'The Goal' - Part 3 Summary!

Fran encounters a few trivial problems as he tries to implement the changes --

1) The union initially disagrees with Frans new lunch break rule. Fran now decides to meet the plant employees in groups, to make them understand the complicated situation the plant was in!

2) As Fran takes a stroll down the plant, he notices that one of the bottle necks is actually sitting idle. Reason - Fran had asked the bottleneck managers to prioritize shipments starting from the most delayed shipment.
Following the order, the machine was waiting on the parts for the current shipment. This was a critical issue and Fran decides to mark parts based on priority. A Red part indicated high priority and a green part indicated lower priority. If all the parts near a bottleneck were red, the parts with the lowest number got the highest preference.

3) The parts going into the bottlenecks and coming out of the bottlenecks appear the same. So Fran suggests that the parts coming out of the bottleneck machines be marked yellow.

4) Ralph and Ted have a minor tiff. Ralph wants to get a detailed log of specific timings when parts enter and come out of the furnace. Ralph tries to make projections on the number of shipments that could potentially go out in a given time frame. He also wants to keep accurate data in his DB about how much time the heat furnace (BN) takes to treat parts. He realizes that some of the plant employees procrastinate even when it comes to handing the bottlenecks. He brings it to Frans attention, who promises him all his assistance so Ralph can get all the relevant data to keep data accurate.

5) Fran also realizes that the bottlenecks sit idle at certain times of the day. So he moves a couple of employees to take care of the BN at all times.

A few other developments also help Fran

1) Bob also gets back another old machine to assist one of the bottlenecks.

2) One of the foremen efficiently processes parts faster than everyone else. He tries to run a full load every time he runs the BN. If two kinds of parts required the same temperature to process, he would load the high priority parts first and fill the remaining area with non BN parts. Fran wants the same process to be followed everywhere.

3) As suggested by Jonah, Bob works with the engineering department to find out that some parts don’t need to go through one of the BN machines.

Everything goes well and the plant improves profits by a solid 12%.

However, Stacey has some bad news eventually. She believes that the bottlenecks have spread. She informs Fran that shipments were not able to go out because some non BN parts were not available.

Throughput has increased leading to the more shipments being sent out. The workload on the BN`s have been increased.

However, should the non BN resources also increase efficiency to meet with the rise in throughput???

Fran decides to call for Jonah again.

Jonahs findings

1) There are huge stacks in front of some machines, some with red tags and some with green. The red stacks are heading towards a bottleneck. The green tag stacks however were not getting any attention. This resulted in some of the non BN machines acting like BN`s.

2) Jonah explains the relationship between BN`s (X) and non BN`s (Y).

Case 1 (Y -> X)

Y is a non BN. Y working 450 hrs, lets assume is equal to X working 600 hrs. If Y completes working for 450 hrs and if Y is given more work for the next 150 hrs, it results in more inventories for X to process, which it cannot handle in the given 600 hrs. Result = Excess Inventory.

Case 2 (X -> Y)

X will end up processing lesser number of parts in 600 hrs. Y will be done processing all parts from X in 450 hours, thereby sitting idle for 150 hrs. According to Jonah this was slightly more acceptable.

Case 3 (Y -> A)
X -> S
S
E
M
B
L
Y

Y processes more parts in the same time, while X doesn’t come too close. So inventory from Y sits until the remaining X parts arrive. Result = Excess Inventory.

Case 4 (Y -> Product A)
X -> Product B

By definition Y has excess capacity, more than what the market demands. So, this is not an ideal scenario as well, even though X and Y are disconnected. Inventory from Y sits in the warehouse.

Bottom line: Making a non BN resource work more than what a BN resource can handle will lead to excess inventories in front of the BN machine. It is OK to keep workers idle and not working 100% of the time.

Mistake Committed: Making a non BN process more parts than what a BN could handle. Thereby, the same non BN resource could not process parts for another non BN, leading to parts not being available from non BN parts.

Fix: Make the non BN resource process parts at the same speed as the BN resource. Ralph comes up with a good suggestion. He says that the DB team can calculate the average time taken by a BN resource to process parts. Based on this average time, parts can be processed by a non BN in order to feed the BN. At all other times the non BN resources can work on parts with the green tag.

Also, based on the BN speed, the time taken for parts to reach the final destination can be predicted. From this information, one can reverse engineer and release parts for the non BN resources. This will inevitably reduce inventory and increase throughput.

Peach is impressed with the plants turnover but at the same time, he wants to see a 15% increase in profits to continue operating the plant.

How?
Reduce Inventory by half.

Advantages: Inventory Reduces. Only half the investment needed. Cash flow eases.

There are four different time-fields associated with processing a specific part.
Setup – A Part waits for a resource, while resource gets ready to work on the part.
Process – Time a part takes to process
Queue – A part waits in Queue for a resource, while resource is processing another part.
Wait – A part waits for another part in the assembly line, in order to be processed.

Queue Time and Wait Time are the highest. Reducing Inventory reduces these two times by half.
Speed of flow of parts increases (Lead time decreases). Customers get their orders faster.

All Fran needed to do was to ask Marketing to market the new turnover rate.

Fran now ends up getting an order for 1000 parts from a client. However he needs to have the parts in by 2 weeks.
So Fran decides to cut down inventory to half one more time. This would not affect his current contracts with other clients.
He manages to ship out 250 parts every week and completes the order in 4 weeks.

One Negative side effect – Costs per part go up.
If 100 parts needed to be processed, then cost per part would be calculated based on direct labor + setup time + burden.
If set up time was initially 2 hrs then the set up time per order would be 120/100 = 1.2

However reducing inventory to half would increase set up time (120/50 = 2.4) increasing
the cost per part.