'The Goal' - Part 4 Summary!

Fran gets promoted to Division Manager.

He now tries to convince Lou (Account Manager) to join him at the division level.
Lou meanwhile has found something interesting. He says that profits in the last few months were way above 20%.

However, the numbers did not reflect the success. This was because Inventory was listed under Assets when they should actually be listed under liability.

Lou is more than happy about prospects of joining the senior management team at the division level and bringing some changes so that numbers ---

1) Reflected whether the plant was doing well.
2) Measurements should induce parts to do what’s good for the organization.

Bob (Production Manager) however refuses the offer.
He believes that he could standardize operations further at the plant. He wants to integrate production with sales. He wants to ensure that sales fits client needs as well as plant abilities.

Stacey (Inventory Manager) refuses the offer too.
Stacey identifies what she calls 'Capacity Constraint resources'. Her team examines daily queues in front of resources. She wants to make sure that there are buffers for every resource to process. She finds out that some of the resources actually have 'holes'.
These resources were not BN`s per se, but the sequence in which they processed was important. She wants to focus all her efforts on improving the efficiency of CCRs.

Ralph wants to provide information to Stacey and Lou, instead of throwing heaps of data at them.

Fran wants to bring his team together to help him chart a path to manage the division as a whole. Everyone has suggestions on what to do (meet the resources, visit plants, meet clients) but they are cluttered and lack a coherent bond that helps them reach a goal. This is when Ralph talks about the Periodic table and how Mandaleev came up with it. Fran agrees that there was a need to develop an intrinsic order in order to maintain perspective and march towards a common goal.

So what’s the GOAL for the division? - To have a process for Ongoing Improvement.

The focus for Fran had shifted from reducing Operational Costs to increasing throughput, which was great.

The process towards achieving the goal was ongoing.
The team comes up with a 5 Step Process --

Step1:
Identify bottlenecks (Identifying NCX 10 and the furnace)

Step2:
Decide how to exploit bottlenecks (No Lunch breaks?)

Step3:
Subordinate everything to the Bottleneck (Red and Green tags?)

Step4:
Elevate bottlenecks (Getting a new machine?)

Step5:
If BN has been broken, go back to Step1.
But do not allow INERTIA to cause a constraint.

Whenever a constraint is broken, it creates a condition where it becomes very dangerous to extrapolate from the past.
This means that every time the team elevates a bottleneck, they should ensure that they dont keep the same scenario in mind when evaluating the next constraint.

EX: The team initially put red and green tags so that non BN parts caught up with BN parts at the assembly. However, there was no reason for the same process to continue, after the BN and non BN resources caught up.
This in effect had caused the CCRs. The CCRs had holes instead of buffers, because the red tags continued to get more importance.

Now that the BN scenario has been evaded, it was safer to remove the tags and process parts on a FIFO basis.

Fran takes a huge new Order from France for a lower price than what is offered within the States. However, the Order is having troubles shipping out.

Problem: The New Order is Huge. BN`s are everywhere.
The team does not realize that they needed to have more resources or buffers ahead of the BN resources to compensate for the New Order.

Suppose there were three non BN`s and one BN resource is a queue. If Murphy hit the second non BN resource, flow of parts to the BN would stop. So the BN would start eating into its current reserves. Since the size of the order is huge it wont be long before the BN actually goes idle due to lack of reserves. So, in order to compensate for the huge new order, the BN resources reserves should be appropriately stacked.

Solution: The team decides to keep its promise with the French Customer by working on extra important orders first.

In the last Chapter, Fran starts thinking about his new job and perhaps his first constraint. He believes that its important to not keep accumulating data, but to look at a specific constraint and begin by asking - IF...THEN...?

The important tasks of a manager are "What to change", "How to change" and "What to change to". Every time a change was made, it was important to not create new negative ripples.