The Goal: a process of Ongoing Improvement

parts.’’

---

There is a moment of silence. I look from the parts to the machines and back
to Jake again.
"What the hell do we do now?’’ asks Donovan in echo to my own thoughts.
"Do we switch tags? Make the missing parts red instead of green?’’
I throw up my hands in frustration and say, "I guess the only solution is to
expedite.’’
"No, actually, that is not the solution at all,’’ Jonah says, "because if you
resort to expediting now, you’ll have to expedite all the time, and the
situation will only get worse.’’
"But what else can we do?’’ asks Stacey.
Jonah says, "First, I want us to go look at the bottlenecks, because there is
another aspect to the problem.’’
Before we can see the NCX-10, we see the inventory. It’s stacked as high as
the biggest forklift can reach. It’s not just a mountain, but a mountain with
many peaks. The piles here are even bigger than before we identified the
machine as a bottleneck. And tied to every bin, hanging from every pallet of
parts is a red tag. Somewhere behind it all, its own hugeness obscured from
our view, is the NCX-10.
"How do we get there from here?’’ asks Ralph, looking for a path through the
inventory.
"Here, let me show you,’’ says Bob.
And he leads us through the maze of materials until we reach the machine.
Gazing at all the work-in-process around us, Jonah says to us, "You know, I
would guess, just from looking at it, that you have at least a month or more of
work lined-up here for this machine. And I bet if we went to heat-treat we
would find the same situation. Tell me, do you know why you have such a
huge pile of inventory here?’’

---

"Because everyone ahead of this machine is giving first priority to red parts,’’
I suggest.
"Yes, that’s part of the reason,’’ says Jonah. "But why is so much inventory
coming through the plant to get stuck here?’’
Nobody answers.
"Okay, I see I’m going to have to explain some of the basic relationships
between bottlenecks and non-bottlenecks,’’ says Jonah. Then he looks at me
and says, "By the way, do you remember when I told you that a plant in
which everyone is working all the time is very 
in
efficient? Now you’ll see
exactly what I was talking about.’’
Jonah walks over to the nearby Q.C. station and takes a piece of chalk the
inspectors use to mark defects on the parts they reject. He kneels down to the
concrete floor and points to the NCX-10.
"Here is your bottleneck,’’ he says, "the X-what-ever-it-is machine. We’ll
simply call it ‘X.’’’
He writes an X on the floor. Then he gestures to the other machines back
down the aisle.
"And feeding parts to X are various non-bottleneck machines and workers,’’
he says. "Because we designated the bottleneck as X, we’ll refer to these non-
bottlenecks as ‘Y’ resources. Now, for the sake of simplicity, let’s just
consider one non-bottleneck in combination with one bottleneck . . .’’
With the chalk, he writes on the floor:
Y --> X Product parts are what join the two in a relationship with each
other, Jonah explains, and the arrow obviously indicates the flow of parts
from one to the other. He adds that we can consider 
any 
non-bottleneck
feeding parts to X, because no matter which one we choose, its inventory
must be processed at some subsequent point in time by X.

---

"By the definition of a non-bottleneck, we know that Y has extra
capacity. Because of its extra capacity, we also know that Y will be faster in
filling the demand than X,’’ says Jonah. "Let’s say both X and Y have 600
hours a month available for production. Because it is a bottleneck, you will
need all 600 hours of the X machine to meet demand. But let’s say you need
only 450 hours a month, or 75 percent, of Y to keep the flow equal to
demand. What happens when Y has worked its 450 hours? Do you let it sit
idle?’’
Bob says, "No, we’ll find something else for it to do.’’ "But Y has already
satisfied market demand,’’ says Jonah. Bob says, "Well, then we let it get a
head start on next month’s work.’’
"And if there is nothing for it to work on?’’ asks Jonah. Bob says, "Then
we’ll have to release more materials.’’ "And 
that 
is the problem,’’ says
Jonah. "Because what happens to those extra hours of production from Y?
Well, that inventory has to go somewhere. Y is faster than X. And by keeping
Y active, the flow of parts to X must be greater than the flow of parts leaving
X. Which means . . .’’
He walks over to the work-in-process mountain and makes a sweeping
gesture.
"You end up with all this in front of the X machine,’’ he says. "And when
you’re pushing in more material than the system can convert into throughput,
what are you getting?’’
"Excess inventory,’’ says Stacey.
"Exactly,’’ says Jonah. "But what about another combination? What happens
when X is feeding parts to Y?’’
Jonah writes that on the floor with the chalk like this...
X --> Y

