"That's right," she says. "That's exactly why we did it. Oh, I see what you mean. Now-not like in the past when we released stuff just to provide work-now whatever we release to the floor is basically of the same importance. Let me think for a minute."
We all do.
"Oh shit," she moans.
"What's the matter?" Bob asks.
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"I just realized the impact that those darn tags have on our operation."
"Well?" Bob presses her.
"I'm embarrassed," she says. "I've been complaining about our problems with the six or seven capacity constraint resources, I raised all the red flags, I've gone as far as to demand that in- coming orders be restricted. And now I see that I've created the problem with my own hands."
"Fill us in, Stacey," I request. "You're way ahead of us."
"Of course. You see, when do the green and red tags have an impact? Only when a work center has a queue, when the worker has to choose between two different jobs that are waiting; then he always works on the red tag first."
"So?"
"The largest queues," Stacey goes on, "are in front of the bottlenecks, but there the tags are irrelevant. The other place where we have relatively high queues is in front of the capacity constraint resources. These resources supply some parts to the bottlenecks, red-tag parts, but they work on many more green- tag parts, parts that go to assembly not through the bottlenecks. Today they do the red-tag parts first. This naturally delays the arrival of the green parts to assembly. We catch it when it is pretty late, when holes are already evident in the assembly buffer. Then, and only then, we go and change the priorities at those work centers. Basically, we restore the importance of the green parts."
"So what you're telling us," Bob cannot contain his surprise, "is that if you just eliminate the tags, it will be much better?"
"Yes, that's what I'm saying. If we eliminate the tags and we instruct the workers to work according to the sequence in which the parts arrive-first come, first done-the parts will be done in the right sequence, fewer holes will be created in the buffers, my people will not have to track where the material is stuck, and..."
"And the foreman will not have to constantly reshuffle pri- orities." Bob completes her sentence.
I try to confirm what I heard. "Stacey, are you positive that your warning about those constraint resources was just a false alarm? Can we safely take more orders?"
"I think so," she says. "It explains one of my biggest myster- ies, why there are so few holes in the bottlenecks' buffers, while there are more and more in the assembly buffer. By the way
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fellows, the fact that there are more and more holes indicates that eventually we will run into the problem of insufficient capacity, but not right now. I'll take care of those tags immediately. You won't see them tomorrow."
"Well, this discussion was very beneficial," I conclude. "Let's carry on. When was the second constraint broken?"
"When we started shipping everything much ahead of time," Bob answers. "Shipping three weeks earlier is a clear indication that the constraint is no longer in production but in the market. Lack of sufficient orders limited the plant from making more money."
"Correct," Lou confirms. "What do you think: did we do anything different on the non-constraints?"
"Not me," says Bob.
"Me neither," echoes Ralph. "Hey, wait a minute. How come we continue to release material according to the oven and the NCX10 if they are no longer the constraints?"
We look at each other. Really, how come?
"Something even funnier is going on. How come my com- puter shows that these two work centers are still a constraint, that they are constantly loaded to one hundred percent?"
I turn my eyes to Stacey, "Do you know what's going on?"
"I'm afraid I do," she admits. "It's definitely not my day."
"And all this time I wondered why our finished goods were not depleting at a faster rate," I say.
"Will one of you tell us what's going on?" Bob says impa- tiently.
"Go ahead, Stacey."
"Come on fellas, don't look at me like that. After operating for so long with mountains of finished goods, wouldn't anybody do the same?"
"Do what?" Bob is lost. "Will you please stop talking in rid- dles?"
"We all knew how important it was to make the bottlenecks work all the time." Stacey starts at last to explain. "Remember, 'An hour lost on the bottleneck is an hour lost for the entire plant.' So, when I realized that the load on the bottlenecks was dropping, I issued orders for products to be on the shelf, in stock. Stupid, I know now, but at least at the moment our finished goods are balanced to roughly six weeks. No more of that awful
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situation where we hold mountains of some products and not even one single unit of others."
"That's good," Lou says. "It means we can easily deplete it. Alex be careful not to do it too fast, remember the bottom-line ramifications."
It's Stacey's turn to be puzzled. "Why shouldn't we get rid of the finished products as fast as possible?" she asks.
"Never mind," I impatiently say. "Lou can, and should, ex- plain it to all of you later. Right now we should correct our five- step process. Now we all know to what extent Ralph was right, something is definitely missing."
"Can I correct it?" Stacey says sheepishly, and goes to the board.
When she returns to her seat the board has the following:
1. IDENTIFY the system's constraint(s).
2. Decide how to EXPLOIT the system's constraint(s).
3. SUBORDINATE everything else to the above decision.
4. ELEVATE the system's constraint(s).
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.
Examining the board, Lou moans, "It's much worse than I thought."
"On the contrary," I'm surprised. "It's much better than I thought."
We look at each other. "You first," I say. "Why do you claim that it's much worse?"
"Because I've lost my only guideline."
When he realizes that we don't get it, he elaborates; "All the changes that we made so far, all the sacred cows that we had to slaughter, had one thing in common, they all stem from cost accounting. Local efficiencies, optimum batch sizes, product cost, inventory evaluations, all came from the same source. I didn't have much problem with it. As a controller I questioned cost accounting validity for a long time. Remember, it's the invention of the beginning of the century when conditions were much dif- ferent from today. As a matter of fact, I started to have a very good guideline; if it comes from cost accounting it must be wrong."
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"Very good guideline," I smile. "But what is your problem?"
"Don't you see, the problem is much bigger; it's not only cost accounting. We put on the green and red tags not because of cost accounting, but because we realized the importance of the bottle- necks. Stacey created orders for finished goods because of our new understanding, because she wanted to make sure that the bottlenecks' capacity will not be wasted. I thought that it takes a lot of time to develop inertia. What I now see is that it takes less than one month."