"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."
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"That means more customers come to us because we can deliver faster," says Lou.
"Our sales increase!" I say.
"And so do our bonuses!" says Stacey.
"Whoa! Whoa now! Hold up here a minute!" says Bob.
"What's the matter?" I ask him.
"What about setup time?" he says. "You can batch sizes in half, you double the number of setups. What about direct labor? We got to save on setups to keep down costs."
"Okay, I knew this would come up," I tell them. "Now look, it's time we think about this carefully. Jonah told me last night that there was a corresponding rule to the one about an hour lost at a bottleneck. You remember that? An hour lost at a bottleneck is an hour lost for the entire system."
"Yeah, I remember," Bob says.
I say, "The rule he gave me last night is that an hour saved at a non-bottleneck is a mirage."
"A mirage!" he says. "What do you mean, an hour saved at a non-bottleneck is a mirage? An hour saved is an hour saved!"
"No, it isn't," I tell him. "Since we began withholding materi- als from the floor until the bottlenecks are ready for them, the non-bottlenecks now have idle time. It's perfectly okay to have more setups on non-bottlenecks, because all we're doing is cut- ting into time the machines would spend being idle. Saving set- ups at a non-bottleneck doesn't make the system one bit more productive. The time and money saved is an illusion. Even if we double the number of setups, it won't consume all the idle time."
"Okay, okay," says Bob. "I guess I can see what you mean."
"Now Jonah said, first of all, to cut the batch sizes in half. Then he suggested I go immediately to marketing and convince them to conduct a new campaign which will promise customers earlier deliveries."
"Can we do it?" asks Lou.
I tell them, "Already, our lead times have condensed consid- erably over what they were before thanks to the priority system and making the bottlenecks more productive. We have reduced lead time of about three to four months down to two months or even less. If we cut our batch sizes in half, how fast do you think we can respond?"
There is an eternity of hemming and hawing while this is debated.
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Finally, Bob admits, "Okay, if we cut batch sizes in half, then that means it ought to take half the time it does now. So instead of six to eight weeks, it should take about four weeks... maybe even three weeks in a lot of cases."
"Suppose I go to marketing and tell them to promise cus- tomers deliveries in three weeks?" I say.
"Whoa! Hold on!" says Bob.
"Yeah, give us a break!" says Stacey.
"All right, four weeks then," I say. "That's reasonable, isn't it?"
"Sounds reasonable to me," says Ralph.
"Well... okay," says Stacey.
"I think we should risk it," says Lou.
"So are you willing to commit to this with us?" I ask Bob.
Bob sits back and says, "Well... I'm all for bigger bonuses. What the hell. Let's try it."
Friday morning finds the Mazda and me again hustling up the Interstate toward headquarters. I hit town just as the sun hits the glass of the UniCo building and reflects a blinding glare. Kind of pretty actually. For a moment, it takes my mind off my nerves. I've got a meeting scheduled with Johnny Jons in his office. When I called, he was quite willing to see me, but sounded less than enthusiastic about what I said I'd like to talk about. I feel there's a lot riding on my ability to convince him to go along with what we want to do. So I've found myself biting a fingernail or two during the trip.