TOA: OK folks, welcome back to ‘Ask The Business Bro’, and maybe for the final time, but we’re here for another round of ‘Q and A’ about The Goal. BB, where did we leave off last time?
BB: Let’s see, well, first, I do agree, this should be the final round, because we really are getting into the weeds here, at least in terms of the detail level. Where did we leave off? I think we were talking generally about how to balance flow through a bottleneck. And really, Goldratt says it best, the rule of thumb to follow is always to use bottleneck capacity to determine the right level of inventory and excess capacity. If you know your bottleneck can handle 100 units of raw material per day, then the organization must design itself to prepare at least 100 units of raw material per day.
TOA: So that all sounds simple enough, well sort of anyway, but I think it leaves out the question of how you might monitor all of this once you setup the organization.
BB: Well, if you go back to our first conversation, I actually answered this.
TOA: You did?
BB: I did. I said it was like lowering the water level of a river until the rocks became visible.
TOA: That was the answer?
BB: Still don’t get it?
TOA: Not exactly…
BB: OK, so think of it like this. What the river analogy really means is that in most organizations, merely watching the water flow downstream hides a lot of the things going on under the surface that dictate how fast the water flows. So you need to identify what parts of the process are hiding the realities of your organization, these realities being the rocks and obstacles so to speak, and make the appropriate adjustments.
TOA: OK, well I’ll try this, let’s see, if the moving water represents flow, then one way to lower the water level, so to speak, is by reducing the release of inventory.
BB: Very good, although maybe more so in theory than in practice. Remember, inventory and excess capacity work together to balance flow, and flow balances only when it fully utilizes the bottleneck. So unless you have the excess capacity required to accelerate the flow of water through your river, you might find that the price you pay for learning where your rocks are is idle time for the bottleneck, and that isn’t the goal, so to speak.
TOA: Ha.
BB: I think part of the issue here is that the analogy brings in an unrealistic assumption.
TOA: Which is what?
BB: The river is made of water.
TOA: That’s unrealistic?
BB: It sure is. Let’s try another version of the analogy. Think about the winter. Suppose the river froze. What happens to flow?
TOA: Well, it would become ice.
BB: So it would stop.
TOA: Right.
BB: Right?
TOA: What?
BB: So it would stop flowing.
TOA: So…
BB: But only on the surface.
TOA: Unless it completely froze.
BB: Well, sure, but let’s say it’s partially frozen.
TOA: Why would it be partially frozen?
BB: Well, because my analogy works better that way.
TOA: This is ridiculous.
BB: Now let’s say the river slowly starts melting. What happens?
TOA: I guess you would have some flow.
BB: What about the ice chunks?
TOA: OK, so first you have some ice chunks, but eventually it would flow.
BB: That’s true, eventually, but the ice chunks are important. Let’s think about those.
TOA: The ice chunks? OK, they would flow at first but not as smoothly as the water, is that it?
BB: Go on.
TOA: And then over time those would melt into water, and eventually there would be perfect flow again.
BB: OK, that’s the right idea. Why would the ice chunks move less smoothly at first?
TOA: Because the ice would bump against obstacles, or each other, or maybe freeze again.
BB: Right, but those problems all go away as soon as the ice melts.
TOA: So what’s the point?
BB: Well, it answers your question about monitoring. One way to think about this analogy is that the batch size is important. If you turn water into ice, that’s like increasing the batch size. That’s like a pizza place saying ‘instead of baking one pizza at a time, we’re gonna do six’. So if you think of it in reverse, melting the ice is like shrinking the batch size.
TOA: I'm lost.
BB: If you think about it, the original analogy’s limitation is that a river of just water is like an organization that works on everything in a batch size of one – there’s just no way to break the pieces down any further. But in reality, most organizations produce in batches. Batches are beneficial in many ways, especially because it creates some visible efficiency, but if it prevents the bottleneck from being fully utilized, it is a big problem. If I order one pizza and the restaurant waits until five other orders come in because their oven is optimized at six pizzas, that’s a problem.
TOA: Are these pizzas frozen, too, or partially frozen even? Does the pepperoni flow?
BB: Oh, quiet. Just understand that one way to monitor flow is to keep an eye on batch size and shrink it as needed until the flow is balanced.
TOA: Even if it is less efficient?
BB: Sure, because the only real thing that matters is keeping the bottleneck utilized. Remember, the bottleneck determines your maximum potential. You could have the most efficient operation in history throughout an organization but if nothing is getting through the bottleneck then you’ll go out of business.
TOA: OK, I understand, so by melting the ice, you see whether the river can handle all the water, and if it can, you need to invest more in melting the ice, efficiency be damned, because without water getting downstream the production of the organization is halted?
BB: Exactly. You could also find ways to simply remove the ice from the river and wait, but then the analogy gets a little too complicated.
TOA: So shrink batch sizes… let me write that down… is that all?
BB: No, certainly not, but at some point you just have to stop asking me and just read the book, right?
TOA: Well…
BB: There are some basic rules of thumb I can put together along the lines of ‘shrink batch sizes to identify flow problems’ and maybe I’ll send those over a little later on. But I think we’ve reached the point where this ‘Q and A’ has done all it can to explain the book.
TOA: OK, well those rules of thumb would certainly be helpful.
BB: No problem.
TOA: Well, thanks for your time. What’s next?
BB: Not sure, actually. I’ve read a couple more ‘BB’ classics recently and maybe I’ll dig into those. I also have some thoughts about email, and I just got a new treadmill desk that I have some comments about. Stay tuned, I suppose.
TOA: Stay tuned, indeed. Thanks for your time, and we’ll see you next time on ‘Ask The Business Bro’.
