The fourth element is wait time, which is the time the part waits, not for a resource, but for another part so they can be assembled together.
As Jonah pointed out last night, setup and process are a small portion of the total elapsed time for any part. But queue and wait often consume large amounts of time-in fact, the ma- jority of the elapsed total that the part spends inside the plant.
For parts that are going through
We have been setting batch sizes according to an economical batch quantity (or EBQ) formula. Last night, Jonah told me that although he didn't have time over the phone to go into all the reasons, EBQ has a number of flawed assumptions underlying it. Instead, he asked me to consider what would happen if we cut batch sizes by half from their present quantities.
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 in- creases.'
'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.'
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'That means more customers come to us because we can deliver faster,' says Lou.
'Our sales increase!' I say.
'And so do our bonuses!' says Stacey.
'Whoa! Whoa now! Hold up here a minute!' says Bob.
'What's the matter?' I ask him.
'What about setup time?' he says. 'You can batch sizes in half, you double the number of setups. What about direct labor? We got to save on setups to keep down costs.'
'Okay, I knew this would come up,' I tell them. 'Now look, it's time we think about this carefully. Jonah told me last night that there was a corresponding rule to the one about an hour lost at a bottleneck. You remember that? An hour lost at a bottleneck is an hour lost for the entire system.'
'Yeah, I remember,' Bob says.
I say, 'The rule he gave me last night is that an hour saved at a non-bottleneck is a mirage.'
'A
'No, it isn't,' I tell him. 'Since we began withholding materi- als from the floor until the bottlenecks are ready for them, the non-bottlenecks now have idle time. It's perfectly okay to have more setups on non-bottlenecks, because all we're doing is cut- ting into time the machines would spend being idle. Saving set- ups at a non- bottleneck doesn't make the system one bit more productive. The time and money saved is an illusion. Even if we double the number of setups, it won't consume all the idle time.'
'Okay, okay,' says Bob. 'I guess I can see what you mean.'
'Now Jonah said, first of all, to cut the batch sizes in half. Then he suggested I go immediately to marketing and convince them to conduct a new campaign which will promise customers earlier deliveries.'
'Can we do it?' asks Lou.
I tell them, 'Already, our lead times have condensed consid- erably over what they were before thanks to the priority system and making the bottlenecks more productive. We have reduced lead time of about three to four months down to two months or even less. If we cut our batch sizes in half, how fast do you think we can respond?'
There is an eternity of hemming and hawing while this is debated.
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Finally, Bob admits, 'Okay, if we cut batch sizes in half, then that means it ought to take half the time it does now. So instead of six to eight weeks, it should take about four weeks... maybe even three weeks in a lot of cases.'
'Suppose I go to marketing and tell them to promise cus- tomers deliveries in three weeks?' I say.
'Whoa! Hold on!' says Bob.
'Yeah, give us a break!' says Stacey.
'All right, four weeks then,' I say. 'That's reasonable, isn't it?'
'Sounds reasonable to me,' says Ralph.
'Well... okay,' says Stacey.
'I think we should risk it,' says Lou.
'So are you willing to commit to this with us?' I ask Bob.
Bob sits back and says, 'Well... I'm all for bigger bonuses. What the hell. Let's try it.'
Friday morning finds the Mazda and me again hustling up the Interstate toward headquarters. I hit town just as the sun hits the glass of the UniCo building and reflects a blinding glare. Kind of pretty actually. For a moment, it takes my mind off my nerves. I've got a meeting scheduled with Johnny Jons in his office. When I called, he was quite willing to see me, but sounded less than enthusiastic about what I said I'd like to talk about. I feel there's a lot riding on my ability to convince him to go along with what we want to do. So I've found myself biting a fingernail or two during the trip.
Jons doesn't really have a desk in his office. He has a sheet of glass on chrome legs. I guess that's so that everyone can get a good look at his Gucci loafers and silk socks-which he exposes as he leans back in this chair, interweaves his fingers and puts them behind his head.
He says, 'So... how is everything going?'
'Everything is going very well right now,' I say. 'In fact, that's why I wanted to talk to you.'
Jons immediately dons an impassive face.
'All right, listen,' I tell him, 'I'm going to lay my cards out for you. I'm not exaggerating when I say everything is going well. It is. We've worked off our backlog of overdue orders, as you know. At the beginning of last week, the plant began producing strictly to meet projected due dates.'
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Jons nods and says, 'Yes, I've noticed my phone hasn't been ringing lately with complaints from customers missing their or- ders.'
'My point,' I tell him, 'is that we've really turned the plant around. Here, look at this.'
From my breifcase, I take the latest list of customer orders. Among other things, it shows the due dates
