Wednesday, December 4, 2013

The Olde Curmudgeon -- Chapter 8

...continued from Chapter 7.

Chapter 8. The Allegory of the Storage Tank Demurrage

When Jack Heller returned to his office, he found a stack of reports waiting for him.  One was the cost analysis of constructing a new storage tank.  It gave dollar figures for construction materials, contractor and subcontractor costs, delays caused by construction, and so on. 

Pump up the action!
What it did not give was any reason to suppose that the tank would solve the problem.  He toggled his screen to intercom.  "Molls, get a hold of Kelly in Purchasing.  Tell him I'd like a breakdown of demurrage costs by week for the past year.  I'd like it broken down by which chemical was involved, which carrier, which pumping station.  I think that will do for now.  I wouldn't mind knowing who was running the pump at the time, or what time of day it was; but those details might not be ready at hand."

"You got it boss," said Molly Colinvaux. "You think it might be clogged pumps or something like that?"

"I'm not going to guess ahead.  I just want to know the size and shape of this problem."

There was never only one thing, and Jack had plenty of other issues to occupy him while he waited for Purchasing's demurrage data. Meanwhile, Bill Tallman called and asked whether his cost analysis had been satisfactory. Jack still did not remember the morning's meeting concluding with that action item, but he said that if a new tank proved necessary, the analysis would be adequate.

"What do you mean 'if'?" the Finance officer asked. "You think there may be some other factor?"

Tanks for the memories!
"I think corporate thinks there may. I don't know that they were unhappy with the estimates, but they may have been uneasy about the need for them in the first place."

"Jack, we still have tank cars backed up on the siding."

That gave Jack an idea, so after he had finished with Tallman, he placed a call to Betsy Chouf, who ran Traffic, and asked her how many tank cars were waiting to be unloaded.

"About the same as usual," she told him.

Jack could almost see the Old Curmudgeon *facepalm. "Yes," he said, "and how many is 'usual'?"

Betsy promised to get back to him with the info, and Jack hastened to ask for a week-by-week breakdown. "Why," she said, "do you think some cars got lost in the shuffle?"

"I don't think anything yet, Betsy; but that's an interesting possibility.  Why don't you keep that on the table until we see if its worth investigating?" The plant was supposed to maintain FIFO on incoming tank cars, but who knew what really happened in the yard? 

Kelly Johns arrived about 4:30 PM with a report in his hand and a funny look on his face.  "Got that breakdown you asked for, Chief.  I dropped you an electronic copy, but I thought you might like to see it personal." He laid two charts on the conference table and he and Jack stood side by side while they studied them.

The first showed that 80% of all demurrage costs had been on tank cars carrying chloroform. 

"That's odd," said Jack. "Chloroform is only 2% of our total purchases." 

"Right.  And that means that the delays in unloading tank cars are almost entirely on chloroform tank cars.  So we need a bigger chloroform tank?" 

"Or all the guys at the pumping station are falling asleep. What's the other chart?" 

Kelly grinned and pushed it in front of Jack. "Time series.  Very little demurrage until about six months ago, then it shoots up over the next month and stays high ever since." 

Jack thought of the check processing errors the Old Curmudgeon had shown him over lunch. When the data jumps, something in the process has jumped.

"Kelly," he said, "that makes no sense.  Our tank capacity did not suddenly become inadequate -- specifically for chloroform -- in one month. I know our orders have not skyrocketed in general, and I don't suppose they have for chloroform in particular. Which processes use chloroform?" 

Kelly did not know but given its share of the purchases, it couldn't be more than a handful. Jack got on the horn to Phil Mattes in Production Ops and asked him. "Just one? Stay on the line, Phil." To Kelly, "He says just one process consumed chloroform."

"Ask him how much per week he uses," said Kelly, who had the purchase order report out. 

Jack put Phil on speaker-phone. "Go ahead."

"You want exact numbers?"said Production.

"Maybe. Right now, I just want a general feel." 

"Okus-dokus. Well, it's used in tetrafluoroethylene production and we consume about 40,000 gallons a week, I'd guess."

"Two tank cars," mouthed Kelly.

"It's a commodity product," Phil went on. "Very little seasonal demand. The only major variance was six months ago."

Jack and Kelly exchanged glances. "What happened then, Phil?" Jack asked.

"Damned reactor sprang a leak and the TFE formed explosive peroxides. Blew out all the seals. We shut down for ninety days overhaul." 

"Let me get this straight. The only process using chloroform on the plant site was down for three months and not using any."

The data say what?!
"Zero consumption," said Phil, "is generally the result of shutting down. Don't worry, though. The Calvert plant picked up most of our orders, so the corporation didn't miss many ship dates."

Kelly had been frantically paging through the purchase orders. He looked up at Jack. "It's on automatic reorder. It's a commodity, steady demand. Tank cars continued arriving, two per week. And Phil wasn't using a single drop. So once the chloro tank was topped off the next car arriving had to sit and wait." 

"For ninety days?" Jack was appalled.

"Hey," said Phil's voice. "Does this have something to do with the storage tank problem?"

"Why didn't you stop the incoming shipments?" Jack asked Kelly.

The Purchasing manager flushed. "We didn't know... God, that was Operations. We're not in the loop for Production issues."

"Guys," said Jack, "I really hate to say this.  I really do. But it looks like the solution to the pumping station backlog is a meeting."

Dang! And it woulda been right purty.

"A meeting," said Kelly.

"Yeah. Coordinate the purchasing schedule with the production schedule, so you guys can turn off the faucet the next time Phil's guys hit a delay."

Phil said over the speaker phone, "Hey, cheaper than a new storage tank."
* * *

Later, when Jack was preparing to leave for the day, he paused and leaned back in his chair and grinned. The Old Curmudgeon would get a good laugh out of this one. He wondered if the old guy always ate lunch at the same restaurant.

But he knew not all problems would be as easy as this one -- finally -- proved to be.

Maybe to be continued......


  1. Nice punchline. I can see that happening in my outfit.

  2. Good story! Peter Drucker tells a story in The Effective Executive similar to the storage-tank story.

    Once upon a time, so the story goes, a company decided to discontinue an old product, for which orders had been declining for several years. Upon announcing the discontinuation, orders shot up, as customers bought extra spares to buffer their own transitions. The Word of Discontinuance had not gone to Purchasing, though, which bought components based on recent usage. When cease-production day came, therefore, the company had in stock sufficient components to support several years of further production of the just-discontinued product -- a stock that had to be liquidated at a considerable loss.

    1. Snarf! All my stories are true, but for dramatization are reworded. The storage tank story actually involved a low level improvement team I coached in approximately the logic the OC used, although I was much coachier. The printing plant story is true, also. As are a number of others that may be coming along the way. Mwahahaha.

  3. Joseph M. Juran:
    For Japan, it would take some 20 years for the training to pay off.[improper synthesis?] In the 1970s, Japanese products began to be seen as the leaders in quality. This sparked a crisis in the United States due to quality issues in the 1980s.[citation needed]


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