Here’s a startling, even crazy, fact. The average organization WASTES between 30% and 70% of its money every day. That’s like taking 30 to 70 cents of every dollar you spend for running the organization and throwing it in the trash. A bit crazy, eh?
Now, before you get all crazy in protest, I must also put this in context. Organizations with a cost-of-sales structure that is 50% or more in purchased goods would probably be on the low side of this scale. Service providers–in which labor is the largest component of sales–may be closer to the higher number, or even higher.
I’m seeing more and more well-managed organizations beginning to come to grips with the fact that avoidable sources of waste and variation eat an unbelievable amount of resources every day. Does this suggest you can get the level waste down to zero? Hardly! Even Toyota, after decades of urging everyone to make continuous improvement part of every employee’s job, admits even their best processes are rife with muda–the Japanese word for waste.
If you are struggling with how this may be possible, I suggest you take a crack at estimating the level of waste in your personal work day. Assuming you are a typical APICS member and/or a reader of APICS magazine, my guess is you provide services to help the organization execute its operations. For the purpose of this discussion, let’s assume you do planning for inventory replenishment.
What are the value-add activities that you do for the organization? To qualify as a value-add activity, the task or process step should be examined against the following three questions:
1) Does the process step physically change something about the information you are developing for the organization? Moving information from one place to another, transcribing, filing and other work that does not change anything does not qualify as a value-add.
2) Is the task something your ultimate customer would see as a value-add activity? Do they care about it? If the activity is a form of necessary evil time to deal with a workaround in your system, chasing down information for planning or waiting for information you should have access to at all times, it is not value add.
3) Is the step some form of rework or redundant inspection? If the task or process step is not done right the first time, it is not value add. Or, if the step is a form of a double check because you can’t trust the sources of information or must look for errors, it is not a
Now make a list of the things you do each day that fully qualify as value-adding activities.
When you are done, critically examine the amount of time in your day that is spent specifically on the value-add aspects of what you do. Finally, compare this amount of time as a percentage of the hours you work each day.
Shocked? Maybe you will agree with this axiom: “80% of your results each day are attributable to 20% of your activities.” If we are willing, to be honest about what eats our time and makes us CRAZY in the context of an inventory planner, we will find it is pretty easy to say 50% (or much more) of your time is spent on activities that don’t add a lick of value against the 3-point test I provided earlier. I suspect you will agree an inordinate amount of your time is wasted due to a litany of problems I have personally experienced over the years. How about IT systems that are not reliable–due to faulty information inputs, delays, and weak functionality. How about the time you spend going back to check facts and double-check calculations because you have been burned before?
What about the time you spend generating reports for others’ use? When working with a large inventory planning group for a $5 billion retailer, we examined the number of reports generated, the effort required and the value-add aspects of them. There were over 100 reports being generated that consumed a lot of time. After doing some analysis and streamlining, the team got the number of standard reports down to just 10 and created a simple method for requesters to self-serve for special reports. This was a BIG DEAL, as the old process was conservatively consuming about 30% of the planner’s time while providing very little in real value.
I suspect you can probably list 30 to 50 things that happen all the time that eat your time without adding a lick of value. How about waiting for someone to review results before proceeding, attending endless meetings that are maybe 10% value add or time spent digging for information that really should be at your fingertips.
Now that you let me suggest a little exercise, you can try it out yourself with a team of people in your organization to gauge how much waste your organization has. I have personally mentored thousands of people in hundreds of organizations in many methodologies to identify and eliminate sources of waste and variation resulting in huge improvements in performance. A 15% or higher jump in organization-wide productivity is common in six months or less if we are willing to commit the energy required to make it happen.
Here is a simple approach you can use to facilitate a team activity that I have found extremely effective in helping folks get their heads around the fact there is a lot of waste AND provide some motivation and empowerment to attack the sources of waste. I have developed a seven-step process that is way too lengthy to explain in this article, but I can share some of the core elements of this approach here.
Assemble a team and focus on a reasonable scope and establish the rules of engagement and expectations. Discuss, at a high level, the typical things that add value in the focus area. Discuss the three-point test I suggested to define what a value-add activity is. Do a round of brainstorming to list the things that happen that eat our time without adding value. For each source of waste and variation, determine the frequency and impact and then calculate the result. A great question to pose for your team at this stage is “What would we say is the percentage of overall waste in this area?” Hearing really big numbers (30%-70%) is not uncommon in most cases. Organize the sources of waste by general category and big impact.
Narrow your focus to generate ideas for improvement to something specific (like generating inventory reports) and then brainstorm implementation actions to address the sources of waste. Organize and prioritize the implementation ideas and then create an action plan. Make sure you have adequate sponsorship and management support for the changes needed–and get to work. Here is an important critical note. Be sure you continue measuring the frequency and impact of your crazy waste issues after you begin implementing improvements. This is the best way to validate that your team picked the right action items and provides the basis to measure your return-on-investment for the energy expended to make improvements.
At this point, you can take it from there, but my experience of having done this hundred of times in various forums is this. The team will be very interested in fixing the root causes because they will clearly see the answer to their WIIFM (what’s in it for me?) question. Not only will customers benefit and the organization will cut costs, they can easily see personal benefits as well. This helps in the process of brainstorming improvement ideas and taking accountability to work on implementing them. They may even now be highly interested in learning more about those Lean Six Sigma tools they have been resisting for some time...
If you are interested in learning more about eliminating CRAZY WASTE, please contact me for more resources.
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