The Goal

Alex Rogo Jonah Bill Peach Bob Donovan Lou ____ Stacey Potazenik Ralph Nakamura

- Plant Manager - Physicist/Production Consultant - Division VP of Manufacturing - Plant Production Manager - Plant Controller - Production Control Manager - data processing manager

Herbie

-slow kid on the boy scout camping trip that kept messing up the flow of the marching line -he helped alex understand dependent events and statistical fluctuations

Chapter 27

Alex's division is the only one that showed progress over the past few months They have to increase the plant's profits another 15% to not get closed down

what does alex decide he needs to fix the problem with non bottlenecks and bottleneck

a signal to link the bottlenecks with the release-of-materials schedule

managerial questions

"what to change?" "what to change to?" "how to cause change?"

how do they make the bottle necks more efficent

-make them run continuously -put quality control before the bottle necks so that the bottle necks are only working on quality products -they relieved workload on the bottle necks by giving some work to vendors

how long does the division have to improve

1 year

chapters in book

40

Chapter 5

Alex leaves the meeting at break time Alex realizes that money is the goal and everything else are just means to achieve the main goal

Chapter 2

Alex rogo is from bearington and his wife hates it Machine employee quits job Machine breaks down Forced to use employees from different areas of the plant Order 41427 gets shipped

Chapter 8

Alex talks to Jonah again and learns that he learns 3 terms to run his plant: Throughput: The rate of sales Inventory: the $ invested in their products Operational Expense: the costs associated with converting inventory into throughput

Chapter 7

Decides to stay with the plant Decides he needs to find Jonah again

how does the plant usually decide batch sizes

EBQ- economical batch quantity

Chapter 12

Focuses on his relationship with his wife, promises to spend the weekend with her

what does alex decide the goal is?

TO MAKE MONEY----not to fill warehouses full of inventory

Chapter 22

They fulfill 12 overdue orders They bring in an old machine to aid the NCX-10 bottleneck

what does Peach say alex has to do to keep the plant open after the first month

a 15% improvement...which relies heavily on demand from market

Lou

accounting

main character

alex rogo

how does the plant reach 17%

an old way of accounting...auditors sent to the plant just found 12.8% and costs have gone up

bottleneck

any resource whose capacity is equal to or less than the demand placed on it

nonbottleneck

any resource whose capacity is greater than the demand placed on it

what way did the division look at inventory

as an asset, so it hurt the plant to lose all the inventory in the eyes of the division

what is the problem with working non-bottlenecks to capacity on bottleneck parts (red)

because now there are stacks of bottleneck parts that need non bottleneck parts for final assembly...the red and green tags need to be modified

what is CCR

capacity constraint resources-vwhen the bottlenecks are going great then some other problems may pop up, not bottle necks but similar symptoms

how does alex decide that a balanced plant is not the answer?

dice game/ match bowl experiment....showed that because of statistical fluctuations and dependent events throughput goes down and inventory goes up

Peach

division vice president

dependent events

events that depend on something else happening before they can happen

problem

everything is late, working on overtime,not making money

what does the night foreman make a difference on the bottleneck

he finds a process by mixing and matching order priority that increases efficiency by 10 percent

how does alex fix the herbie problem on the hike?

he put him at the front of the line and relieved him of his pack...this valences fluctuations and increased his productivity which increased throughput of the team

Chapter 16

his wife leaves him and leaves children

why does every plant need bottlenecks?

if they didn't they would have enormous excess capactiy

Stacey

inventory control women

what happened when they new priority system starts working?

inventory decreases and it revealed more "bottlenecks"

what was the nature of the things Jonah taught them

it is common sense....yet the opposite of everything they have ever thought about running the plant

what is the absolute measurement ? relative measurement?

net profit needs to increase (absolute) along with increasing ROI...return on investment... and cash flow (relative)

Jonah

old physics professor, consultant

alex's job

plant manager

Bob

production manager

what should you balance with demand

the flow of product through the plant

inventory

the money that the system has invested in purchasing things which it intends to sell

should the resources at the beginning have more capacity or should the resources at the end?

