Alex gets home in the evening, just as Jonah calls from Singapore to check on their progress. Alex tells Jonah that everything is going well, but that Peach laid down a new ultimatum. Jonah thinks matching Peach’s demand is entirely feasible, though it is time for Alex to take the “next logical step.” The next morning, Alex meets with Stacey and tells her Jonah says they need to cut their batch sizes in half. Stacey realizes that that would cut their in-process inventory in half, though it would require twice as many machine setups and a lot of negotiating with material vendors to deliver twice as often. Alex promises her that it will be worth it, because there is a hidden benefit.
Jonah’s confidence that Alex can meet Peach’s demand suggests that he, and thus Goldratt, have a tremendous amount of confidence in the Theory of Constraints and its ability to revolutionize businesses and grow profits. Stacey’s observation that cutting batch size in half would also reduce their in-process inventory implies that the plant would have more cash available at any one time, since less of it would be trapped in the system as inventory.
While meeting at a restaurant, Alex relays Jonah’s new advice to his staff. Jonah claims that any part’s time in the system involves four stages: setup time, while the part waits for the necessary machine to be set up; process time, while a machine is actually working on a part; queue time, while the part is waiting to be fed into a machine while that machine works on something else; and wait time, while the part waits for the other parts it will be assembled with into the final product. The majority of each part’s time in the manufacturing process is queue and wait time.
Jonah’s claim that most of a part’s time in the system is queue and wait time implies that parts spend the majority of their manufacturing journey sitting idle, waiting for their turn in the machine. This implies that if Alex and his staff can reduce that queue and wait time, they can vastly increase the rate at which they manufacture parts and build finished products, which will increase throughput.
Although the plant uses a traditional economical batch quantity (EQB) formula to determine batch size, Jonah advises that by cutting the batch size in half, the plant can reduce each part’s queue and wait time in half as well. This means that cutting the batch size in half also cuts inventory roughly in half, and the increased speed means that their plant can deliver products faster than their competitors can, leading to more sales and more throughput. Bob worries about increased setup time, but Alex reminds him that since this mostly happens at non-bottleneck machines, they have idle time to burn anyway. Thinking about this, Bob estimates they can reduce the time it takes to fulfill an order from two months down to three or four weeks. Alex decides he’ll tell marketing to promise four-week deliveries to new clients.
Jonah’s point that offering faster delivery times results in more sales provides yet another benefit of Goldratt’s Theory of Constraints. By increasing speed, not only can the plant produce and sell more products faster, but it can also provide a better service to clients. Additionally, the plant’s flexibility to accommodate more setup time only results from allowing workers to stand idle at non-bottleneck machines, demonstrating that such idleness actually allows for greater flexibility within a complex system.
Alex drives to UniCo headquarters to meet with Johnny Jons and convince him to promise four-week deliveries to generate more sales. Jons is skeptical, since orders used to take Alex’s plant six months to execute. Alex promises Jons that he can do it and says that if they promise it and don’t deliver, he’ll buy Jons a new pair of Gucci loafers. Jons compromises and says he’ll advertise six-week deliveries—and if Alex delivers any orders in less than five weeks, Jons will buy Alex a new pair of shoes instead.
Johnny Jons’s skepticism that Alex can improve his delivery time from six months to only four weeks seems merited, but it also underscores the massive improvement that Goldratt believes his Theory of Constraints can create.