Thinking Lean

Last week I attended a webinar on Lean Supply Chain. One concept they discussed was Lead Time. In manufacturing this is generally thought of as the time between placing an order and receiving the product. But at BlueGrace this could take many forms. Lead time could be the time a quote comes in until it has been quoted. It could be any request from a customer or employee. It could be a request from management down the chain of command. It can be just about anything.

The lecturer used the following math formula:

Pretty simple stuff. Lead time equals the value placed on the object by the customer plus wasted time/movement etc. Waste has no value to the customer. Like any mathematical equation if lead time is constant and you increase waste what happens to value? It goes down. Conversely how do you increase value? By lowering waste.

Per the lecture the Ultimate Business Model looks like this:
Supply Lead Time + Manufacturing Lead Time + Outbound Logistics Lead Time  needs to be < Customers Lead Time (this is Built to Order)

Most companies fail at lead times and have to forecast (guess). Their model looks like this:
Supply Lead Time + Manufacturing Lead Time + Outbound Logistics Lead Time  > Customers Lead Time (This is called Inventory)

How does all of this apply to us? Honestly, I haven’t totally put my finger on that but my gut tells me this is important. Lets look at our process when handling a request from Bobby. For example, he told me to manage a particular area of the business.

The optimum design would be:
The time it takes for me to complete (This is Lead Time) = Value (this is the value Bobby places on the request) + Waste (this is me asking someone to get me a list, go through the list, wait for responses, meet to make decisions).

Nothing in the waste category adds ANY value to the customer (Bobby), he just wants it done. In this equation, if we reduce waste (remember, for this equation Bobby’s value is a constant) what happens to lead time? It goes down! The very cool thing about this type of equation is reducing waste does two very big things.

  1. It reduces lead time.
  2. It increases value!

I am about to start a course in Lean Six Sigma. Hopefully,  I will learn more about lean concepts and how it can apply to us but for now please consider this blog and think about the simple equation
This article is worth reading, A Lean Office Eliminates Waste and Saves Time.

Randy Collack, COO
Follow me @schmengieBG

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