The Goal
...operation expense, the money the system spends in order to turn inventory into throughput. Jonah tells Alex that a plant that is continuously productive is considered inefficient. He explains that continuous production will result in high employee turnover and absenteeism and low quality. Jonah explains that the goal of an operation is to reduce operational expense and reduce inventory while simultaneously increasing throughput. Alex is left to ponder the question what the combined effect is of dependent events and statistical fluctuations. The next day Alex leaves on a hike with his son’s scout troop and he decides to study dependent events and statistical fluctuations in a game with the scouts. He gets the kids involved in a game to demonstrate a perfectly balanced system. He figures out that the speed of production at the bottleneck determines the speed of the dependent events. Back at the plant Alex and his team carefully analyze the production system and identify a bottleneck machine, the NCX-10. A new schedule is created in which the bottleneck machine is used to full capacity. This is done by eliminating down-time by keeping the machine running during breaks and creating a buffer stock in font of the bottleneck machine to keep it busy at all times. Another bottleneck is identified after implementation of the new schedule. This time it is the heat treatment machine. A solution is implemented where quality inspection takes places before parts enter the heat treatment machine. This results in reducing the number of defective parts that would go through the heat treatment process and waste this bottleneck resource and parts are grouped by heat requirements. After this and other changes take effect Alex’s plant ships out a record number of products. A new problem is discovered however; new bottlenecks seem to have appeared throughout the plant. Alex gets a hold of Jonah who tells him that the new policy of continuously releasing material to keep the non-bottleneck machine busy continuously is the cause of this problem. This approach has been the cause of a huge work in process. Alex and his team calculate the quantity of new material that needs to be released so that there is only a few days of inventory in front of the bottlenecks. This effect of this new measure is that the non-bottleneck machines may be idle during some periods. Jonah explains that the bottleneck machine defines the throughput of the entire plant. After Alex and his team run their first profitable month with improved cash flow and lowered inventory he is assured by his boss that if he can show an additional 15 percent increase in his bottom line that the plant closure will be of the table. At this point Alex is getting concerned about demand for products. Alex consults Jonah about his concern and Jonah suggest to cut batch size on the non-bottleneck machines to half and to request the marketing department to offer four week delivery time to its customers. The smaller batch size will cut waiting time of part at the non-bottleneck machines and increase the response time to customer’s orders. These implementations are cause for an increased profitability at the plant. Alex continues to impress his boss and at the end is promoted and ...