US plants see competitive spark from software that speeds parts

In the quest to ``beat the Japanese,'' American manufacturers have sought one panacea after another. Eliyahu Goldratt claims to have it.

One might be tempted to scoff at a man who once labored to boost chicken coop production in Israel. But General Motors does not. Mr. Goldratt's ideas are transforming factories at the largest corporations in the world.

A decade ago, Goldratt hatched a mathematical formula that evolved into a software program to schedule work flow, optimizing factory floor production. General Electric was among the first to buy it. Impressive results followed, and more companies latched on to his Optimized Production Technology software.

A mere computer program wasn't enough for Goldratt. He sought to revolutionize the entire manufacturing process. But his ideas were too radical for many old-line plant managers. Business associates say his early tirades about saving the Western world hurt his credibility.

So in 1984, Goldratt sank his hard-to-swallow views into a highly palatable manufacturing textbook-cum-romance novel. ``The Goal'' has become an underground hit (North River Press, Box 241, Croton-on-Hudson, NY 10520, $15). Although it had no advertising budget, the book has sold more than 100,000 copies.

Suddenly, Goldratt's consulting services are in demand.

More than 5,000 corporations, including GM, Eastman Kodak, and Hughes Aircraft, have bought the book, according to Robert Fox, president of Creative Output, a Milford, Conn., consulting firm formed by Goldratt. Sales of ``The Goal,'' just revised, continue strong. It has been tranlated into nine languages and is being used at more than 40 universities.

Recently, Creative Output initiated a series of two-day seminars built around a computer game to expand on the concepts introduced in the novel.

``The way to produce a cultural revolution [in manufacturing] is not to impose it but to provoke it,'' says Goldratt. ``The book and the computer game are ways we can radiate these ideas in a self-deductive mode.'' Bottlenecks are the problem

What about factory floor results? Ask a plant manager, Goldratt replies.

James R. Rulseh manages a plant in McHenry, Ill. - one of 16 owned by the Modine Manufacturing Company, which makes auto parts. Mr. Rulseh has read ``The Goal'' half a dozen times and last March started testing it on the factory floor. His comments are typical.

``Prior to utilizing the concepts Eli promotes, our manufacturing lead time - from raw materials to shipped products - was 13 or 14 days. Now we're consistently making runs in 3 to 4 days, sometimes as low as 2 days. We've also reduced our work-in-process inventory by 70 percent. And absenteeism has decreased 25 percent.''

A year-and-a-half ago, Convergent Technologies bought about 200 copies of ``The Goal'' and held study sessions.

``Two years ago we were in pretty big trouble,'' recalls Emmett Donohue, a plant manager at the time. ``All our cash flow was tied up in inventory. Today, we've got $100 million in cash sitting in the bank. Eli's book was part of that rejuvenation process.''

Goldratt has worked with General Motors over the last two years in its Saginaw, Mich., division, improving plant efficiency. GM is on the verge of a major expansion of this ``synchronized manufacturing'' effort, as GM officials call it.

What Goldratt's system does is to enable managers to control and maximize the flow of parts through a factory, chiefly by tackling ``bottlenecks.'' These bottlenecks - anything from rickety machines to unskilled workers - control and constrain the entire factory output.

Inventory piles up behind the bottlenecks. And inventory sitting on the shop floor, says Goldratt, is just idle, wasted cash. By maximizing output by easing bottlenecks and carefully controlling the flow of parts to them, plant output is increased, inventories go down (freeing cash), while operational expenses fall.

Essentially, this is the just-in-time inventory control practiced by the Japanese and an increasing number of US manufacturers. And while Goldratt's software provides a means of scheduling work flow and running simulations so that bottlenecks can be discovered ahead of time, there are similar scheduling systems on the market.

Where Goldratt breaks from the pack is by incorporating the software into a plantwide management philosophy.

``Just-in-time, statistical process control, preventive maintenance on critical equipment - no one's tied it all together like he has,'' says Rulseh.

``It took years to understand,'' Goldratt concedes. Now I see the software as not the first step but as the very last step. ``The Goal'' is the first step in an ongoing improvement process.'' Full bore isn't best

``The Goal'' provides the basics of his views on how to set up the plant, how best to utilize workers, and his nontraditional means of measuring a plant's efficiency. It also shows how to save a marriage and lead a Boy Scout hike.

Goldratt and Fox of Creative Output have just published a more traditional textbook, ``The Race,'' which further details this manufacturing system.

For example, Goldratt says an efficient plant does not run every machine and every worker at full speed. Yes, from a cost accounting basis, running flat out produces the most widgets per machine at the least cost. But in a production line, some machines (or workers) produce at a slower rate. If all machines are running at maximum, parts (inventory) pile up in front of the poky (bottleneck) machines.

The Japanese have learned that it is most productive for the plant as a whole, under some circumstances, simply to let a highly paid worker running a very expensive machine stand idle for a time. It is a concept some US plant managers and cost accountants refuse to abide.

``Western work ethics don't allow that,'' says Goldratt. ``It's as if the goal of a plant is to make its workers work, and not to make money.''

Goldratt also scorns the rush to automate. ``Automation is good, so long as you know exactly where to put the machine.'' But he warns that small companies buying expensive automated machines may be heading toward bankruptcy. ``Once they've bought the machine, they'll make sure they run it at capacity. If it's placed on a non-bottleneck, inventory will pile up, and since he doesn't have the cash to support the inventory increase [having spent much of his cash on the new robot], he's going out of business.'' Some shortcomings cited

Are Goldratt's ideas going to revolutionize manufacturing?

``That's marketing hype,'' says Stephen Graves, associate professor of management science at the Massachusetts Institute of Technology. ``But to some old-line manufacturing operators, it is quite revolutionary in that it's a different way to think about the process.''

Rulseh, the Modine manager, confirms that opinion. ``Some managers have been here 10, 15, 20 years. ``The Goal'' certainly has added a great deal of excitement, and fun, to an otherwise humdrum life.''

Still, Professor Graves sees flaws. ``It's much more difficult to implement than would appear from the book. His techniques are not applicable to all environments, such as some high-technology companies.''

Other critics say Goldratt assumes plants operate in an environment where they can sell as much as they produce. And he factors in no setup costs. For a high-tech company or defense contractor that has to make frequent design changes, the costs of reconfiguring machines and gathering data to devise a new schedule can make Goldratt's system prohibitive.

But a growing number of American and European executives believe that Goldratt is on to something. And, it appears, the Japanese think so, too.

Goldratt and Fox recently spent an afternoon talking with Dr. Taichi Ohno, head of production at Toyota and founder of the just-in-time concept. Two Japanese management groups have translated ``The Goal.'' But Goldratt refuses to give the Japanese permission to publish it - at least for another six months. He wants Western manufacturers to get a leg up and feels he is racing against time.