Critical Chain: A Business Novel (14 page)

We are gathered in a small classroom; Jim, Johnny, Charlene and myself.

It's gray outside, and cold. Not just outside, inside as well. My mind is not on this meeting. It's not anywhere else, either. For the past few days I haven't seen any point in pulling myself together. I just go through the motions. I show up every morning, I teach, I stare at some academic journals, and I go home. I don't even have the heart to break the devastating news to Judith. It's not right, but what's the rush? What can she do about it? Having the satisfaction that she was right all along is small consolation. I know I don't have the right to hide it from her. We'll have to return the Blazer. We'll have to sell the house. Probably we'll have to move. Where to? Doesn't matter. It's gray outside, and cold.

"In my systems layout course," Jim says, explaining the purpose of the meeting, "I started hearing very insightful comments from the students. Sometimes so insightful that I didn't know how to handle them. Charlene has been complaining for a while that the students have been giving her a hard time in her cost accounting course. Now Rick has started to encounter the same thing in project management.

At first we didn't know where it was coming from, but after your colloquium, Johnny, we don't have any doubt."
Smiling, Johnny reacts, "So you want me to stop teaching what I'm teaching?"
"Not at all," Charlene is quick to respond. "I think what you teach is very good. Every professional in accounting has known for a long time that something was wrong. True, your students irritate me a little with their new ability to point out the fallacies so clearly. But I don't have a real problem with it. I just want to know more about it than they do. Is that too much to ask?"
"That's basically what we all want." Jim puts his hand on Johnny's shoulder. "Your colloquium was fascinating, but it wasn't enough. We want to know more about what you teach in your production course."
Laughing, Charlene adds, "First, because we do want to know. Second, because we can't afford not to know."
I don't say a word. I don't agree. I, for one, don't want to know. What does it help to know? I'm through with stuffing my head with all this garbage. It won't help keep the house for Judith. It won't help me keep Judith.
Besides, all this mumbo jumbo about links in a chain. The mistake there is so obvious, even a child can spot it. So much fuss about nothing.
"I'd be delighted to," Johnny is all smiles.
Of course he is delighted. Why shouldn't he be? He is a chaired professor.
And I'm sure that last year, on his sabbatical, besides his majestic salary from the university, UniCo paid him another fortune.
"The production application of TOC," Johnny is all business, "is a straight deduction of the five focusing steps." He stands up and goes to the board. "The first step, as you may recall, is identify the constraint." And in capital letters he writes ‘1. IDENTIFY.'
"Suppose you identified the constraint, the bottleneck. Then the next..."
He is so full of himself I can't stand it any longer. I cut him off. "Okay, let's cut the crap and for a change let's be practical," I challenge him. "In practice there is more than one constraint. And don't tell me that one work center has to be loaded more than others. In mathematics it might be so, but in reality the differences are negligible."
I ignore the surprised expressions on Jim's and Charlene's faces, and charge on. "It's clear even in your chain analogy. Theoretically one link is the weakest. But practically? In a real chain, the next weakest link is almost the same, it's just infinitesimally stronger. All your arguments are based on nothing."
I've shown them what I really think about their theories. I'm not going to continue being the nice guy. In the time I still have left in academia I'm going to speak my mind. When something is garbage, I'm going to call it garbage.
The way Johnny continues raises my blood pressure. With his best scholastic manners he has the nerve to say, "This is a very interesting question."
Interesting, my ass. I nailed him, and he knows it.
Not surprisingly, he immediately starts to cover up, to cloud the issue with fancy mathematics.
I barely listen when he mumbles something about when you use linear programming to solve the equations, and then you use sensitivity analysis, you see that a system having two constraints results in only unstable solutions.
Jim starts to take my side. "Johnny, can you answer Rick's question without using mathematics?"
"Sure," he says.
Leaning forward, I challenge him, "Let's see." I'm not going to let him get away with some empty convoluted sentences. I've played this game long enough. Enough to know how to expose phonies.
On the left-hand corner of the board Johnny draws a line of circles. "These represent work centers. The flow of material is from left to right."
Let it be.
"Let's suppose that we want to utilize this work center to one hundred percent," and he puts a big "X" on one of the middle circles. "We can't do it unless the previous work centers constantly supply enough material."
"Don't forget that in practice, machines are not working smoothly," I'm making sure that he doesn't turn it into one of those artificial examples Johnny likes so much to use in his articles. "And don't assume any neat pattern. A worker may slow down, tools can break, materials jam. You never know; you only know that it happens."
Johnny smiles at me. "Precisely." He behaves as if I'm trying to help him. "Under the realistic conditions that Rick so vividly described, how can we guarantee that our X machine will always have enough material so that it will be able to work constantly?"
"Put enough stock in front of it," Jim collaborates.
"Good idea." And Johnny draws, in front the circle with the X, a hump that is supposed to represent a pile of stock. "Now, as Rick told us, Murphy hits; one of the work centers upstream has a problem. The flow of material to the X machine stops. But not to worry, due to Jim's suggestion there's a pile of material ready. We can continue to utilize our X machine to one hundred percent."

