The Goal Quiz

What does Peach say the future of the business depends on?

their ability to increase productivity

Why did they create the red/green tag systems? How did they determine the color of tag for a specific batch?

they find that they need another system to inform the workers what materials have priority at non-bottlenecks. Red and green tags are the answer. Red for bottleneck parts to be worked on first as to not hold up the bottleneck machine, and green for the non-bottleneck parts.

Does the bottleneck ever move to outside the plant?

Yes

Why does Jonah say "... the closer you come to a balanced plant, the closer you are to bankruptcy."?

"Alex, the goal is not to reduce operational expense by itself. The goal is not to improve one measurement in isolation. The goal is to reduce operational expense and reduce inventory while simultaneously increasing throughput," says Jonah.

What does Jonah say "A plant in which everyone is working all the time is very inefficient."?

"Do you realize that the only way you can create excess inventories is by having excess manpower?" he says.

How to optimize the use of bottlenecks?

"First, make sure the bottlenecks' time is not wasted," he says. "How is the time of a bottleneck wasted? One way is for it to be sitting idle during a lunch break. Another is for it to be processing parts which are already defective—or which will become defective through a careless worker or poor process control. A third way to waste a bottleneck's time is to make it work on parts you don't need." "Then make the bottlenecks work only on what will contribute to throughput today . . . not nine months from now," says Jonah. "That's one way to increase the capacity of the bottle- necks. The other way you increase bottleneck capacity is to take some of the load off the bottlenecks and give it to non-bottlenecks." A second question: do you have other machines to do the same process? If you have the machines, or if you have a vendor with the right equipment, you can offload from the bottleneck. And, again, you gain capacity which enables you to increase throughput."

What's Jonah ask?

"Have they really increased productivity at your plant?"

What are the steps taken other place in the system (other than the bottleneck resources) to improve the system performance? List all of them.

"I'm not going to worry about those at the moment," I tell him. "Let's work on the assumption that anything not needing to go through a bottleneck is either waiting in front of assembly already, or will be by the time the bottleneck parts arrive."

At the end of the chapter Jonah tells Alex not to be concerned with "local optimums." What does he mean by this term?

"Just remember we are always talking about the organization as a whole—not about the manufacturing de- partment, or about one plant, or about one department within the plant. We are not concerned with local optimums."

Why did Bob recommend switching back to a slower process for cutting?

"The thing is, the machines we made more efficient happen to be non-bottlenecks," says Bob. "We have enough capacity on them to slow down and still meet demand. And if we go back to the slower processing, we don't need the heat-treat. Which means we can take about twenty percent of the current load off the furnaces."

How is inventory different from normal?

"Very simply, I decided to define it this way because I believe it's better not to take the value added into account," he says. "It eliminates the confusion over whether a dollar spent is an investment or an expense. That's why I defined inventory and operational expense the way I just gave you."

What is the meaning of Drum-Buffer-Rope?

"You know, like mountain climbers," he says. "You tie every- one together at the waist with one long rope. So, that way, no one could get left behind, and nobody could speed up without every- body speeding up."

According to Jonah, what are the costs of NCX-10 and heat-treat?

2735 an hour

Why did the troop spread out?

Accumulation of slowness because dependency limits the opportunities for higher fluctuations

Why does Jonah ask if sales have increased?

Because making money is the goal

Jonah says there are 2 kinds of resources; what are they?

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

What is "statistical fluctuations"?

But there are other kinds of information we cannot precisely predict. Like how long it will take the waiter to bring us our check. Or how long it will take the chef to make an omelet. Or how many eggs the kitchen will need today. These types of information vary from one instance to the next. They are subject to statistical fluctuations."

What was impact of robots?

But we find that in every case where a robot came on line, there was no increase in sales for any product for which they made parts, not even the slightest blip in the curve. For the heck of it, we also check the shipments made from the plant, but there was no increase there either. In fact, the only increase is in overdue shipments—they've grown rapidly over the last nine months.

What are dependent events and statistical fluctuations in Alex's plant?

