asks.
'Never mind,' I impatiently say. 'Lou can, and should, ex- plain it to all of you later. Right now we should correct our five- step process. Now we all know to what extent Ralph was right, something is definitely missing.'
'Can I correct it?' Stacey says sheepishly, and goes to the board.
When she returns to her seat the board has the following:
1. IDENTIFY the system's constraint(s).
2. Decide how to EXPLOIT the system's constraint(s).
3. SUBORDINATE everything else to the above decision.
4. ELEVATE the system's constraint(s).
5. WARNING!!!! If in the previous steps a constraint has been broken, go back to step 1, but do not allow INERTIA to cause a system's constraint.
Examining the board, Lou moans, 'It's much worse than I thought.'
'On the contrary,' I'm surprised. 'It's much better than I thought.'
We look at each other. 'You first,' I say. 'Why do you claim that it's much worse?'
'Because I've lost my only guideline.'
When he realizes that we don't get it, he elaborates; 'All the changes that we made so far, all the sacred cows that we had to slaughter, had one thing in common, they all stem from cost accounting. Local efficiencies, optimum batch sizes, product cost, inventory evaluations, all came from the same source. I didn't have much problem with it. As a controller I questioned cost accounting validity for a long time. Remember, it's the invention of the beginning of the century when conditions were much dif- ferent from today. As a matter of fact, I started to have a very good guideline; if it comes from cost accounting it must be wrong.'
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'Very good guideline,' I smile. 'But what is your problem?'
'Don't you see, the problem is much bigger; it's not only cost accounting. We put on the green and red tags not because of cost accounting, but because we realized the importance of the bottle- necks. Stacey created orders for finished goods because of our new understanding, because she wanted to make sure that the bottlenecks' capacity will not be wasted. I thought that it takes a lot of time to develop inertia. What I now see is that it takes less than one month.'
'Yes, you are right,' I say gloomily. 'Whenever the con- straint 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 reexam- ined.'
'How can we do it?' Bob asks. 'It's impossible to question everything every time.'
'Something is still missing,' Ralph summarizes.
Something definitely is still missing.
'Alex, it's your turn to explain,' Lou says.
'Explain what?'
'Why did you claim that it's much better?'
I smile. It's about time for some good news.
'Fellows, what stopped us from once again taking another jump on the bottom line? Nothing, except for the conviction that we don't have enough capacity. Well, now we know differently. Now we know that we have a lot of spare capacity.'
How much spare capacity do we actually have?
'Stacey, how much of the current load on the oven and the NCX10 is due to the fictitious orders?'
'Roughly twenty percent,' she says quietly.
'Marvelous,' I rub my hands together. 'We have enough capacity to really take the market. I'd better drive to headquar- ters tomorrow morning and have a heart-to-heart talk with Johnny Jons. Lou, I'll definitely need you. On second thought, Ralph, will you join us? And bring your computer with you, we're going to show them something.'
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It is six o'clock in the morning when I pick up Lou and Ralph at the plant. We (I) decided that it will be best, since pick- ing them up at their houses would mean I would have had to leave home close to five. In any event, we're probably not going to spend more than a few hours at headquarters so it's reasonable to assume that we'll be back to work in the afternoon.
We hardly talk. Ralph, in the back seat, is busy with his lap- top computer. Lou probably thinks that he's still in bed. I drive on automatic pilot. That is, my mind is busy constructing imagi- nary conversations with Johnny Jons. I somehow have to con- vince him to get many more orders for our plant.
Yesterday, in the heat of discovering the amount of free ca- pacity that we have, I looked only on the bright side. Now I wonder if I'm not just asking for miracles.
I recheck the numbers in my head. In order to fill our capac- ity Johnny will have to come up with over ten million dollars of additional sales. It is totally unrealistic that he holds so much up his sleeve.
So, squeezing, begging, and pleading techniques will not help. We'll have to come up with some innovative ideas. Well, the truth is that so far I haven't been able to come up with any. Let's hope Johnny has some clever ideas; he's the one who is supposed to be the expert in sales.
'I want you to meet Dick Pashky,' Johnny Jons says as we enter the small conference room. 'He's one of my best people. Dedicated, professional, and above all he's full of innovative ap- proaches. I thought it would be a good idea for you to get to know him. Do you mind if he joins us?'
'On the contrary,' I smile. 'We need some innovative ideas. You see, what I want is for you to get my plant additional business -ten million dollars' worth.'
Johnny bursts out laughing. 'Jokers, all of you in production are wonderful jokers. Dick, what did I tell you? It's not easy to deal with plant managers. One is asking me to persuade his client to pay a ten percent increase in price, another wants me to get rid
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of a pile of old junk for full price, but Alex, you're the best-ten million dollars!'
He continues to laugh, but I don't join in.
'Johnny, put on your thinking cap. You must find more or- ders for my plant, ten million dollars more.'
He stops laughing and looks at me, 'You are serious. Alex, what's happened to you? You know how tough it is to get more business these days; it's dog eat dog out there. Everybody is cut- ting each other's throats for the smallest order and you're talking about ten million dollars more?'
I don't hurry to respond. I lean back in my seat and look at him. Finally I say, 'Listen Johnny, you know that my plant has improved. What you don't know is to what extent it's improved. We're now capable of delivering everything within two weeks. We've demonstrated that we never miss an order, not even by one day. Our quality has improved to the extent that I'm sure we're the best in the market. We are very responsive, very quick, and above all, very reliable. This is not a sales pitch, it's the truth.'
'Alex, I know all this. I hear it from the best source, from my clients. But that doesn't mean that I can immediately turn it into cash. Sales take time, credibility is not built overnight, it's a grad- ual process. And by the way, you shouldn't complain; I'm bring- ing you more and more sales. Be patient and don't press for miracles.'
