck parts from reaching assembly.

When he's finished, I say, 'All right, I see now the error of

217

our ways . Can you tell us what we should do to correct the prob- lem?'

'I want you all to think about it as we walk back to your conference room and then we'll talk about what you should do,' says Jonah. 'The solution is fairly simple.'

218

26

Just how simple the solution is doesn't become apparent to me until I'm home that night. I'm sitting at the kitchen table with a pad of paper and a pencil thinking about what was suggested today when Sharon comes in.

'Hi,' she says as she sits down.

'Hi,' I say back. 'What's up?'

'Not much,' she says. 'Just wondered what you were do- ing.'

'I'm working,' I tell her.

'Can I help?' she asks.

'Well... I don't know,' I say. 'It's kind of technical. I think you'll probably be bored by it.'

'Oh,' she says. 'Does that mean you want me to leave?'

Guilt strikes.

'No, not if you want to stay,' I tell her. 'Do you want to try to solve a problem?'

'Okay,' she says, brightening.

I say, 'All right. Let me think of how to put this to you. Do you know about the scout hike Dave and I were on?'