Dependent: Parts are made in a sequence of steps. Machine A has to finish Step One before Worker B can proceed with Step Two. All the parts have to be finished before we can assemble the product. The product has to be assembled before we can ship it. And so on. Statistical Fluctuations: How long does it take to solder the wire leads on a transformer? Well, if you get out your stopwatch and time the operation over and over again, you might find that it takes, let's say, 4.3 minutes on the average. But the actual time on any given instance may range between 2.1 minutes up to 6.4 minutes. And nobody in advance can say, "This one will take 2.1 minutes . . . this one will take 5.8 minutes." Nobody can predict that information.

What are dependent events and statistical fluctuations in the hike?

Dependent: So does the hike we're taking now. In order to arrive at Devil's Gulch, a trail has to be walked. Up front, Ron has to walk the trail before Davey can walk it. Davey has to walk the trail before Herbie can walk it. In order for me to walk the trail, the boy in front of me has to walk it first. Statistical Fluctuations: I look up and notice that the boy in front of me is going a little faster than I have been. He's a few feet farther ahead of me than he was a minute ago. So I take some bigger steps to catch up. Then, for a second, I'm too close to him, so I slow down.There: if I'd been measuring my stride, I would have re- corded statistical fluctuations. But, again, what's the big deal?

According to Jonah's definitions, how should Alex account for the following? Employee time (direct labor, indirect labor, idle time, operating time)? Tooling, machines Lubricating oil Scrap Knowledge The whole plant Carrying cost

Employee time: operational expense Machine: depreciation on the machine is operational expense. Whatever portion of the investment still remains in the machine, to be sold, is inventory Whole Plant: Inventory Lubricating Oil: Operational Expense Scrap: Operational Expense Carrying Cost: Operational Expense Knowledge: Depends on what it is used for

What does Alex do when he sees 3 guys sitting around in plant? Is he sure he is doing a smart thing?

He talks to their supervisor. So I tell him, "If you can't keep them working, I'll find a department that can. Now find something for them to do. You use your people, or lose 'em—you got it?" But, well . . . maybe there really isn't anything for them to work on right now. And even though I could perhaps have those guys shifted to some- place where they could produce, how would I know if that work is helping us make money?

What is "dependent events"?

I mean that an event, or a series of events, must take place before another can begin . . . the subsequent event depends upon the ones prior to it. You follow?"

In chapter 24, many green-tag parts are short (orders at assembly cannot be shipped because they lack green parts). Does this mean new constraints have emerged? What is causing this? How did Alex and his crew fix this problem?

I nod. Yes, that sounds like a possibility. With the bottlenecks more productive now, our throughput has gone up and our backlog is declining. But making the bottlenecks more productive has put more demand on the other work centers. If the demand on another work center has gone above one hundred percent, then we've created a new bottleneck.

Alex wonders how to tell if an action is productive or non-productive toward (the goal). What does he learn in his discussion with Lou?

I write down the three measurements which Lou and I agreed are central to knowing if the company is making money: net profit, ROI and cash flow.

How to express the goal use the three measurements?

Increase throughput while simultaneously reducing both inventory and operating expense.

What does Alex tell Jonah that the effect of the robots is?

Increased Productivity

Jonah asks Alex if sales are up. Alex says no. Then Jonah makes predictions. What are these predictions?

Inventories go up Everything is late

What does Jonah speculate about inventories and late shipments?

Inventory is going through the roof and everything is always late

What does the combination of dependent events and statistical fluctuations mean to Alex's plant? What is its impact on the job for Hilton Smith?

It explains why they have so many late orders. Alex identifies the bottlenecks. and puts them at the front of production.

Why the concern with setups?

It just took him and his helper an hour and a half to set up for the other part that everyone needed so desperately.

How to use the idea of Drum-Buffer-Rope to schedule an unbalance production?

It would mean that the line—which would translate to the total inventory in the plant—could never be longer than the rope. And the rope, of course, could be of a pre-determined length, which means we could control it with precision.

What is a balanced plant?

