Issue link: https://iconnect007.uberflip.com/i/1513827
JANUARY 2024 I SMT007 MAGAZINE 69 aer casting the parts, they require precise machining. For one customer, we had been making the same part for over 40 years. During this time, costs had risen due to an increase in both materials and labor." Patty felt sympathetic and said, "at makes sense. It is hard to escape the increase in mate- rials and labor costs." John continued his story. "However, this cus- tomer has been complaining about the cost. e part was sold to this customer for $20 in 1985 and is now almost $100." "But," Patty determined, "$100 seems rea- sonable given inflation." "I know, but my customer was under pres- sure from his customers," John responded. "He said I had to lower his cost to $90 or he would go offshore for the part." He paused for a moment, then continued. "We managed to lower the price the customer had to pay to $85 by following Musk's 'Algorithm' and 'Idiot Index.'" "Wow, what did you do?" Patty asked, excit- edly. "We started by implementing e Algo- rithm's 'Question Every Requirement,'" John told her. "First was the material: e require- ment was 316L stainless steel, and we asked why much cheaper 304 stainless steel couldn't be used instead. Aer some environmental testing by the customer and us, we concluded that 304 stainless was fine." "How did that affect the cost?" Patty asked, and John answered: "We got it down to $92." "Were you able to get it to the desired $85?" Patty queried. "Yes, we did get it to $85," John shot back. "How?" Patty asked. "We used the 'Idiot Index,'" John said. "We found that our casting process improved over the years, and we needed fewer precision machining operations. Also, the customer had specifications that required time-consuming measurements that were not really needed. So, we were able to charge our customer $85 and our profit actually increased by 7%." "Wow, what a story," Patty responded. "I'll bet your customer was pleased." "Very much so, and they even gave us new business," John said. "ey are working on implementing Musk's concepts into their pro- cesses." "The Algorithm" and "The Idiot Index" from Walter Isaacson's book: The Algorithm At any given production meeting, whether at Tesla or SpaceX, there is a nontrivial chance that Musk will intone, like a mantra, what he calls "the algorithm." It was shaped by the les- sons he learned during the production hell surges at the Nevada and Fremont factories. His executives sometimes move their lips and mouth the words, like they would chant the liturgy along with their priest. "I became a broken record on the algo- rithm," Musk says. "But I think it's helpful to say it to an annoying degree." It had five com- mandments: 1. Question every requirement. Each should come with the name of the person Ivy University Professor Patty Coleman