The Goal – Chapter 30 – Bucky Burnside’s Helicopter

Rogo hosts a surprise corporate walk through of his robots, which leads to another vanity metrics discussion.  A big account, Bucky Burnside, flies in on a helicopter to thank his team.  Alex and Julie reflect on life and lament past poor communication.

Highlight

“Throughput is going up as marketing spreads the word about us to other customers.”

The world cheers on a winner.  Your team, your vendors and others around you will work with a winner to help continue the winning.

Page by Page

P247 – “Throughput is going up as marketing spreads the word about us to other customers. Inventories are a fraction of what they were and still falling. With more business and more parts over which to spread the costs, operating expense is down. We’re making money.”

P248 – “That was killed,” I say.

UniCo had planned to promote the robots, but then stopped.  Now it is back!  This is a personal corporate pet peeve. ‘Decision Impermanence’ is never healthy!

P249 – “I feel my stomach twisting.”

With the NCX-10 running, but following the smaller batch sizes, Rogo knows that the utilization will not be as high.  Corporate’s vanity metrics will be out of whack!

P250 – “Is that a helicopter?” I ask.

Bucky Burnside returns in a helicopter to say a gracious “Thank you” to the team.

P251 – “What’s the status on Burnside’s Model 12’ s?” I ask her.

Rogo is concerned that Burnside is upset – he has never experienced the other side of the equation.

P252 – “Rogo, I came down here because I want to shake the hand of every employee in your whole plant,” growls Burnside.

This is how you thank a vendor!

P253 – “We’re going to do a new campaign pushing everything you make down here, because this is the only plant we’ve got in this damn division that can ship a quality product on time.”

The marketing team, led by Johnny Jons, is thrilled to have a plant that can delight customers.

P254 – “Even with screwed-up measurements, we’re making money.”

Even vanity metrics can look good with robust financials.

P255 – “When all those crises were occurring, I just kept thinking you must know how important they were,” I tell her.

Rogo assumed his wife knew what was going on, even when he did not communicate.  He had avoided that trap with this employees but failed personally.

P256 – “But then there were babies,” says Julie.

At age 19 when I asked my university adviser, Dr. Fred Diehl what his guidance was for the following years, I had expected him to recommend courses or the pursuit of specific internships.  His reply instead was, “Don’t have kids.  Don’t have them until you are comfortable in what you are doing, because the obligations they create remove flexibility from your life.”

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The Goal – Chapter 29 – Nightmares & Sales

Alex awakens from a nightmare just as Bill Peach’s Mercedes is about to run him over.  Nightmare episodes are a common trope, and it is easy to imagine first time author Goldratt smiling at his choice of story-telling tool.  Julie sleeps next to Alex.  Alex reviews the plant’s continued improvements brought on by cut batch sizes and walks through a plan to recapture business lost in the first chapter with Bucky Burnside.

Highlights

There are a number of great quotes and concepts in this chapter.

“The units will ship when we say they will,” I tell him.

Rogo has integrated sales and operations – he knows his schedule, his constraints and his capabilities.

“The only work-in-process out there now is for current demand.”

Why do otherwise?

“Financially speaking, it doesn’t make a damn bit of difference.”

Vanity metrics change the way numbers are presented, but core financial and accounting metrics are the same.

Page by Page

P237 – “When the excess inventories were exhausted—which happened quickly as a result of the increase in throughput—efficiencies came back up again.”

Cutting batch size improves the flow of an operation.  Boulders become gravel, gravel becomes sand.

P238 – “But now that the batches are smaller, the parts are ready to be moved to the next work station sooner than they were before.”

“The only work-in-process out there now is for current demand.”

Why pursue any work other than that required to meet current demand?  Speculative capacity is a fool’s game – this is why The Lean Startup focuses so much on product-market-fit and preventing premature scale-up.

P239 – “Politically speaking, yes,” I tell her. “Financially speaking, it doesn’t make a damn bit of difference.”

P240 – “The measurement assumes that all of the workers in the plant are always going to be fully occupied, and therefore, in order to do more set-ups, you have to hire more people. That isn’t true.”

Helping an organization increase throughput by more efficiently organizing personnel is a great way to create growth.  People have capacity to learn.  Teams that can learn and redeploy with new skillsets create flexible production sites.

P241 – “Remember our dear friend Bucky Burnside?” says Jons.

P242 – “He tells me he did some digging and found out that the order had originally gone to our number-one competitor, who makes a product similar to the Model 12.”

P243 – “What if we cut the batch sizes by half again?”

If a game plan has worked – keep running the play.

P244 – “And how soon could they ship the first week’s quantity to us?”

This is a step towards iteration.  Rogo is negotiating with the buyer (always a good sign) and is trying to find a way to unlock the business.  By getting Bucky to take deliveries as they are done, he keeps Bucky’s plant full and shows commitment to being a good supplier.