the ones at the end should have more capacity

who is Burnside and what does he

the owner of the company that did the 1000 orders, comes to plant and shakes hands, and signs contract for 10,000 orders

throughput

the rate at which the system generates money through SALES...money coming in

robots

the robots actually increased costs and didn't decrease any costs

why are workers not at the bottlenecks when batches need to be changed

they are under the impression that they have to be constantly working, so they don't want to just wait on batches to be done

how do they fix the problem of more inventories and less throughput

they cut the batch sizes in half on non-bottlenecks....half the work-in-progress on the floor...smaller batch sizes would result in less wait time on non-bottlenecks would would create lower lead times and faster turn around for customers

what is another thing that helped with the bottle necks

they found complement machines

how do they increase the capacity of the plant

they need more capacity at the bottlenecks

order of importance regarding assets

throughput > inventory > operating expenses

statistical fluctuations

types of information that vary from one instance to the next

company

unico

what is a balanced plant

when the capacity of each and every resource is balanced exactly with demand from the market

new problem in plant at the very end

with so many new orders the bottlenecks were okay but the non bottlenecks feeding into the bottlenecks did not have enough capacity and they didn't account for it with increased inventory. increased inventory would allow the machines with lower capacity to supply the new orders

how much does it cost when a bottle neck is down

2735= the cost of the entire system -because without the parts from the bottlenecks you can't sell the products

Chapter 17

Jonah tells his team about what he learned hiking and applies it to complete an overdue order

5 step plan the plant followed

1. INDENTIFY the systems constraint(s) 2. decide how to EXPLOIT the system's constraint(s) 3. SUBORDINATE everything else to the above decision 4. ELEVEATE the system's constraits 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

when the people on the shop floor worked according to alex's schedule, what were the results

19 units in first hour

how long does the plant have to improve

3 months

needed 100 units by 5pm. capacity on next unit was 25. how many units were ready to ship?

90

Chapter 19

Jonah visits the plant and points out bottlenecks Jonah shows them how to increase productivity by increasing it at the bottleneck's locations Relates bottleneck downtime with the loss of throughput Every minute of downtime at a bottleneck translates into thousands of dollars of loss throughput, because without the parts from the bottleneck, you can't sell the product.

authors

cox goldrat

Chapter 29

Accountant buys them some time by editing data Customer asks for 1000 products in 2 weeks They negotiate 250 products a week for 2 weeks to prevent solely working on this one project

Chapter 30

Accountant shows a 17% growth Company audits them and shows a 12.8% growth Man who made the 1,000 product order comes to the plant to increase it to 10,000 products

Chapter 32

Alex & his wife talk about how Alex's new workers need to be taught everything Alex recently learned.

Chapter 18

Jonah teaches Alex about bottlenecks: Bottleneck: A bottleneck is any resource whose capacity is equal to or less than the demand placed upon it. Non-Bottleneck: A non-bottleneck is any resource whose capacity is greater than the demand placed on it. Jonah explains that Alex should not try to balance capacity with demand, but instead balance the flow of product through the plant Alex & his team find the plant's bottlenecks and work on ideas to improve it like the slow kid in the hiking line their machines NCX-10 and their furnace are the bottlenecks

does alex use FIFO or LIFO

FIFO--first in first out...most overdue orders first

IF...THEN statement

IF the hypothesis is right THEN logically another fact must also exist

Chapter 24

Inventory lowered which revealed more bottlenecks Jonah decides to come back to visit

Chapter 11

Jonah confirms their problems can be fixed in 3 months Jonah says, "A plant in which everyone is working all the time is very inefficient." Jonah says the closer to a balanced plant, the closer to bankruptcy Jonah says to consider dependent events and statistical fluctuations

Chapter 25

Jonah says there are no new bottlenecks increase in productivity at the bottleneck led to the accumulation of parts at the assembly line still awaiting parts from the non-bottleneck processes They rework the tagging process to help balance between bottlenecks and non bottlenecks

Chapter 3

Mr. Peach holds a meeting Division closes in 1 year if they don't improve Peach wants to set new goals and work to achieve them

what promotion does Alex get

Mr. Peach's hob, he is going to be the division manager and manage 3 plants

Chapter 1

The plant has to finish order 41427 by the end of the day Plant already laid off half their employees Plant has 3 months to improve or they close losing 600 more jobs

Chapter 21

They institute a tagging policy on parts to be worked on Red tags for bottleneck parts to be worked on first as to not hold up the bottleneck machine, and green for the non-bottleneck parts.

