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Laws of Speed and Lean Six Sigma
The title of a recent book argues: “It’s not the big that eats the small, it’s the fast that eats the slow.” Speed is one of the keys to competitive advantage.
The Speed Power Laws In the book, Competing against time (Free Press 1990), the authors present compelling evidence for power laws of velocity.
The 5% Rule: The actual time required to produce or provide a service is only 5% of the total time elapsed.
The 25-20 Rule: Every 25% reduction in elapsed time will double productivity and reduce costs by 20%.
The 3X2 Rule: Companies that routinely reduce cycle time enjoy three times the industry average growth rates with twice the profit margins.
Problem: Ad hoc processes
Most processes, whether ordering, invoicing, manufacturing, or fulfilling an order, evolve from ad-hoc processes combined over time. To “reduce costs”, jobs are carried out in increasingly large batches by specialized people. Every employee is busy working hard, but their inbox remains full and their outbox becomes someone else’s inbox.
The customer’s “lazy” order
Whenever I work with a team of people to reduce cycle time, they all complain that they don’t see how they can work faster… and they’re right. Speed is not about people working harder or faster; it’s about focusing on the customer’s “lazy” order.
Here’s what I learned: Your people are always busy, but the customer order is Idle 90% of the time. The order doesn’t mean being crazy, but the process forces you to behave that way. Sure, you can always squeeze a little more speed out of the “factory” line workers, but the big gains always come from putting the pressure on the order, not the people.
Example of computer operations
I worked with an IT operations group that was having trouble finishing their nightly “batch” processing so they could bring the customer support systems online in the morning. It took, on average, 8-10 hours a night. When we looked at the process, we found that the actual time it took to run the batch programs was one hour, but there were 32 points in the process where they waited for technician validation before they could move forward. Turns out the computer job scheduler could do most of what the techs did, so they automated 30 checkpoints and now the jobs are done in 1-2 hours…a reduction from 80 % in cycle time or a fivefold increase in speed. .
Example of medical claims
Last year I worked with a medical claims group. It took, on average, 140 days or more to process each claim. After looking into it, we found that claim processing only consumed 7 hours (one day) of that time; the rest of the time, the claim sat around waiting for something to happen. In just one two-day session we found ways to shave almost 100 days off her cycle. This means a 70% reduction in cycle time or a 3x increase in speed.
Breaking the speed barrier
Do you want to make innovative improvements to your speed? This is how:
1. Flowchart of your process showing all the activities (boxes), decisions (diamonds), and arrows connecting each box.
2. Starting at the top of your flow chart, from the moment the customer (internal or external) contacts you to place an order for your product or service, list each box, diamond and arrow…especially arrows. Tip: 80% of the cycle time is in the arrows, the delays between activities, not the activities themselves.
3. For each box, diamond, and arrow, calculate the actual time it takes to do this part of the process. And don’t buy the first answer you get. I asked the claims team how long it takes to receive and queue a new claim. They said 25 days. It’s not true! It took about 10 minutes to register the form, 24 days before it reached a reviewer, and 45 minutes to validate the form. 55 minutes, not 25 days. For 24 days and 7 hours, the claim was inactive waiting to be processed.
4. Now ask yourself if this box, diamond or arrow adds value to the order? Value-added things change, improve, or improve order. What is not added value? Delay, downtime, inspection, rework, scrap, etc.
5. Eliminate delays. In the claims example, there was really no reason for the claim to wait 24 days to be inspected. I recommended that they set a goal to log and inspect a claim in less than 24 HOURS. We continued to do this with each major delay in the process to remove 100 days in total.
6. Eliminate work without added value. If a box, diamond, or arrow doesn’t add value, is there a way to reduce its impact or remove it from the flow? Why, I wondered, do they have to inspect every incoming claim form? Using team troubleshooting could identify the most common error in filling out the form and redesign it to reduce or eliminate common errors. It would then not need to be inspected or could be easily handled by less experienced personnel.
7. Establish an action plan to move from the old, slow process to the newer, faster process. Start the new process with the incoming orders and let the existing orders run out of the old process.
8. Find a way to “burn bridges” back to the old process. At one company, they removed the old individual workstations, forcing everyone to participate in learning to use the newer, faster ones.
9. Establish cycle time measures to maintain improvement, probably an XmR chart for individual orders.
Templates for flow charts and value-added analysis are available in the QI Macros SPC software for Excel. For more help, consider the Lean Simplified book.
If you need help getting a team back on track or refocusing, consider our consulting services.
Avoid common pitfalls
Trap no. 1: Don’t buy the first response you get. People often include downtime in their answers.
Solution: Keep pushing to determine how long value-added work actually takes. The rest of the time is delay that can be reduced.
Pitfall #2: Old habits are hard to break.
Solution: Burn the bridges of the old process. Implement the new process so people can’t go back to their old ways. Do you want to make your customers happier? More faithful? Less likely to switch providers? In today’s high-speed society, they want you to be faster, always faster. Using the simple tools of a flow chart and value-added analysis, I have never failed to find 50-70 and even 90% reductions in cycle time. And you can too! It’s a bit exhausting, taking apart your process and collecting its flow, but you only have to do it once to discover the power of this process.
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