---

"How much of Y’s 600 hours can be used productively here?’’ asks
Jonah.
"Only 450 hours again,’’ says Stacey.
"That’s right,’’ says Jonah. "If Y is depending exclusively upon X to feed it
inventory, the maximum number of hours it can work is determined by the
output of X. And 600 hours from X equates to 450 hours for Y. After
working those hours, Y will be starved for inventory to process. Which, by
the way, is quite acceptable.’’
"Wait a minute,’’ I say. "We have bottlenecks feeding nonbottlenecks here in
the plant. For instance, whatever leaves the NCX-10 will be processed by a
non-bottleneck.’’
"From other non-bottlenecks you mean. And do you know what happens
when you keep Y active that way?’’ asks Jonah. "Look at this.’’
He draws a third diagram on the floor with the chalk.
Y →A X→S S E M B L Y
In this case, Jonah explains, some parts do not flow through a bottleneck;
their processing is done only by a non-bottleneck and the flow is directly
from Y to assembly. The other parts 
do
flow through a bottleneck, and they
are on the X route to assembly where they are mated to the Y parts into a
finished product.
In a real situation, the Y route probably would consist of one non-
bottleneck feeding another non-bottleneck, feeding yet another non-
bottleneck, and so on, to final assembly. The X route might have a series of
non-bottlenecks feeding a bottleneck, which in turn feeds a chain of more
non-bottlenecks. In our case, Jonah says, we’ve got a group of non-bottleneck
machines downstream from X which can process parts from either the X or
the Y route.
"But to keep it simple, I’ve diagrammed the combination with the fewest

---

number of elements—one X and one Y. No matter how many non-
bottlenecks are in the system, the result of activating Y just to keep it busy is
the same. So let’s say you keep both X and Y working continuously for every
available hour. How efficient would the system be?’’
"Super efficient,’’ says Bob.
"No, you’re wrong,’’ says Jonah. "Because what happens when all this
inventory from Y reaches final assembly?’’
Bob shrugs and says, "We build the orders and ship them.’’
"How can you?’’ asks Jonah. "Eighty percent of your products require at least
one part from a bottleneck. What are you going to substitute for the
bottleneck part that hasn’t shown up yet?’’
Bob scratches his head and says, "Oh, yeah ...I forgot.’’
"So if we can’t assemble,’’ says Stacey, "we get piles of inventory again.
Only this time the excess inventory doesn’t accumulate in front of a
bottleneck; it stacks up in front of final assembly.’’
"Yeah,’’ says Lou, "and another million bucks sits still just to keep the
wheels turning.’’
And Jonah says, "You see? Once more, the non-bottleneck does not
determine throughput, even if it works twenty-hour hours a day.’’
Bob asks, "Okay, but what about that twenty percent of products 
without
any
bottleneck parts? We can still get high efficiencies with them.’’
"You think so?’’ asks Jonah.
On the floor he diagrams it like this...
Y →PRODUCT A X→PRODUCT B

---

This time, he says, the X and Y operate independently of one another.
They are each filling separate marketing demands.
"How much of Y’s 600 hours can the system use here?’’ asks Jonah.
"All of ’em,’’ says Bob.
"Absolutely not,’’ says Jonah. "Sure, at first glance it looks as if we can use
one hundred percent of Y, but think again.’’
"We can only use as much as the market demand can absorb,’’ I say.
"Correct. By definition, Y has excess capacity,’’ says Jonah. "So if you work
Y to the maximum, you once again get excess inventory. And this time you
end up, not with excess work-inprocess, but with excess finished goods. The
constraint here is not in production. The constraint is marketing’s ability to
sell.’’
As he says this, I’m thinking to myself about the finished goods we’ve got
crammed into warehouses. At least two-thirds of those inventories are
products made entirely with non-bottleneck parts. By running non-
bottlenecks for "efficiency,’’ we’ve built inventories far in excess of demand.
And what about the remaining third of our finished goods? They have
bottleneck parts, but most of those products have been sitting on the shelf
now for a couple of years. They’re obsolete. Out of 1,500 or so units in stock,
we’re lucky if we can sell ten a month. Just about all of the