Critical Chain: A Business Novel (18 page)

I don't know what she is talking about. But at least somebody is satisfied with this class.

"Six weeks? Can't you do it faster?"
"Impossible."
He is in his early fifties. Big mustache, all gray. And he talks confidently. Clearly he knows his business. What he forgot about special coating is more than I ever knew. What am I talking about? I know diddly about it.

Roger might know much more, but he is playing the dummy. I cannot expect any help from his side. He's just sitting there grinning to himself.

It's unfair. To talk the vendor's language you have to know something about the vendor. And I know nothing.
I flip through the proposal again. Most of it is meaningless to me. Every second word is technical jargon. But I do know how to read numbers, and the numbers are telling me that something is fishy.
This proposal is for coating three different molds. Each one takes a different number of hours to do, nevertheless, they are each quoted to be delivered in six weeks. I suspect that the lead time is not based on anything more than a general rule of thumb ‘This type of a job, quote six weeks' type of rule.
The reluctance of the salesman to discuss it strengthens my opinion. But how can I prove it? Moreover, how can I persuade him that this ‘six weeks' is not holy? I don't say a word.
Salespeople don't like silence. "I could have told you, like some of our competitors might, that we could deliver in five weeks. But we have a reputation to protect. Roger can tell you how reliable we are."
"Reliable?" Roger almost chokes. "What about . . ." Then he reconsiders. "You're as reliable as the others."
"That's unfair," the salesman protests.
"Well, slightly more reliable." He can't stop himself from adding, "Which is not a big deal."
"When we say six weeks," the salesman is firm, "we deliver in six weeks. And always first-class quality. We don't compromise on quality, like others sometimes do." And he gives us a whole story about coatings that peel, not theirs, God forbid.
When he finishes, I'm ready to start. "Let's take the big mold. You are charging for seventy-four point two hours. Remarkable accuracy. By the way, you must be computerized."
"Sure," he says proudly. "We use only the very best and latest technology."
"Do you work one shift?" I ask.
"No. In two of our processes we have two shifts." And he gives a long explanation. Listening to him you get the impression they invented efficient coating.
I let him finish and then say, "Seventy-four hours, even if all the work is done sequentially, does not make up six weeks. Using two shifts, it's closer to one week."
"You have to add curing time and drying time. It all adds up."
"How long can it take? Curing and drying are twenty-four hours a day." And I make a wild, totally unfounded speculation, "So another two days. Where do you get the six weeks from?"
"Closer to four days. This is a three-layer job." Then realizing that he's still far from justifying six weeks, he adds, "And there are other jobs in the shop. We are a big place."
"Eleven people," Roger murmurs.
"So if you gave this job top priority," I charge on, "you could finish it in less than two weeks."
"We cannot give it top priority," he protests. "Every client wants his job rushed." His face reddens. "If we give everything top priority, our place will become a zoo. It's out of the question. I'll never allow it."
The way he talks one might think that he was the owner, not just a salesman. Then I realize, with eleven people in total, maybe he is the owner.
It's not wise to push a person into a corner, so for now I drop this topic. "Can we go over the cost calculation?" I suggest.
He relaxes. Here is a place he can tell me whatever he wants, and there is no way I can expose him.
Taking his time, he explains all the details. It's important to him to show me how cost efficient they are. I let him persuade me that he makes only six-percent profit on these jobs. Roger is yawning.
"There isn't much profit in this business," I say.
Roger wants to protest, but our coating man doesn't give him a chance. He immediately starts with another lengthy story that is supposed to demonstrate how careful they are with their quotes. One might get the impression that their mission in life is to save money for their customers. Maybe he is the salesman after all.
When the flood stops, I say, "You need more net profit. Roger's company needs shorter delivery times. I suggest you put it in your proposal."
"Put what?" He's confused.
"I'm not asking you to give anyone first priority," I clarify. "But, I think you should add some options. Options that trade price with lead time."
He still doesn't understand.
"Something like . . . doubling your profit for three-week delivery."
"Three weeks is out of the question!" He reacts immediately.
I don't know what else to say, when he continues, "But maybe we can do it in four weeks."
"It might work," I say. "So suppose they give you the molds in, let's say, March . . ." I look at Roger.
"There about," Roger confirms.
"Suppose they give them to you sometime in March . . ."
"I need the molds," the coating man says. "And I need clear drawings. From the minute everything is in my hands you can count four weeks and the molds, perfectly coated, will be delivered. But then I'm paid six percent more. That's the deal?"
"What date are we talking about?" Roger interferes.
"It doesn't matter," comes the grumpy answer. "I deliver four weeks after I get everything I need. All the pieces of the mold, not one missing, and all the drawings. Only then the clock starts."
He stresses it so much, it's apparent that here is where he usually loses the time. It's similar to what I learned from Ruth regarding printing houses. The same phenomenon.