I like it. It's simple. And Johnny will soon admit that he is wrong. There is no problem having as many bottlenecks as we want, the only price is some inventory. I'm not going to let him give a baloney speech on the cost of holding inventory as an excuse for having just one bottleneck. Oh, no.

"So far, so good," he smiles. "But what, unavoidably, happens during this time? The flow of material to X stops and X continues to work, pulling from its pile. The amount of inventory in the pile must go down."

Johnny stops, turns to me and asks, "Should we agree that Murphy does not strike only once? That sooner or later one of the feeding machines will, once again, stop?"

Even though I see where he is leading, I must agree.

"And if so, from time to time, the pile will continue to be drained. Can we afford to let the initial pile be drained to zero?"
I don't answer. I don't like people asking trivial questions. I hate it even more when they bother to answer their own trivial questions. Which Johnny does. "If we do, the next time Murphy hits one of the feeding machines, our X machine will be starved, it won't work for one hundred percent of its time. So, if we don't want this initial pile to be drained to zero, when the problem in the feeding machines was corrected and the flow resumed, what did we have to do?"
"Rebuild the pile in front of X," Jim plays Johnny's trivial question and answer game.
"But to do that," Johnny says triumphantly, "the feeding machines have not only to supply the ongoing rate of X, at the same time they also have to rebuild the stock. Quickly, before Murphy hits again. Which means . . ." he looks directly at me, "which means that each one of them must have more capacity than X."
He goes back to his seat. "Conclusion. If we want to utilize even one resource to one hundred percent, all its feeding work centers have to have more capacity. Since Murphy is not negligible, and the feeding machines have limited time to rebuild the stock, they must have more than infinitesimal excess capacity. QED."
I stare at the board. Johnny's proof is surprisingly elegant. I can't find any crack in it. But if he is right on this point, I have to accept the resulting five focusing steps.
So what? What's bad about it?
In the background I hear Jim asking, "How much excess capacity do the feeding work centers need to have?"
And Johnny answers, "It depends on the magnitude of the breakdowns, not less on the frequency of the breakdowns, and, of course, the amount of the stock you allow or want to build in front of X."
I know what's bad about it. Since the minute I heard it the first time, I knew that these five focusing steps are the key to solving all the riddles of project management, and I wanted to try and give it a shot. But now, now that B.J. puts it as a condition to prove myself worthy of tenure, I'm not willing to degrade myself by playing her game. I've already proven myself, I passed all the professional committees.
Jim and Johnny are now both at the board writing some equations.
But what if I can beat her at her own game? Not a chance.
Why do I take for granted that it's beyond me to solve the projects' problems?
"Rick?" Charlene touches my arm. "I need to know this stuff. Do you mind letting Johnny continue?"
I stare blankly at her.
"In two hours I have a class to teach, and you are wasting our time now."
She is so self-centered. I need to know this stuff even more than she does.
"Why are you picking on me?" I say.
She doesn't answer. Instead she turns back to them. "So, the first step is ‘identify.' Johnny, Jim, can we proceed?"
"And the next steps," I say, "are ‘exploit,' then ‘subordinate,' then ‘elevate' and ‘go back.' That's simple. My question is, how do I convert it into a logistical solution? Something practical."
Jim returns to his seat. Johnny wipes their scribbles from the board and writes the remaining four steps.
When he finishes, he turns around, and half seriously, half sarcastically he asks me, "Can I use an analogy?"
"Why not?"
He turns back to the board and adds legs and noses to the circles. "Now they are a troop of soldiers on a march. Do you see the analogy to a plant?"
We don't.
"The first row of soldiers is walking on virgin road, processing raw material. Each row in turn processes the same piece of road until the last row releases the finished goods, the part of the road the troop, as a whole, has left behind."

"Now I see," says Charlene. "It's slightly confusing at first because in a plant the machines are fixed and material is moving, here it's the opposite. But I agree, it doesn't matter."

"If the first row consumes raw materials," Johnny continues, "and the last row releases finished goods, the distance between the first and last rows is work-in-process inventory. In this analogy we can see the inventory visually."

