VELOCITY - DEE JACOB [139]
“The other reason,” Murphy continued, “is that we are beginning to glimpse some major possibilities. If we have a TRR – the time to reliably replenish – that we can trust, we can carry a lot less inventory and still provide the kind of guarantee that Garth is talking about.”
“How so?” asked Amy. “I’m still a little fuzzy on all this.”
“Okay, let’s say that we have a twenty-day supply in stock, and we are confident that we are protected for that period, that between the time we reorder and the time the replenishment stock arrives we will have enough. So we start to ask some what-if questions, and by studying the steps in the TRR, we are able to reduce it by five days. Now we find that the TRR can be reduced. Now we can have high confidence that fifteen days will be sufficient. That’s twenty-five percent less – and depending on the demand pattern, it could mean a significant reduction in the amount of money tied up in that inventory.”
“You’ve got my attention,” said Elaine.
“And what happens when we continue to improve the TRR? If we keep sweetening the system, maybe we get that number down to twelve days or even ten days. So now we’re doing the same amount of business, but with much less inventory – yet we never miss a shipping date or a sale because we don’t have something in stock. We know we’ll be able to come through.”
“There are a lot of virtues in this,” said Wayne. “I like it.”
“You like it?” asked Elaine. “I love it!”
She turned to Amy.
“If you go back to the idea that inventory is a kind of short-term investment,” said Elaine, “then with this we can lower the magnitude of the investment while still getting the same return – our net profit on sales. So our return on investment – our ROI – for our inventory improves by a lot.”
“Hey, you know what? I love it, too!” said Amy. “Let’s add that to the tree and think about what it does.”
Injection: We establish time to reliably replenish (TRR) and use peak demand patterns to set stocking levels for raw materials.
And …
Injection: We replenish what’s been consumed during each fixed time interval.
As a result …
We improve our material buffers’ ability to prevent out-of-stocks.
Therefore …
ROI increases.
And this state leads to the higher condition …
Winner management is pleased.
“Great. What else?” Amy prodded. “What else speeds us toward those happy days when both our profit centers – Hi-T and F&D – are making gobs of money, customers are lining up to do business with us, and Nigel Furst is thrilled to have me be president?”
After the smiles and chuckles, it was quiet for a moment. Then Wayne Reese spoke up:
“You probably know what I’m going to suggest.”
“Haven’t a clue,” said Amy.
“Lean Six Sigma. It’s been on hold at Oakton, and it’s fallen by the wayside in Rockville. But I for one think maybe it’s time we revived that effort.”
“We are not going to revive what didn’t work,” Amy said bluntly.
“All right,” said Wayne, “I grant you that the balanced line did not function all that well for us. And takt time may be overblown. And a few other things. But let’s not forget that a number of projects accomplished by LSS did work. For instance, the ability of Six Sigma techniques to solve the cracking problem in a number of the Navy components.”
“And I have to give Wayne and Kurt and LSS their due,” said Murphy. “Oakton is a better manufacturing plant due to Lean and Six Sigma. No question in my mind about that. The reconfigured M57 Line in particular. I have to say that the new M57 is – why, it’s just slicker than a greased pig at the county fair.”
This broke up everyone at the table.
“What? Y’all’ve never wrassled a greased pig?” Murphy asked. “Well, I can tell you, they’re pretty slick!”
Shaking her head, but with a smile on her face, Amy said, “Wayne, this is nothing against you, because I know you were sincere. And if you’d rather I talk about this in private, I’ll be happy to do that.”
“No,” said Wayne, “I’m from South Boston. I can take it. Let’s get it out in the clear.”
“My problem with Lean Six Sigma is that, while it did make improvements,