"There is another thing," I say. "The smaller mold, is it possible, for that job only, that when it arrives, you drop everything else and work on it."
"No way," he says flatly.
I want to demonstrate to Roger that it is possible to build a resource-buffer even when dealing with a subcontractor, so I try again. "How much more money do you want for it?" If this mold were on the critical path, it would pay us to pay more.
"I told you, no way. I can't run my shop from one day to the next. That's not the way to run a place."
Remembering what Mark is doing in his project, I try the same. "I'm not talking about that. Ten days before you get all the pieces of that mold and all the drawings, you will be notified."
He thinks about it, and then declines. "A lot can happen in ten days."
"Suppose they give you notice ten days before they plan to ship it. Then, three days before. And then a day before. That way you could comfortably plan your work."
"I don't know," he says.
"What about another six percent for this service. It would triple your profit on this job. Why won't you add this option to your proposal? One of the major criteria to choose a winner is vendor responsiveness. Be more responsive, for a price of course."
"Fine, I'll add it." He turns to Roger. "When do you want the modified proposal?"
"Wait," I interrupt. "There is one more thing."
"What is it?" he manages not to snarl.
"You want to know, in advance, what is coming your way."
"Without it, forget it."
"Forget what?" Roger aggressively asks.
"If you don't give me the notices, as we discussed, forget it. I'm not going to give first priority to the small mold. No matter how much you want to pay."
Before Roger has the opportunity to mess it all up, I step in. "You are right," I pacify the coat-man. "To run your business properly, you must have a clear idea of what's coming your way. So does Roger."
"What do you mean?"
"When you deliver the coated molds," I explain, "that's not the end of the story. There is a lot of work that depends on them. Roger's company needs to get advance notice from you when to expect each mold back."
"Four weeks. I told you."
"A lot can happen in four weeks," I flatly repeat his phrase. "Besides, on the small mold, we do expect to get it in less than four weeks."
"I see." He thinks it over. "Once a week. That's all I can do. I'm not going to turn my place into a paper nightmare. Once a week is all I can do." He turns back to Roger. "When do you want the modified proposal?"
"I don't want it," Roger flatly says. "Why waste my time. Let's finalize this deal now."
Less than ten minutes later, a happy salesman walks out.
"If I hadn't seen it with my own eyes, I wouldn't believe it," Roger says. "A vendor who doesn't insist on dates? What a dummy."
A teacher is supposed to like his students. But with some students it's mission impossible. "Why call him a dummy?" I'm impatient with him. "Do you think that he should care, now, in January, if the work will be at the beginning of March or at the end?" Then I add, "At this stage, negotiation is on lead time. Not on date. That's always the case. Your problem is that once you agree on lead time, in those rare cases you bother to argue about it, then you yourself force the date. It's not the vendor, it's you."
I cannot stop myself from adding, "And as you noticed, if you talk the vendor's language, there is no problem. The vendor is willing to commit to much shorter lead times, for money."
"One swallow doesn't yet mean it's spring," he plays it down. Then he grins. "But I must admit, just for you I picked the most conservative vendor I know."
I control my desire to punch him and instead remark, "He can't be so conservative if they use the latest technology."
"They don't. But they have some real experts, some real meisters."
I want to leave, but I have a problem. I know Roger just wanted to humiliate me, to show that I'm full of hot air. I won, but Roger will never admit it to the class. That's why we agreed that if I succeeded in moving the vendor to modify his proposal, I would get copies of the original and modified proposals. That way I could show the class a real case demonstrating that a vendor can be persuaded to trade lead time for money, and that a vendor does not insist on exact starting times, and definitely not on a delivery date.
But now there will be no modified proposal.
"Tell me, Roger, how come you actually agreed to pay more? Where are you going to get the additional budget?"
He shrugs. "I've been in this business for a long time. I have my cushions."
"And top management? Will they agree?" I try to punch a hole in his greasy self-assurance. "I suspect that paying for shorter lead times is against some cost-saving policies."
It doesn't work. "I took care of it."
"May I ask how?"
"First, I had a meeting with my boss, the VP of finance. Then he dragged me with him to tell it to the president. I explained the bottom line impact of shortening our project lead time. That trivial stuff you talked about. They took to it like fish to water. No problem."
I can't believe my ears. Such a thing coming from Roger? It's hard for me to grasp. I considered Roger my most nasty, bitchy, cynical student, and the last one I expected to take initiative. Nasty and bitchy he is, but he sure can move.
"By the way," I hear him say, "next week I have important meetings with three more vendors. Is it possible for you to join in? Soften them up a little for me, you know?"
I'm wondering how to answer, when he continues.
"Of course, I can't ask you to do it for free. Will five hundred dollars a meeting do?"
"Only if you prepare a presentation for the class on how to negotiate shorter lead times with vendors."
At last I reached him. He makes faces, but I'm firm.
In the car, it dawns on me. That's fifteen hundred dollars. Judith will love another weekend in the Big Apple.

