The Goal

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negotiating through purchasing, and I'm not sure all the vendors will go for it."

I tell her, "That's something we can work on. Eventually they'll go for it because it's to their advantage as well as ours."

"But if we go to smaller batch sizes," she says, squinting at me in cynicism, "doesn't that mean we'll have to have more set- ups on equipment?"

"Sure," I say, "don't worry about it."

"Don't- ?"

"Yeah, don't worry about it."

"But Donovan-"

"Donovan will do just fine, even with more setups," I say. "And, meanwhile, there is another set of benefits, aside from what you said, that we can have almost immediately."

"What's that?" she asks.

"You really want to know?"

"Sure, I do."

"Good. You set up a meeting with the other functions and I'll tell everyone at the same time."

For dumping that little chore of the meeting arrangements on her, Stacey pays me back in kind by setting the meeting for noon at the most expensive restaurant in town-with lunch bill- able to my expense number, of course.

"What could I do?" she asks as we sit down at the table. "It was the only time everybody was available, right, Bob?"

"Right," says Bob.

I'm not mad. Given the quality and quantity of work these people have done recently, I can't complain about picking up the tab for lunch. I get right down to telling everybody what Stacey and I had talked about this morning, and lead up to the other set of benefits.

Part of what Jonah told me last night over the phone had to do with the time a piece of material spends inside a plant. If you consider the total time from the moment the material comes into the plant to the minute it goes out the door as part of a finished product, you can divide that time into four elements.

One of them is setup, the time the part spends waiting for a resource, while the resource is preparing itself to work on the part.

Another is process time, which is the amount of time the part spends being modified into a new, more valuable form.

A third element is queue time, which is the time the part spends in line for a resource while the resource is busy working on something else ahead of it.

The fourth element is wait time, which is the time the part waits, not for a resource, but for another part so they can be assembled together.

As Jonah pointed out last night, setup and process are a small portion of the total elapsed time for any part. But queue and wait often consume large amounts of time-in fact, the ma- jority of the elapsed total that the part spends inside the plant.

For parts that are going through bottlenecks, queue is the dominant portion. The part is stuck in front of the bottleneck for a long time. For parts that are only going through non-bottlenecks, wait is dominant, because they are waiting in front of assembly for parts that are coming from the bottlenecks. Which means that in each case, the bottlenecks are what dictate this elapsed time. Which, in turn, means the bottlenecks dictate inventory as well as throughput.

We have been setting batch sizes according to an economical batch quantity (or EBQ) formula. Last night, Jonah told me that although he didn't have time over the phone to go into all the reasons, EBQ has a number of flawed assumptions underlying it. Instead, he asked me to consider what would happen if we cut batch sizes by half from their present quantities.

If we reduce batch sizes by half, we also reduce by half the time it will take to process a batch. That means we reduce queue and wait by half as well. Reduce those by half, and we reduce by about half the total time parts spend in the plant. Reduce the time parts spend in the plant, and...

"Our total lead time condenses," I explain. "And with less time spent sitting in a pile, the speed of the flow of parts in- creases."

"And with faster turn-around on orders, customers get their orders faster," says Lou.

"Not only that," says Stacey, "but with shorter lead times we can respond faster."

"That's right!" I say. "If we can respond to the market faster, we get an advantage in the marketplace."