Chapter 31

They let the plant stay Alex gets promoted to Mr. Peach's position and runs 3 plants Jonah won't help until Alex has specific questions

Chapter 28

To fulfill 15% increase: Jonah suggests reducing batch sizes by half their size which meant they needed to get new deals with vendors If successful, they could reduce operational costs by half Alex has their sales manager (Johnny) outline a new marketing strategy

operational expense

all the money the system spends in order to turn inventory into throughput

red tag

first priority, materials processed by bottle neck, work on them right away (only allowed to finish another order if it takes less than 1/2 and hour) ((always work on batch with lowest number))

Chapter 36

The team creates a 5 step process to use in every plant: Step 1: Identify bottlenecks Step 2: Decide ways to exploit the bottlenecks Step 3: Subordinate every other decision to 'step two decisions' Step 4: Evaluate the system's bottlenecks Step 5: If a bottleneck is found broken in the system evaluation, return to step one

in an efficient plant should everyone be working all the time?

no

green tags

non bottleneck material, second priority (always work on batch with lower number)

how does the division meeting go?

not well, they just can't understand the new way of thinking

process for the whole division

on-going improvement

how does alex handle the challenge of 1000 products in two weeks

they shipped 250 a week for 4 weeks starting in 2 weeks

Chapter 33

Alex is division VP (Peach's job) Alex returns to his old plant to promote his team members to help run all 3 plants

Result of running the machines at all times?

"Inventories must be sky high and orders must be late."

Bottleneck ? Non-bottleneck?

- any resource whose capacity is equal to or less than the demand placed upon it. - any resource whose capacity is greater than the demand placed upon it.

Boy scout hike -> Manufacturing Plant Each boy is The product is Each boy/operation is A "sale" is Throughput is Operating expense is Inventory (material inside the plant) is Fluctuations in operating speed is causing Attempting to reduce gaps is

-an operation -"walk the trail" - dependent on the one in front. -when the last operation/boy walks the trail. - the rate at which the last person walks the trail. - the energy output of each boy. - the distance between the first and last boy. -inventory to increase and causing throughput to decrease. - increasing operating expense.

what does jonah tell alex during the first meeting at the airport

-productiviy is meaningless unless you know a goal -preducts the high inventories and late orders -tell alex to not think like everyone else

Chapter 9

Alex forms a group (Bob, lee, Stacy) and they plunge into the basic nature of each element of the plant and categorize them according to the three figures They discover the robots increased costs, operational expenses, and therefore were less productive

Chapter 23

Alex hires foremen One of these employed foreman comes with the idea of mixing of the priority of the orders in order to match the production of its parts. This new method hiked the production by 10%

After lunch the boy scouts "self-arrange" so that the fastest is up front and so on until Herbie is at the rear. Q. What was the result? Q. Did throughput improve (completing more miles)? Q. How does Alex fix the boy scout hike? Q. How do they further improve throughput?

A. Line got even longer. A. No, completed miles still dependent on last scout walking the trail, plus "inventory" has increased. A. Puts kids in order from slowest first to fastest last. The line then stays compressed (i.e. inventory has gone down and progress has improved because Herbie is setting the pace and doesn't have to exert energy to catch up). A. Off-loaded Herbie's backpack. In otherwords, they improved Herbie's throughput so the entire boy troop's throughput improved.

Jonah believes the "new bottlenecks" are not real bottlenecks, but self-created bottlenecks. Why? Lesson?

A. Material is being "released" to the plant just to keep the non-bottleneck machines busy. This improves these machines efficiency measures, but does not help the goal. Lesson: Do not try to make non-bottlenecks work all the time. They should be idle some of the time!

Q. Does this scheduling system work (e.g. get late jobs completed while always keeping bottleneck running)? Q. What do they do to rectify this?

A. No, because the late job components are not always waiting in front of the bottleneck machines. A. Create a red tag (parts that travel through the bottleneck) / green tag system for all jobs throughout the plant such that any job with a red tag which arrives at a machine is given priority. If they are in the middle of a run, then if the run takes longer than 30 minutes to complete, stop that job and start the red tag job. If no red tags, then ok to process green tag jobs. If more than one red (or green tag), then process job with lower number on tag.

. Once the bottleneck is identified, can you simply move the machines/operations around like Herbie was moved to the front of the line? Q. So how do you solve the problem of "moving Herbie to the front"?

A. No, production steps often cannot be reorganized. A. Find more capacity for the bottleneck, don't try to move them. Have enough capacity to meet demand.

Q. Where does Alex and company find the bottleneck? Q. What is thier first approach to improving the flow through the bottlenecks and ultimately improving productivity.