P245 – “The units will ship when we say they will,” I tell him.

Committing to tasks that aren’t possible is a great way to fail.  There are times to take risk – such as with the 15% that was committed to Peach earlier in Chapter 27.  Rogo isn’t taking risk here – he knows his team’s method and he knows he can hit the target.  This is excellent integration of sales and operations.

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The Goal – Chapter 28 – Cutting the Batch Size

Rogo works with his team to extend their lead.  When things are going well it can be tempting to take relative leadership and coast.  Rogo is beating his peers at other plants.  However, to get the most for all of the business – he makes a bold step and tries to extend his lead again.

Highlights

“Okay, if we cut batch sizes in half, then that means it ought to take half the time it does now.”

Batch size is a common underlying driver in The Lean Startup.  Large batch sizes are a reason that innovation in materials science is so difficult.  Plants that take weeks to startup don’t easily shut down to do trials.  Experiment design is very expensive.

Page by Page

P229 – “If I were you, I wouldn’t worry too much about being shut down.”

P230 – “If we cut our batch sizes in half, then I guess that at any one time we’d have half the work-in-process on the floor.”

Rogo is on to something.  If we think of flow as a fluid – then smaller particles will travel through the plant faster.

P231 – “But queue and wait often consume large amounts of time—in fact, the majority of the elapsed total that the part spends inside the plant.”

Reducing batch size for known products will cut down on inventory and WIP.

P232 – “And with less time spent sitting in a pile, the speed of the flow of parts increases.”

If personnel and plant expenses are known, then we don’t have to add any resources to cut batch size.

P233 – “Okay, if we cut batch sizes in half, then that means it ought to take half the time it does now.”

Cutting batch size is almost always a good thing.

P234 – “We’ve worked off our backlog of overdue orders, as you know.”

Reducing inventory of past due work to zero is a great way to create revenue and cash flow.  If a business it has orders it cannot meet, figuring out how to deliver those orders is a great place to start.

P235 – “With our overdues gone, and our current backlog declining, I’ve got to get more work into my plant.

Here the plant becomes part of a larger system – the whole supply chain.  Now that the plant is not a constraint (since it has worked through inventory), it has earned the right to go hunt for more business.  A plant that constrains the supply chain is unlikely to win new work.

With the lessons learned, the operations and marketing teams can collaborate to pursue profitable new business for the site.

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The Goal – Chapter 27 – More Vanity Metrics

Rogo delivers good results and commits to a 15% improvement. He stops to see Julie on his way home where they discuss life goals. Julie waffles about their relationship.

Highlights

“It’s too bad the standard report we’ve prepared can’t begin to tell the full story of what’s really going on.”

Vanity metrics may be Rogo’s primary enemy.

Page by Page

P220 – “All of the other manufacturing operations in the division reported only marginal gains in performance or sustained losses. Despite the improvement at Bearington and the fact that as a result the division recorded its first operating profit of this year, we have a long way to go before we are back on solid financial footing.”

“Rogo,” says Peach, “because you seem to be the only one among us who has improved to any degree, we’ll let you start the round of reports.”

P221 – “It’s too bad the standard report we’ve prepared can’t begin to tell the full story of what’s really going on.”

P222 – “How big?”

Rogo commits to 15% improvement to Peach. Again, what was his other choice?

P223 – “But what am I going to do after that?”

It is good that Rogo is thinking through iteration. Think through another round!  However, his jumping at the risk here is reasonable – there might not be another round if he doesn’t win today.

P224 – “No sense killing myself trying to get back to the plant. It occurs to me, in fact, that by the time I get back to the plant it’ll be time to go home.”

P225 – “It was my father’s rule: the business was what fed us, so it came first.”

Eating together is a core act of family – in Boy Scouts, the importance of a troop dining together is stressed.

P226 – “Do you even know why you want the things you do?”

“I think we should do the opposite. We ought to start asking a few more questions.”

[Rogo has done a lot in this relationship – but simply acquiescing to his wife won’t solve the issues they face.  He pushes back when he has to.]

“And what’s all this about a goal? When you’re married, you’re just married. There is no goal.”

[This is a pretty fatalistic view of the world.]

P227 – “All I’m saying is we ought to throw away for the moment all the pre-conceptions we have about our marriage, and just take a look at how we are right now,” I tell her. “Then we ought to figure out what we want to have happen and go in that direction.”

Rogo is searching to add personal goals to his life.

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The Goal – Chapter 26 – Results Beat Vanity Metrics

Rogo debates the Scout hike dependencies with his kids over dinner. At the plant, decisions are made to pursue results rather than follow vanity metrics.

Highlights

“And I’m not about to stand by and let that happen just to maintain a standard that obviously has more impact on middle management politics than it does on the bottom line. I say we go ahead with this. And if efficiencies drop, let them.”