It's a plant where the capacity of each and every resource is balanced exactly with demand from the market.

How does cutting batch size in half on non-bottleneck resources help? What are the benefits?

Jonah suggests reducing batch sizes by half. Of course, this will take some doing with vendors, but if it can be done, nearly all costs are cut in half. Also, they get quicker response times and less lead times for orders. Sounds good.

What did they do to move faster during the hike?

Kept the group in a condensed line and made them hold hands. and then made herbies backpack lighter.

What are the actions taken by Alex and his crew at bottlenecks to increase the plant capacity? List all of them.

Move QC inspection points in front of bottlenecks Lunch breaks Make sure bottlenecks are processing parts for late orders

What are the bottlenecks in the plant?

NCX-10 Heat-Treat Department

What is the problem with these measures?

Net profit, ROI, cash flow-—that's just headquarters talk to Eddie. It's absurd to think I could measure Eddie's world by those three. For Eddie, there is only a vague association between what happens on his shift and how much money the company makes. Even if I could open Eddie's mind to the greater universe, it would still be very difficult to draw a clear connection between the values here on the plant floor and the values on the many floors of UniCo head- quarters. They're too different.

Can we use T, I, OE to link local performance to global performance?

No

Does everyone agree that this is pretty good set of measures for evaluating a business overall?

No

How did they get the hot order out the door?

Overtime and having nearly all of the employees work on 41427

If the troop is analogous to a manufacturing system, what are product, raw material, throughput, operational expense, and inventory in this case?

Product: Walk Trail Throughput: Rate at which the last person in line walks Inventory: Amount of trail between Ron (first person in line) and me Raw Materials: Ron Operational Expense: Energy the boys need to walk

What is the process of ongoing improvement?

Production is an ongoing process of improvement, and when new problems arise they need to be dealt with accordingly.

What does Alex mean by productivity?

See, it was just in one department that we had a thirty-six percent improvement." something about the value added per employee equals... that hes accomplishing something

What is the best way to organize the boys in terms of their speed? Why?

Slowest up front

Why does Jonah say "balance flow, not capacity?" What does this rule mean?

Speaking fundamentally, the bottleneck flow should be on a par with demand."

What are dependent events and statistical fluctuations in the dice game?

Statistical Fluctuations: Every time I roll the dice, I get a random number that is predictable only within a certain range, specifically numbers one to six on each die. Dependent: set of bowls

Why does Jonah speculate that inventories have increased and many shipments are late?

T, I, OE

Going back to the airport conversation about the robots in chapter 4: Jonah asks about 3 performance indicators. What are they?

That's how Jonah knew. He was using the measurements in the crude form of simple questions to see if his hunch about the robots was correct: did we sell any more products (i.e., did our throughput go up?); did we lay off anybody (did our operational expense go down?); and the last, exactly what he said: did our inventories go down?

Why was the hike slower than expected?

The ability to go faster than average is restricted. It depends upon those in the front of the line.

What does Alex say about the impact of the carrying through the hot order?What is the impact on efficiency/economies of scale?

The economies of scale would disappear. Our costs would go—well, they'd be even worse than they are now. We can't run the plant just by the seat- of-the-pants." "Listen, you did a hell of a job today. I mean that. But we set policy for a purpose. You should know that. And let me tell you that Bill Peach, for all the trouble he caused to get one order shipped, would be back here pounding on our heads at the end of the month if we didn't manage the plant for efficiency.

Why did Jonah ask whether all inventory in front of heat-treat requires heat-treat?

The first thing Jonah does is look at the stacks of parts and ask, "Are you sure all this inventory requires heat-treat?"

What does Jonah tell Alex about his performance measures?

The measurements are lying to Alex

How did Alex re-evaluate the effect of Robots?

The robots have increased our depreciation, because they're new equipment, but they haven't directly taken away any jobs from the plant; we simply shifted people around. Which means the robots had to increase operational expense. Okay, but efficiencies have gone up because of the robots. So maybe that's been our salvation. When efficiencies go up, the cost-per-part has to come down. But did the cost really come down? How could the cost-per- part go down if operational expense went up?