A.They find two bottlenecks, NCX-10 and Heat Treating is not for all it was elected by company for some 1. Move QC in front of bottlenecks. 2. Make a list of all late jobs and what components from those jobs flow through the bottleneck machines. They then create a schedule/list in due date order and instruct the bottleneck operators to only work on those jobs in that order.

Chapter 40

Alex and Lou decide upon 3 basic questions every manager must consider while in charge of a system and its improvement: 1. What to change? 2. What to change to? 3. How to cause the change Finding out the answers to these questions would bring out the best manager out of everyone

Chapter 34

Alex and his team use their strategy for one plant and modify it to suit the entire division The group decided to meet in the afternoon on a daily basis to discuss the plants and problems

Chapter 20

Alex creates a priority chart of overdue orders and instructs the bottlenecks to work on them from latest to earliest

Chapter 14

Alex plays a game with dice called the Match bowl experiment with the hikers. Alex realizes the effects of bottlenecks and learns that balanced plants aren't ideal Dependent events and statistical fluctuations tend to pull down the throughput for each day, and the operational expenses as well the cost of inventory increase

Chapter 15

Alex puts slowest hiker in front and reduces his weight to increase productivity

Chapter 4

Alex reflects on meeting Jonah Jonah tells him he's running an unproductive plant predicts high inventories and low shipping rates Jonah tells him to figure out the GOAL of every company

Chapter 6

Alex talks to Lou (plant controller) about how to achieve the goal of Money Net profit needs to increase along with simultaneously increasing return on investment and cash flow.

Chapter 13

Alex went hiking with his son and notices their walking line spreading and closing and relates that to statistical fluctuations and then states that the dependent events of each scout cause them Even if there were no limits, the last event must make up for all the others for all of them to average out

Chapter 26

Alex's group create a formula to anticipate how many products need to be finished/when some were to be released They use the formula to create a balance between bottleneck and non-bottleneck parts

Chapter 10

Alex's staff make their own definitions of: Throughput: $ coming in Inventory: the $ currently inside the system Operational Expense: $ we have to pay to increase throughput They make a plan to meet with Jonah in NY

Chapter 35

Alex's team takes a more scientific perspective They relate the periodic table to their division and decide they will concentrate upon designing a common framework upon which all the issues of the division could be examined

Where does Alex first come to grips with dependent events and statistical fluctuations?

Boy scout hike

location?

City of Bearington

Impossible to perfectly balance capacity to demand, there even exists a mathematical proof showing if you did, inventories go through the roof?" what is involved in this phenomenon?

Combination of create the issue Dependent events - a series of events must take place before another begins. Statistical Fluctuations - the length of events and outcomes are not completely deterministic.

In order to improve by another 15% what does Jonah suggest as the "next logical step"?

Cut batch sizes for non-bottleneck parts in half.

So how do you find a bottleneck in a manufacturing plant?

Go out on the floor and find the operation with the most inventory sitting in front of it.

Q. What do they do next to further off-load the Herbies / bust the bottleneck?

Gold tags placed on parts that have traveled through the bottleneck everyone extra careful not to damage. Dedicate personnel at NCX-10 and Heat Treat even though they are idle much of the time, just don't let machine idle. Send out some portion of heat treat parts to vendor in town. Found old equipment (that is less efficient) to run in parallel to NCX-10. Fully load furnace when possible (e.g. mix batches). Reduce setup time with new fixtures. Were able to process some parts differently so heat treat wasn't required.

Final words from Alex on "how to be an effective manager":

Help people to identify: "what to change?" "what to change to?" "how to cause the change?"

How is the rope and drum concept implemented in the plant?

Identified it takes about 2 weeks from when parts are released to the floor until they get to bottleneck. Setup system that monitors when inventory is processed at the bottleneck. Material required 2 weeks later is then released to the floor. Non-bottleneck parts are released according using the same principle but tied to assembly.

. What does Alex expect to gain by reducing lead times to ship from what used to be 4 months to 4 weeks?

Increased sales!! The bottleneck had moved to customer demand. Quick response on promised due dates should translate to a competitive advantage.

What other performance measure made them not look as good as they actually were? why?

Inventory Inventory is counted as an asset on the balance sheet. When the plant worked hard to reduce inventories to improve their throughput and responsiveness, it looked as if their assets had fallen.

How do you find more capacity for a bottle neck?

