Critical Chain - Eliyahu M. Goldratt [43]
Without hesitation, they confirmed it.
What does this lead to? On its own, it might make sense, but not when combined with other facts that exist in the industry. Like the fact that in almost all departments some items require less time per ton than others, 520. For example, in the rolling department, you squeeze red-hot steel into plates to produce ten tons of two-inch thick plates, which takes much less time than to produce ten tons of one-half-inch thick plates. The result must be that in order to maximize their performance of tons-per-hour in a given measurement period, departments tend to produce the fast items at the expense of the slow ones, 540. You can imagine what this leads to. High inventory of the fast items, while missing orders on the slow items.
They discussed it at length, debating the magnitude of the resulting damage. Some tried to minimize its significance. Don didn't argue. He didn't have to. The other managers did it for him. They brought up hard numbers to prove it. The numbers weren't funny at all. Everything was in the many millions. Actually, the accompaning anecdotes were very funny, if you have a twisted sense of humor like I do.
When that was settled, Don moved on to highlight that in the steel industry, significant setup times exist in every department. Twenty years ago a setup of twenty-four hours was common. Today, due to new technology, most setups are more in the range of three to five hours. Still significant.
Everybody knows that setup reduces the tons-per-hour. While you are doing the setup, you produce nothing, 530. Don asked them how long they would run after a four-hour setup. Minimum a whole shift and usually much longer, was the consensus. And if there are not enough orders? After these questions nobody argued with the conclusion: to maximize their measurement of tons-per-hour, departments tend to process orders ahead of time and out of sequence in order to increase the batch size, 550. Once again they discussed and tried to quantify the unavoidable results, the unnecessarily high inventories and unreliable due-date performance.
The worst situation for a department is to be idle. Non-production results in zero tons-per-hour, 525. It's no surprise that to maximize their tons-per-hour, departments tend to produce for stock, even when there is no market request on the short or medium horizon, 545. This definitely doesn't help the inventories.
At that stage I thought I finally understood why they have such mountains, and I mean mountains, of inventory. And why even though they promise that they will deliver a new order in seven weeks, they succeed in only about sixty percent of the cases. But I was wrong. The real killer was about to come.
What typifies the base industries, steel being one of them, is that the nature of their process is to have divergence of products at each stage of production. For example, in the rolling department, they produce many different plates from the same type of steel. Plates different in thickness. Once you produce a two-inchthick plate, and later you change your mind and want to turn it into a one-inch plate, it's too late, the steel is already cold. It's the same in the slitting department, where they slit the plates to size. If you slit a plate to be seventy inches wide, you cannot later make it eighty inches. In short, in the steel industry, items are produced through a process having many divergent points, 560.
Now combine all this with each of the facts outlined in 540, 545 and 550, and what do you get? You get that to maximize their performance of tons-per-hour, departments tend to take actions that result in "stealing." No, nobody suspects that a worker puts five tons of steel in his pocket when he goes home. It's much worse.
For example, we prepare a specific plate for only two nearterm orders; ten tons for sixty-inch-wide plates and another ten tons for seventy-inch-wide plates. The setup time in the slitting department is