Tag Archives: Manufacturing

The Goal: A Process of Ongoing Improvement by Eliyahu Goldratt, Jeff Cox

Summary

  1. Using The Goal (understanding the world and the principles that govern it), thousands of corporations have increased profits through reducing inventory, eliminating bottlenecks, and applying the theory of constraints

Key Takeaways

  1. No exceptional brain power is needed to construct a new science or expand an existing one. What is needed is just the courage to face inconsistencies and to avoid running away from them just because that’s the way it was always done. This challenging of basic assumptions is essential to breakthroughs. Progress in understanding requires that we challenge basic assumptions about how the world is and why it is that way. If we can better understand our world and the principles that govern it, I suspect all our lives will be better. 
  2. I do not believe in absolute truths. I fear such beliefs because they block the search for better understanding. Whenever we think we have final answers, progress, science, and better understanding ceases. Understanding of our world is not something to be pursued for its own sake, however. Knowledge should be pursued, I believe, to make our world better – to make life more fulfilling
  3. Every action that brings a company closer to its goal is productive. Productivity is meaningless unless you know what your goal is
  4. The goal is making money but this can be expressed in many different ways (cash flow, ROI, net profit) and some measurements to help you track this include throughput, inventory and operational expense.
    1. Throughput is the rate by which money is generated through sales (finished product which isn’t sold is not throughput)
    2. Inventory is all the money the company has bought which it intends to sell
    3. Operational expense is all the money spent turning inventory into throughput.
    4. You must express the goal in terms of these measurements. Increasing throughput while simultaneously decreasing inventory and operational expense 
  5. Must consider the company as a whole, no local optimums
  6. A measurement not clearly defined is worthless, even dangerous. 
  7. Having people and machines working nonstop is inefficient 
  8. Dependent events and statistical fluctuations are incredibly important to understand and keep track of. Whatever is the slowest process or bottleneck of any sort is your limiting factor. You can sprint in every other area but if you don’t increase the throughput of the bottleneck, productivity won’t increase at all. The capacity of the plant is the capacity of the bottleneck. The actual cost of a bottleneck is the total operating cost / the number of hours the bottleneck produces. Make sure the bottleneck’s time is never wasted (idle, working on defective parts, working on parts you don’t need immediately) and, if you can, shift work from bottleneck to non-bottlenecks
  9. There must be a way to signal the bottlenecks with the release of material schedule – they must be at the “front” of the assembly process
  10. The amount of time material spends in a plant can be broken down into 4 parts
    1. Set up while the resource is being set up
    2. Process time
    3. Queue time for resources
    4. Wait time for another part.
    5. By reducing batch sizes you can decrease the amount of time parts spend in queue and wait time since you are no longer turning non-bottlenecks into bottlenecks 
  11. All of Rogo’s (the main character’s) suggestions make common sense but they flew in the face of everything he had ever learned and if he hadn’t taken the time to think and sweat through the problems himself, he would never have gained the conviction in them necessary to implement them and turn the plants around. What Alex really needs to learn from Jonah is not plant management practices but how to persuade people how to question common sense and common practice and how to overcome resistance to change
  12. Accounting’s true meaning is to keep control and see how much the company is spending, and helping to understand the process as a whole so that the best thing can be done for the organization. Financial metrics can be hurtful if they’re taken just for their own sake and looked at out of context
  13. Capacity constraint resources are one step below bottlenecks and have to be improved in lockstep or else you could get a wave of bottlenecks at the same time
  14. You have to shift from a cost-centered world to a throughput-centered one. You have to find the weakest link or the bottleneck first in order to increase throughput – not solely focused on cutting costs.
    1. Identify the bottlenecks
    2. Identify how to exploit the bottlenecks
    3. Subordinate everything to the above decision
    4. Increase the bottleneck
    5. If the bottleneck is still broken go back to step one, and don’t let company inertia stop you
  15. The more inventory, the less spare capacity you need and vice versa. As you take on more orders it might not create more bottlenecks but it drastically reduces your spare capacity which means you have to take on more inventory in order to compensate
  16. The first step must be to identify the week link as this is the bottleneck the areas you need to focus on first
  17. Three fundamental questions
    1. What to change
    2. What to change to
    3. How to go about making this change 
  18. A goal should not have a set final metrics – it should be something that triggers ongoing improvement and innovation 
  19. Toyota did away with economical patching and instead focused on the set up time trying to reduce that as much as possible. This allowed them to switch components of what the operator was doing quickly and efficiently
  20. Better production flow or shorter lead times creates incredible cost savings and efficiency savings for many reasons 
  21. A grave mistake by some top management is to layoff capacity – either people or machines – when throughput increases and efficiencies increase. This sends the signal to the company that if you become better and more efficient at your job, that you will lose it. Instead, encourage the sales team to go out and make more sales to take advantage of the increased capacity 
  22. Production’s biggest focus has to be improving flow. There are many other things that can be done but that ultimately lies with other departments. They must prevent overproduction (don’t produce unneeded product), condemn local efficiencies and focus on the global. Lastly, you must balance the flow after all these disruptions are mitigated 
  23. Small disruptions can become major ones but the most important disruptions are those which impact availability. Those are the ones you need to focus on and get rid of. In order to address, you should create a database of disruptions and whenever a major one which impacts availability occurs, it should be defined and described within the database

What I got out of it

  1. Goldratt did a great job of weaving in some valuable lessons in a story format. It was a production example but the ideas and the theory of constraint can be widely applied