Make sure it is never idle (focus your attention on it). Increase cycle time on the machine Add another duplicate machine Outsource to another vendor Reduce the demand (process change) Inspect part quality before bottleneck (make sure bottleneck only works on good parts) Ensure process controls on bottleneck are good so bad parts aren't produced Don't let it work on parts that aren't needed.

How do you know you are making money (Alex and Lou)?

Net profit (Income-Expenses) Return on Investment Cash Flow

Chapter 39

New bottlenecks form at the plant from all the new orders The group agrees to increase inventory in front of the bottlenecks and tell sales not to promise new order deliveries for four weeks This will hurt the new relationship between sales and production Peach asks Alex to help Hilton with his plants improvement and visit Hilton's plants to teach his practices

Q. What were the results of these bottleneck busting tactics?

New monthly shipping record from old record of 2 million to new record of 3 million. 57 customer orders shipped versus old record of 31. WIP Inventories reduced 12%.

starting what are some things going on?

Plant out of control VP of manufacturing expediting an order New robots Controlled chaos Good at "fighting fires" Excellent at getting order filled when pressed Lots of inventory

Alex's belief about the robots at first?

Robots increased productivity by 36% in one department" "Must keep robots running to maintain efficiencies".

Chapter 37

Team revises their 5 step process: 1. Identify the systems constraints 2. Decide how to exploit the systems constraints 3. Subordinate everything else to step two decisions 4. Evaluate the systems constraints 5. If in the previous steps a constraint has been broken, go back to step one, but don't allow inertia to cause a system constraint Their continuously improving structure adds 20% to their previous capacity which improved their market share

What process did they use to shift their focus to the "throughput world"? Describe

The Theory of Constraints Step 1: Identify the system's constraints (NCX10 and oven) Step 2: Decide how to exploit the system's constraint (don't take lunch break on bottleneck machines) Step 3: Subordinate everything else to the above decision (red tags and green tags) Step 4: Elevate the systems constraint (bring back old Zmegma machine, outsource heat treat) Step 5: Warning!! If in a previous step, a bottleneck has been broken, go back to step 1 (material release system, marketing), but do not allow inertia to cause a system's constraint (red and green tags eventually caused problems).

Everything is going good now except it looks like part costs are going up. However, in reality all costs have gone down. How can this be?

The accounting rules: Cost per part = raw material + direct labor + burden cost Burden cost is all the indirect labor costs. Burden = direct labor x burden factor Cost per part has risen because more setups are occurring because of smaller batch sizes. However, workers were idle, so the increased number of setups didn't really increase costs.

What determines the flow of product through the plant.

The bottleneck resources.

what goes wrng with the tags?

The bottlenecks are apparently expanding... material is backing up at the milling machines, and non-bottleneck parts (green tags) are not reaching assembly even though all bottleneck parts (red tags) are available at assembly.

Chapter 38

Their sales manager has a new European client to fill the increase in capacity They have to price products lower in the European market Alex points out that they could use their spare capacity to meet the contract requirements and it would all be material costs to show a net profit in the company accounts

How do the "making money" measures translate to the production environment? (Jonah's translation)

Throughput - Is the rate at which the system generates money through "Sales" up Inventory - all the money that the system has invested in purchasing things which it intends to sell. down Operational Expenses - all the money the system spends in order to turn inventory into throughput. down

What does Alex determine "The Goal" is?

To make money

Manufacturing Plant ?

UniCo Corporation

What is the impact of reducing these batch sizes?

WIP for non-bottleneck parts reduced by half. Significantly reduce time parts spend in plant. Leads to increased responsiveness (from 6-8 weeks to 3-4 weeks).

What is the result of this new release system?

WIP is down. Revenues are up. Efficiencies dropped initially, but have come back up. The backlog of orders is completely gone (satisfied customers).

what was the tag system

a way to communicate to the workers which parts/orders were important

What approach did Jonah use to help Alex and the plant succeed?

asking questions, the Socratic approach. Let others convince themselves of the answers, don't just give it to them. Also used a "common sense"

So how do you go about fixing the problem of keeping the non-bottleneck machines working at the same rate as the bottleneck?

rope and drum Rope: Attach a rope from Herbie (bottleneck machine) to the kid at the front (assembly). The length of rope represents inventory. Drum: Herbie tells the kid at the front to slow down or speed up (beats the drum). Need some kind of signaling or communication between assembly and the bottleneck.