How did Mike Haley (a foreman at heat-treat) manage to push more parts through heat-treat on his shift than the others?

Then one of those dedicated foreman, the night foreman, discovers a way to process more parts by mixing and matching orders by priority, increasing efficiency by ten percent. Finally, one process being sent through a bottleneck could be accomplished through another older way and therefore free up time on the bottleneck.

Why did Alex want to station foreman permanent at heat-treat and permanent crew at NCX-10?

They are becoming more and more efficient, but lag time arouse with the two bottlenecks because of workers being loaned out to other areas and not being at the bottlenecks when needed to process another order. It seems there was nothing to do while waiting for the bottleneck machine to finish the batch. Therefore, in keeping with the notion that everybody needs to stay busy, workers were at other areas between batches. Alex decides to dedicate a foreman at each location all the time.

How did Alex and his crew manage to get more orders and more importantly fulfill the delivery promise?

They can greatly increase sales, current and future, if they can ship a thousand products in two weeks. Impossible without committing the plant to nothing but the new order? Wrong! How about smaller batch sizes. Cut them in half again. Then promise to ship 250 each week for four weeks starting in two weeks. The customer loved it.

What are Throughput (T), Inventory (I) and Operational Expense (OE)? How are they defined?

Throughput: the rate at which the system generates money through sales Inventory: all the money that the system has invested in purchasing things which it intends to sell. Operational Expense: all the money the system spends in order to turn inventory into throughput." "They're measurements which express the goal of making money perfectly well, but which also permit you to develop operational rules for running your plant

Why is Peach in the plant?

To be shown the status of CO Number 41427

What's the goal in terms of NP, ROI and CF?

To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously in- creasing cash flow.

What is the difference between activating a resource and utilizing a resource?

Utilizing: making use of the resource in a way that moves the system toward the goal Activating: pressing the on switch of a machine; it runs whether or not there is any benefit to be derived from the work it's doing.

How did they find bottlenecks?

WIP inventory showing that they are waiting for parts for the NCX-10

According to Jonah, how to find more capacity of the plant? Where is the hidden capacity?

Walk around the plant and see how the bottlenecks are being managed.

Why did more inventory pile up in front of NCX10 after they improved the capacity of NCX10?

Working non-bottlenecks to maximum capacity on bottleneck parts has caused the problem. All parts are stacked up in front of the bottlenecks and others are awaiting non-bottleneck parts for final assembly. There needs to be balance.

After meeting Alex overlooks plant and thinks about what the goal should be. What are some of the things he thinks about? Why does he rule them out? What does he finally decide?

cost-effective purchasing, employ- ing good people, high technology, producing products, producing quality products, selling quality products, capturing market share. I even add some others like communications and customer satisfaction. None of these are the goal. They enable the company to make money The goal of a company is to make money

According to Jonah, how to compute the value of parts piled in front of heat-treat? Is it a good idea to find vendors to heat-treat parts for the plant? Why?

each product shipped means a thousand dollars. a thousand units times a thousand dollars is one million dollars. yes. they will treat the parts quicker

What is the announcement made at division headquarter?

lay some news on us about how badly the division performed in the first quarter.

Where did the plant perform quality inspection on bottleneck parts? What was Jonah's advice?

prior to final assembly. put the QC in front of the bottlenecks. "Very perceptive of you. Make sure the bottleneck works only on good parts by weeding out the ones that are defective. If you scrap a part before it reaches the bottleneck, all you have lost is a scrapped part. But if you scrap the part after it's passed the bottleneck, you have lost time that cannot be recovered."

Why NCX-10 is stopped at the moment? Why did Jonah ask for the older machine?

set-up people went on break Because he believed they should be used if it's still operational

Why does the operator not want to run the piece?

some other do-it-now job which somebody imposed upon them for some other product.

How does Jonah define productivity?

the act of bringing a company closer to its goal. Every action that brings a company closer to its goal is produc- tive. Every action that does not bring a company closer to its goal is not productive. Do you follow me?"