Out of the Crisis by Edwards Deming

The Early Days of WL Gore and Associates by Bob Gore

Summary
  1. Bob Gore, son of founder Bill Gore, recounts the early days at WL Gore and what has made the company sustainable and successful
Key Takeaways
  1. Bill Gore was very enthusiastic and did not have a lot of patience for bureaucracy. He was an entrepreneur from a young age and loved to improvise, move quickly and always emphasized product development. He always was experimenting and he got the family involved by trying out new products or materials with them. He was always looking for the practical potential in new materials.
  2. Always believed in the idea of “value pricing” – price products for what they are worth, not what they cost to manufacture
  3. From DuPont he learned and enjoyed the task force approach and the fact that a group of people can come together without titles without a formal hierarchical position.
    1. People just just get the job done as well as working harder and more enthusiastically then when they were in their usual 9-to-5 jobs. This eventually led to the lattice business structure as opposed to the typical pyramid structure. He became wary of corporate structures and believed that standard accounting tended to make bad business decisions
  4. Another chemist at DuPont had a machine shop and Bill was jealous of that. He was not able to just go ahead and make what he needed to make and use it but had to fill in a request for shop work and would be processed according to its place in the queue. That kind of obstacle destroys momentum and destroys enthusiasm which is why Bill set up a shop in his own basement so that he could experiment and follow his passion
  5. My advice to the man who contemplated an individual enterprise is to carefully consider if he has a dream of compelling importance and to follow his dream
  6. Mother served as moral support and encouragement. Never complaining and keeping everyone happy
  7. The emphasis was always on building our own machinery rather than purchasing it
  8. The large order that forced us into a new facility finally came in the summer of 1960. It was for an application that was totally unforeseen and was never to be duplicated
  9. Our staff is unusual in that each member knows he is closely identified with the success of the enterprise. It is the realization of this that is unusual. This realization has been brought about by a carefully considered program Carried out by the officers, managers, and supervisors. Important in this program is the profit sharing policy established by the Board of Directors. In this plan a sum is appropriated by the Board from profits and distributed amongst all employers in proportion to their gross pay for the period. Neither the period nor the sum is specified in the plan, but the principle of rewards in proportion to contribution has been established. Profit sharing by employees amounted to about 5% of gross pay over the past fiscal year. Our pay scales are minimum and all employees look to profit sharing as an important source of future income. Your management believes that the success of our business rests inescapably on the competence, diligence and loyalty of our people. This is the resource that sets both the limitations and potentials of the enterprise.
  10. Hosted open houses to show visitors their new buildings and products
  11. Action was prized. Gores attitude is to encourage any idea that could be tried relatively quickly and inexpensively which did not have a downside
  12. There was considerable informality and this lead to enhanced communication. We tried hard to fit the organization around an individuals capabilities and needs rather than remake the individual to a predetermined slot in a predetermined organizational concept.
  13. 5-year service anniversary pins have been handed out since the early days
  14. Every associate learned to exercise extreme control over intellectual property and pricing. Manufacturing operations were off limits to visitors and pricing was a very serious area where Bill exercised personal control insofar as he was able. He developed a value pricing model where he would price products for what they were worth in the marketplace not what they cost to manufacture
  15. An early vision of Bill’s was that the enterprise would last far beyond his life. He set up a trust which he transferred a significant portion of his shares so that there would be no ruinous estate taxes upon his and his wife’s death
  16. Established a big office in Flagstaff, AZ, far away from customers, source of raw materials and eastern support. However, it was along the Route 66 and a railroad went through it, making LA just an overnight trip away. They didn’t like LA because of the environment – too much traffic, high taxes, and people continually switched jobs. They sensed there was no permanence and little loyalty of the workforce to a company or a community
  17. There was fear of unionization at one point but after a head of a union took a tour through the plant, he determined that they would not have any trouble with unionization. It was the cleanliness, the good order, the pictures of people’s kids on the machines – the whole atmosphere showed the community and loyalty fostered at Gore. Culture is not all written in words, nor is it all spoken in words, but it is also expressed by our facilities, by a walk through the plant.
  18. Troubles with counterparties often stem from a lack of alignment, enthusiasm, and trust
  19. The biggest benefit of thinking in leaps and not incrementally is that it’ll throw off tons of other ideas that you otherwise never would have had
  20. In the immediate aftermath of our founding back in 1958 our sales organization has been established as a collection of independent third-party sales companies who represented us, each with an exclusive sales territory. The use of independent sales companies have been a financial necessity in the early start up days. This was away for Gore to be sure it’s flow of cash was in balance at all times since we paid the independent sales representatives only one there was income from the sales they had made. To keep their cash flow and balance the sales representative Natalie took the opposite point of view. They only wanted to concentrate on producing near term sales to earn near term commissions. They were reluctant to finance long-term, time consuming, and risky sales development efforts in hopes of earning sales commissions I would pay off only far in the future. Unfortunately, many of our products requires long term efforts and this had to be us and so over a period of years, we replaced independent sales representative companies with full time Gore people
  21. Gore dreamed of an enterprise with great opportunity for all who would join in it, a virile organization that would foster self-fulfillment and which would multiply the capabilities of the individuals comprising it beyond their mere sum
  22. Bill Gore was more interested in the organizational and philosophical portions of the company and his son, Bob, was more product oriented
What I got out of it
  1. Passion, hard work, genuine interest, caring, and a win-win mindset has helped make Gore a durable and successful company
More links and info on Gore: