Critical Chain - Eliyahu M. Goldratt [40]
"Because if I produce more," Pullman confidently says, "the only result will be the accumulation of unneeded inventory." "And if inventory goes up, what happens to cost?" "Goes up."
"You see," Johnny addresses the audience, "we all asked the non-bottleneck to produce much less than he can, not in order to protect throughput, but in order to control cost. We instructed the non-bottleneck to restrict its local efficiency to only fifty percent, when it could achieve one hundred, for only one reason. To control cost. What does that tell us about our upper assumption?
"The only way to achieve good cost performance is through good local performance everywhere. Baloney!
Speaking slowly, stressing each word, he concludes, "We are chasing compromises, degrading our performance, making our life miserable, because of an assumption that is apparently wrong."
After a short while he repeats, "The only way to achieve good cost performance is through good local performance everywhere. The fact that so many managers and almost all our systems are based on this assumption is regarded by TOC as the current core problem of our organizations."
"I have to think about it," Rick promises himself. "All the new management philosophies," Johnny is now on a roll, "implicitly recognized it. They all try to stress the importance of protecting throughput, they all try to shy away from local optimums.
"TQM and JIT are adamant about throughput even though they haven't realized that it mandates a much sharper focusing. Reengineering puts the emphasis on reexamining basic assumptions. A cornerstone of the learning organization is to replace unsatisfactory compromises with win-win solutions. Using the clarity provided by TOC and systematically using its analytical methods, all these philosophies, at last, merged into a coherent whole.
"But you didn't come here for a theoretical lecture. You want to see what can be done with it. In reality. What results can be achieved? In what time frame? And above all, how?
"What I'm going to do now is to share with you one of the most fascinating experiences I had last year. How, in UniCo, they turned around a losing company they bought. Turned it into a gold mine in just a little over three months. But my first hour is over and I was told to break for coffee. If you are still interested, be back in twenty minutes."
Chapter 12
I see that not all of you are back. Okay, I've learned my lesson. No more of that heavy, boring stuff. Instead, I'll tell you a story, everybody likes stories, about my most significant personal experience at UniCo.
One day I was called to the office of Don Pederson. He is a vice-president, but not like the other vice-presidents. Nobody reports to him, except for a few assistants. That doesn't mean that he is not important. At least for me he was very important. He is the one who signed my grant.
Anyway, until that day, my contact with him had been only through memos. I liked his memos. They were polite, short, and each one meant another trip. At that time I had been with UniCo for about six months, and it was the first time I was to meet him in person. I didn't have any problem finding his office; it's right next to the office of the CEO, which is supposed to mean something. Exactly what, I never found out.
Don is a very pleasant and open person. Surprisingly young. I doubt if he is much over thirty. But this guy taught me a lesson I'll never forget.
We had a lengthy conversation about the last place to which I had been assigned. It was a huge distribution center, and I showed him how they could optimize their truck schedules. According to my calculations, they could save at least fifty thousand a year. He showed a lot of interest, asked a lot of questions, and even looked at my elegant solution to a complex set of equations. I felt good. Here I am, the knowledgeable professor, teaching an executive how they should scientifically run their business.
I'm embarrassed to think about what he actually thought of me. A professor who spent a