The Goal Report

The Goal Report

1. What are the methods described in The Goal for identifying a bottleneck?

The Goal describes a bottleneck as “any resource whose capacity is equal to or less than the demand placed upon it” (Page 148). Stacey suggests that the parts that are most frequently in short supply are probably where the bottlenecks are located. The machine with the most work-in-progress siting in front of it would probably identify as a bottleneck as well.

2. After bottlenecks have been identified, what are the concrete factory floor-level actions described in the book for improving overall system performance?

In order to improve the overall system and capacity, manufactures must:

• Develop quality inspection system – by checking pieces before bottleneck
• Integrate antique machines to help speed up the process of the NCX-10 station
• Adjust the heat treat station
• Design a color-code system for all work-in-progress
• Complete the oldest projects first
• Outsource to vendors
• Alter the union contract to create a more cost-efficient break system and reduce idle time

3. Relate the notions of statistical fluctuations and dependent events mentioned in the book to concepts covered during the course. Also explain and relate to course concepts the statement made by Jonah that a factory “balanced with demand” will soon experience bankruptcy.

I think statistical fluctuations and dependent events relate most to capacity. Even though there are procedures to optimize its use, such as a process flow diagram and congestion analysis, because the market is always changing. Due to seasonal/irregular fluctuations in demand, manufactures could face an excess capacity or lack of capacity. Excess capacity can create capital expense, labor expense, environmental damage and/or cash flow issues. Having a lack of capacity can create customer dissatisfaction, brand damage, lost sales and/or high turnover.

Jonah describes that there is a “mathematical proof which could clearly show that when capacity is trimmed exactly to marketing demands, no more and no less, throughput goes down…because inventory goes up, the carrying cost of inventory-which is operational expense-goes down” (Page 93).  Demand will have a great deal of variability, so trying to match demand and capacity will not be feasible. In lecture, we made many references to the service industry and that wait time is an important component of customer satisfaction. Which means you need to know how long your customers are willing to wait on your product. This is why manufactures should attempt to balance their flow with demand, and not their capacity. Attempting to have a factory “balanced with demand” will experience bankruptcy because it will cause throughput to go down and inventory to increase. Since inventory will go up, the carrying cost will also rise and this leads a company into bankruptcy.

4. Several times in the book, lot sizes are reduced in order to decrease cycle time. What are the limits to this strategy?

When Al suggests that they receive portions of a shipment, instead of the full shipment, from a very profit heavy source, Stacey refutes that suggestion. Stacey highlights that they won’t be able to get a volume discount, so they would be committing to the same number of units, but have to stagger delivery. This will clearly increase their cost, due to a lack of bargain discount and increase in delivery charges. Also, one would assume the number of batch sizes will equal the number of setups, and result in more direct labor costs, but on the contrary, it will actually decrease costs. Al reminds us that it is “perfectly okay to have more setups on non-bottlenecks, because all we’re doing is cutting into time the machines would spend being idle” (Page 239). The time and money saved would all just be an allusion. Also, too much of a reduction could lead to critically low levels of inventory.