Leaders make decisions.

There is no point in failing, but doing so while following the rules.

Page by Page

P213 – “I’ll give you ten minutes, and then we’ll see which one of you comes up with the best idea to keep everyone together in the line.”

Rogo follows a Dale Carnegie method and “throws down a challenge.”

P214 – “Everybody is marching in step.” Sharon puts forward her drum idea to keep a uniform cadence.

P215 – “The Herbies (the bottlenecks) are going to tell us when to let more inventory into the system—except we’re going to use the aid of computers instead of drums and ropes.”

Rogo applies his children’s guidance to the plant.

P216 – “But maybe we can predict when to release material by some kind of system based on the data we’ve kept on both the bottlenecks.”

Ralph uses data to improve the plant’s flow.

P217 – “You can also attack the inventory problems in front of assembly.” Jonah

“I can crank something out in no time,” said Ralph, “but I’m not going to promise it’ll work.”

Ralph will make the effort – he isn’t sure if the first effort will solve the issue. He may have to iterate – as is called for in The Lean Startup.

P218 – “What happens if efficiencies all over the plant go down?” he asks.

If they still achieve the goal – then who cares? If it fails, the plant can reverse course. This is a poor plan and weak objection.

P219 – “And I’m not about to stand by and let that happen just to maintain a standard that obviously has more impact on middle management politics than it does on the bottom line. I say we go ahead with this. And if efficiencies drop, let them.”

Leaders make decisions.

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The Goal – Chapter 25 – “Stop Futile Work!”

Jonah is retrieved from the airport and supports the team at the plant.

Highlight

“What you’re saying is that making an employee work and profiting from that work are two different things.”

Ineffective employee time has a second trap – it creates future work that continues to be off target. Stopping bad direction work is a huge relief on an organization.

Page by Page

P203 – “Before we jump to conclusions, let’s invest half an hour to go into the plant so we can find out what’s happening,” Jonah says.

P204 – “You know, I would guess, just from looking at it, that you have at least a month or more of work lined-up here for this machine.

P205 – “But let’s say you need only 450 hours a month, or 75 percent, of Y to keep the flow equal to demand. What happens when Y has worked its 450 hours? Do you let it sit idle?”

P206 – “Excess inventory,” says Stacey.

P207 – Bob shrugs and says, “We build the orders and ship them.” “How can you?” asks Jonah.

Money cannot be made without the part as the constraint.

P208 – As he says this, I’m thinking to myself about the finished goods we’ve got crammed into warehouses.

Warehouses full of inventory are an operations and financial red flag.

P209 – “A major constraint here in your system is this machine,” says Jonah.

“When you make a non-bottleneck do more work than this machine, you are not increasing productivity. On the contrary, you are doing exactly the opposite. You are creating excess inventory, which is against the goal.”

“But what are we supposed to do?” asks Bob. “If we don’t keep our people working, we’ll have idle time, and idle time will lower our efficiencies.”

“So what?” asks Jonah.

Jonah is calling out the importance of cadence. It doesn’t make sense for the plant to outwork the constraint.

P210 – Then Ralph suggests, “What you’re saying is that making an employee work and profiting from that work are two different things.”

P211 – “We’re releasing material faster than the bottlenecks can process it.”

Creating inventory that cannot be advanced has no purpose. It is makework. Many companies make this mistake with projects – kicking off projects that cannot be completed.

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The Goal – Chapter 24 – Champagne Room, Julie

Rogo’s team achieves several major milestones and celebrates in response. Julie shows up, jumps to conclusions, and runs away from her problems as usual. Jonah returns to provide more guidance at the plant.

Highlights

“The bottlenecks have spread.”

In this re-reading, I found this line confusing. Cells at Rogo’s plant are producing out of cadence with the constraint, creating interim bottlenecks. This is a somewhat absurd situation – why would anyone do that? Perhaps it is an indication of how much wisdom has been spread since The Goal was first published.

Page by Page

P195 – “Here’s to a new plant record in shipments of product,” he says.

“Not only did we ship more product,” says Stacey, “but, having just calculated our inventory levels, I am pleased to report that between last month and now, we’ve had a twelve percent net decline in work-in-process inventory.”

P196 – “The reason I called is I know how I’m always on your case when things go wrong, Al, so I just wanted to tell you thanks from me and Jons for doing something right,” says Peach.

P197 – “You bastard!”

P198 – “Look, why don’t I talk to her.”

Often times the messenger is as important as the message.

P199 – “The bottlenecks have spread.”

P200 – If the demand on another work center has gone above one hundred percent, then we’ve created a new bottleneck.

Last week, for the first time since I’ve been at this plant, you could actually walk over to the assembly line without having to turn sideways to squeeze between the stacks and bins of inventory.

P201 – Jonah says, “Maybe I’d better come have another look.”

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