I'm not interested in inventory, it's not a factor in projects. "What about lead time?" I ask.
"It's the same," Johnny answers. "Production lead time is the time elapsed from the minute the first soldier stepped on a particular point until the last soldier stepped on the same point. So, the bigger the distance between the first row and the last row, the longer the lead time. Work-in-process inventory and lead time are twin brothers."
I don't have a problem with it, I just want him to talk in terms of lead time rather than inventory.
"When the troop leaves the camp," Johnny continues to explain, "the soldiers are packed together. But when we look at the same troop two miles down the road, what do we see? They are spread all over the countryside."
"Lead time has gone through the roof," I comment to myself.
"The officer will stop the troop, regroup the soldiers and then they'll continue. Stopping the troop means that throughput has been lost. We see that even in this simple ‘plant' there are problems. On average, lead time is too long, and from time to time throughput is lost."
I start to like Johnny's analogy.
He turns to Charlene. "What happens if we use efficiencies to judge the performance of each soldier?"
It's an interesting question. How does one go about answering it?
Charlene goes about it systematically. Slowly she says, "Being efficient means doing more in a given time period. In our analogy, it translates into ‘walk faster."'
Picking up speed she continues, "That's exactly what we want. We want the soldiers to move faster. I do not see any problem."
Neither do I.
"Do we want every soldier to move faster?" Johnny asks her, "or do we want the troop as a whole to move faster?"
"What's the difference?"
"You're forgetting that we have a bottleneck," and he points to the solider bearing the big X. "The rate at which the troop as a whole moves is dictated by the rate of the bottleneck. Our X fellow is not the first soldier. If we encourage each soldier to walk as fast as he can, the troop will spread. Lead time will go up."
Yes. We all knew it, but it's so easy to fall into the trap of the cost world.
"It's like what you've shown us about the steel mill," Charlene remarks, "measuring each work center by tons-per-hour."
"Precisely," Johnny nods. "The question is what to do instead? Look at that analogy, it might give you a clue."
We look. It doesn't.
"How can we prevent the spreading?" Johnny is not giving up on us.
Still not knowing the answer, I try to joke, "We can tie the soldiers to each other, with chains."
"That's the assembly line," Jim jumps up and starts to pace. "That's the conveyor belts of the assembly line."
I think about it for a second. "I don't get it," I admit.
"Me neither," says Jim, and sits down again.
Johnny draws chains between his funny soldiers. "What is the effect of putting chains?
"Look at the soldier before the bottleneck. By definition that soldier is faster than the bottleneck. So the chain between them is tight. Now this soldier can no longer move at his own pace; due to the chain, he is restricted to moving at the pace of the bottleneck. Spreading is prevented. Jim is right, an assembly line is a case where we use chains. The limited space of the conveyor belt serves as a chain. Look at it.
"Suppose that in an assembly line one work center is faster than the work center downstream from it. The conveyer belt between them will be full of products, the chain is tight. If that conveyor belt is full, our fast work center cannot continue to produce at it's own rate. It is forced to continue producing at the rate at which space becomes available on the conveyor belt. Which means, producing at the pace of the downstream work center."
"The same is true for Just-In-Time," Jim is saying slowly. "JIT doesn't use conveyor belts, it uses containers, of which a limited number are allowed to accumulate between work centers. It's exactly the same concept."
"Correct," Johnny agrees. "And we all know how effective assembly lines, or JIT are. Lead time under those methods is by far shorter than what we see in conventional production.
"So, what is the essence of these methods?" He continues to ask, "Why do they work so well?" And then answers, "All they've done is to put a cap on the amount of inventory they allow to accumulate between each two centers. Once the local inventory reaches its cap, the work center generating it is not allowed to continue producing at one hundred percent of its capability."
I understand, but something doesn't fit.
"Please wait," I ask him. "I'm trying to put my thoughts in order. Otherwise I don't have a chance of transferring what you are showing us in production to the project environment. Bear with me."
"Take your time."
"I'll tell you what bothers me," I say after a short pause. "In your colloquium you presented what I consider to be a generic process of five steps. If I followed you correctly, you claimed and proved that following these steps is not only beneficial, it's mandatory."
"Correct," Jim answers for Johnny.
"In my vocabulary, ‘mandatory' means that if you don't do it, good results will not occur."
I'm stuck. I cannot put my finger on what bothers me. Jim continues for me, "Now we see methods, the assembly line and JIT, that do work. Which means that either they follow the five steps or the five steps are wrong."
Thank you, Jim. Now I know how to continue. "It's apparent that assembly lines and JIT do not follow the five steps. Not only don't they start with identifying the bottleneck, they are not even considering the existence of a bottleneck at all. So where is the mistake in the five steps?"
Johnny looks at us, then at the board. Then he sits down.
"I don't follow you," Charlene says to Jim. "You talk as if it's all or nothing. What happens if JIT follows just one step? Won't it yield better results than a method that doesn't follow any?"