Mark, Ruth and Fred update Isaac Levy. He wants to go over the details. It doesn't take long; the project is not far from completion. The project buffer is still nine weeks. The remaining feeding buffers also look healthy.

"Looking good," Isaac says when they finish. "Almost too good to be true. I must say that at the beginning I was quite skeptical, but you can't argue with the results."

"We are going to deliver two months ahead of time and without compromising on any of the original specs," Mark is confident.

Levy smiles.

"As far as I'm concerned, it's a world record," Mark concludes.
Still smiling, Isaac asks, "What is the chance of a piece of bread falling with the butter-side down?"
"Fifty percent," Fred answers.
"In this place it's closer to one hundred," Mark corrects him.
"You are too optimistic," Isaac says. "The chance of a piece of bread falling with the butter facing down . . . is directly proportional to the price of the carpet."

They are all in a good mood, so it takes some time before they stop laughing.
"You haven't finished yet," Levy reminds them. "The final tests on the modem just started. Anything can still happen."
"So I shouldn't have started the wheels rolling in marketing?" Ruth is not sure anymore.
Levy thinks about it.
"We can't afford to surprise them," Ruth tries to persuade him. "If we do, all the gain we make here will be wasted there."
"You are right," Levy says.
"So what do you think?" Mark pushes Levy. "Suppose that the final tests do not reveal anything catastrophic, do you think we made it?"
Isaac looks at the three of them. They are quiet, waiting for his verdict. "Let's straighten things up," he says. "Even if the final tests reveal some bad news, it has nothing to do with what you three have done. We were looking for a way to significantly shrink the development time and you pointed out such a way. But..."
He pauses for a few seconds to organize his thoughts. The three do not dare to even blink.
"But, there is still a lot to do until the way is clear. Right now I have more questions than you have answers. We are only at the beginning."
He tries to give them an example of what he means. "When you started to implement this radical method, the A226 was in the final stages. Not that I'm trying to put down what you did, you have done a wonderful job. But I would like to see how your method works on a full project. From start to finish."
"I don't see much difference," Marks argues.
"You may be right, but until we try it, we don't know. Besides," Isaac adds, "don't you think it would be interesting to find out by how much your method can shorten the development time?"
They do not answer.
"There is another thing that troubles me," he says. "I see how you made it work with one project, but I don't clearly see how it will work with many. Our projects interact with each other, you know."
"I know," Mark murmurs. Then, gathering his courage, he looks into Isaac's eyes and says, "There will always be some loose ends."
When Isaac doesn't answer, Ruth adds, "When are we going back to our regular jobs?"
Isaac turns to Fred, "Do you have a question as well?"
"Yes," he says. "We were promised that if we succeeded we would get ten thousand shares each. What are the criteria for our success?"
"Ten thousand shares each is a lot of money," Isaac answers. "Do you think that you earned it?"
They don't answer. He continues. "Are you willing to gamble that your method works? Always? In how many cases have we checked it? From start to finish, not even once. If you were developing a modem, would you accept it as a final product? At the stage that we are now it's only a promising prototype. Don't ask me what the criteria are. You know. You know when something can be declared good enough."
"I think we would like to have a more tangible target," Ruth says quietly. "I know I would."
"I cannot commit to any numbers, but I can tell you that when it's clear that your method is going to become the norm in our company, you have definitely delivered. Is that good enough for you?"
"It's good enough," Mark says firmly. He looks at the others. They nod.
"You said there are no budget limitations," Fred reminds Isaac. "Can we hire the help of our professor? I don't think it's fair to continue to use Professor Silver's kindness, and we need more of his time."
"Sure, good idea. Offer him the standard consulting fee, a thousand dollars per day. Does three days a month sound about right?"
"Will do," Mark answers for the three of them.
"Anything else you need, think tank? Fine. Keep up the good job and continue to keep me posted."