"It will," I agree. "But which of the five steps does JIT follow? It's apparent that it doesn't obey the first or second."
"What about the third?" she asks. "It forces work centers to work at less than their maximum local efficiency. It does force subordination."
"Yes, it does," I once again agree with her. "But then . . ."
Something is still wrong.
"But then," Johnny continues my trend of thoughts, "then, if we follow all five steps, not just one, we are bound to get a better method. And that's exactly what we get."
"Wait," I stop them again. "This is important, so can we please take it a little slower? Before you show us a better method, which now I'm convinced must exist, let's see if we can spot, in JIT or assembly line, something that is not satisfactory."
"Why is that important for you?" Jim is curious.
"He just wants to find out," Johnny explains for me, "if, without our knowledge of the five focusing steps, we could have predicted that a better method exists."
"Actually," I clarify, a little embarrassed, "I haven't gone that far. I just want to check if the problems that I've identified in projects also exist in assembly lines."
Charlene looks at her watch, but Jim and Johnny encourage me to give it a try.
I don't know how.
I stand up, go to the board and slowly pick up the chalk. I look at Johnny's soldiers, all tied together now with chains. "As we said, the chains actually symbolize a restriction on the amount of inventory allowed to be accumulated locally," I say. Johnny already drew a hump of inventory in front of the X soldier. Mindlessly I add humps between each two soldiers.
"Johnny," Jim says, "can't we regard these humps as queues before machines?"
"That's exactly what they are."
"Let's not talk inventory," I impatiently say. "Let's talk time."
"Go ahead." Johnny is very patient.
"If this work center has a problem," I point arbitrarily to one of the soldiers, "then the hump represents the time that the next soldier can still work before he will have to stop. In a way," I slowly say, "these humps represent the protection a work center has. Protection against problems occurring upstream."
"You could say so," Johnny agrees. "They represent safety."
"Safety. Safety. You are right. Here is the connection to projects, don't you see?" Y-E-S! "I told you that we have to relate to inventory as representing time. In production we protect a work center with inventory, in projects we protect a step with safety time."
"I see what you mean," Jim comments, "and I agree. Still I think that there is a difference. In projects the situation is worse."
"Why?"
"Because, if there is a stoppage, inventory does not disappear. In projects, time is gone, forever."
I'm still thinking about it when Charlene comes from left field with "I have a problem with all of that. Why do we do that? Why do we try to protect the performance of each work center? I thought that we already agreed that local efficiencies don't count."
Somehow these sentences sound familiar to me. Then I recall that Ruth's complaint was "We try to protect the performance of each step." I also recall what Ruth said next. "We put in so much safety, and the project as a whole is still exposed." Does it mean here that the performance of the assembly line is exposed? Of course.
"Thank you, Charlene."
"What for?" She is still irritated by my rudeness.
"You showed me the problem with the assembly line, or JIT. We spread the protection everywhere and it's not enough, the line as a whole is exposed. In an assembly line one work center goes down and very quickly it stops the whole line."
"Of course" she says. "The only place that we want one hundred percent efficiency, the only place that needs protection, is the bottleneck. Exactly as Johnny showed us at the beginning, that's where the pile of inventory should be, right before the bottleneck, nowhere else."
I agree, but I don't see how to do it. We have to build the protection there, nowhere else. But at the same time we must prevent the spreading. It seems contradictory.
We are all looking at Johnny.
It takes some time before he realizes that we are waiting for him to show us the solution, the better method.
"But you solved it," he says, surprised.
Jim speaks for all of us, "If we did, we haven't noticed."
"You already said it all. The starting point is the bottleneck. To exploit it we must protect it against disruptions everywhere else in the process. That's why we must make sure that a pile of inventory will be built in front of it. But not a mountain, that will cause inventory, or lead time, to go too high. So . . ."
He stops talking, waiting for us to continue.
We look at each other. "So, we don't know how to do it," I say.
"Tie the first soldier with a rope to the slowest soldier, to the bottleneck. That's all. What's the point in tying all the soldiers to each other? It will only force inventory between them rather than allowing the inventory to flow toward the bottleneck and accumulate there. Of course, the length of the rope, we call it the buffer, will dictate how much inventory in total you allow."
I'm trying to digest.
Jim does the same, but aloud. "If we tie the first soldier to the bottleneck, then the first row will be forced to walk at the rate of the bottleneck. That's good, spreading of the troop is prevented. All the other soldiers, being faster than the bottleneck, will jam pack, some behind the first row, the others behind the bottleneck. So the troop will spread over a distance that will be almost equal to the length of the rope we choose. That's neat. It will also guarantee that there is a gap before the bottleneck, so if one of the upstream soldiers stops, the bottleneck can still proceed. The inventory, the safety, accumulates there. Very nice, Johnny."