Improvement opportunities in the office are everywhere; document reviews and the resulting rework, quarterly or monthly tasks that are late, and the amount of money spent on printing paper that ends up in the recycling bin, just to name a very few.
Sometimes Continuous Improvement teams have to justify their existence so they set financial targets. Usually something bold like 1-2% of budget or 5-10% of salary (that's not really bold). These become very interesting when the Lean Guy asks how much is a minute of downtime worth in our office processes or to show the metrics? This turns into Lean Transformation only by project, not at the enterprise, and starts the familiar battle between two obvious allies, the Lean Guy and the Money Girl.
When charters are created and signed off by the Project Sponsor, we have to go create the "business case" for the projects. This is usually a half dreamed up estimate with a shaky basis to a disco beat. Enter Money Girl with her list of questions and the first one revolves around how much money can she have back at the end of the project.
Lean Guy's or Project Sponsor's first response is, "This is all cost avoidance". Which is code for, "You ain't getting any of this money back" or "You slashed our budget last year".
Let's first have a common understanding of the terms, and this will work in almost any environment whether it's manufacturing, health care, design, government, or services.
1. Cost Avoidance - This is where we decide to keep any money saved to use on other projects, or we were already overrunning budgets and this project brings us a step closer to even.
2. Cost Savings - This is where we are going to return some amount of the savings back to the provider.
Cost avoidances can show up as improvements to Cost of Poor Quality. This cost is usually comprised of rework costs, repair costs, and scrap costs, and all three of these are comprised of unplanned labor and material. In the office processes rework will outweigh the other two as they are usually associated with manufacturing.
As we consider the amount of rework in our processes we use the amount of time we are actually touching the things we are creating and was kind of material we are using. Material is easy to calculate as it is the number pages you printed before you stop seeing your document return for more rework, multiplied against the printing costs per page. This number can be found online or provided by your handy-dandy IT Helpdesk friends. Try not to pass out when you see the number and when blood is pumping again into your head, don't call the IT people to scrap all the printers. Think about how to make information portable.
Another will come from the variation in the different ways the different team members perform the same task. This may be measured in minutes or hours, but this needs to be one of your measures. You can pull time & date stamps if you use an automated work-flow control system or email. When you have a well documented baseline, share it with the team, maybe pull out a fishbone and ask why a few times. When you begin developing a solution remember that email is not an automated work-flow control tool.
Cost savings arrives in the form of performing better than budgeted or projected. This will be simple to calculate and defend if this can be applied to the cost of the product going to the paying customer. If the new performance does not manifest increased demand, then you may find yourself overstaffed. This is a great opportunity to think about other ways to add value to the internal products, or see if opportunity exists elsewhere in the firm.
Keep in mind that LEAN is not an acronym for Less Employees Are Needed. I have seen this model used without improving the flow or scope of work tasks and within a short time the number of people were back to original levels. This type of activity reduces the trust in you from your team members and would be labeled as L.A.M.E., a concept developed by Mark Graban, a blogger at Lean Blog.
If we are going to sell your improvement as a cost savings, there should be a reduction in the final price of the product for manufacturing or service organizations, or elimination of unneeded assets, or reduction in the tax rate for tax payers. If the money is "intercepted" and used somewhere else, this is no longer a savings.
Although money is a great way to talk about projects, Lean Transformation is reflected in the Customer and the employees working in the information processes. Don't ignore elimination of the other wastes just because you cannot quantify a financial figure. If reducing the wait time a report experiences in the flow improves customer satisfaction, then you learn what you can about the flow stopper and improve your process.
What are your thoughts and what have you experienced?
Sometimes Continuous Improvement teams have to justify their existence so they set financial targets. Usually something bold like 1-2% of budget or 5-10% of salary (that's not really bold). These become very interesting when the Lean Guy asks how much is a minute of downtime worth in our office processes or to show the metrics? This turns into Lean Transformation only by project, not at the enterprise, and starts the familiar battle between two obvious allies, the Lean Guy and the Money Girl.
When charters are created and signed off by the Project Sponsor, we have to go create the "business case" for the projects. This is usually a half dreamed up estimate with a shaky basis to a disco beat. Enter Money Girl with her list of questions and the first one revolves around how much money can she have back at the end of the project.
Lean Guy's or Project Sponsor's first response is, "This is all cost avoidance". Which is code for, "You ain't getting any of this money back" or "You slashed our budget last year".
Let's first have a common understanding of the terms, and this will work in almost any environment whether it's manufacturing, health care, design, government, or services.
1. Cost Avoidance - This is where we decide to keep any money saved to use on other projects, or we were already overrunning budgets and this project brings us a step closer to even.
2. Cost Savings - This is where we are going to return some amount of the savings back to the provider.
Cost avoidances can show up as improvements to Cost of Poor Quality. This cost is usually comprised of rework costs, repair costs, and scrap costs, and all three of these are comprised of unplanned labor and material. In the office processes rework will outweigh the other two as they are usually associated with manufacturing.
As we consider the amount of rework in our processes we use the amount of time we are actually touching the things we are creating and was kind of material we are using. Material is easy to calculate as it is the number pages you printed before you stop seeing your document return for more rework, multiplied against the printing costs per page. This number can be found online or provided by your handy-dandy IT Helpdesk friends. Try not to pass out when you see the number and when blood is pumping again into your head, don't call the IT people to scrap all the printers. Think about how to make information portable.
Another will come from the variation in the different ways the different team members perform the same task. This may be measured in minutes or hours, but this needs to be one of your measures. You can pull time & date stamps if you use an automated work-flow control system or email. When you have a well documented baseline, share it with the team, maybe pull out a fishbone and ask why a few times. When you begin developing a solution remember that email is not an automated work-flow control tool.
Cost savings arrives in the form of performing better than budgeted or projected. This will be simple to calculate and defend if this can be applied to the cost of the product going to the paying customer. If the new performance does not manifest increased demand, then you may find yourself overstaffed. This is a great opportunity to think about other ways to add value to the internal products, or see if opportunity exists elsewhere in the firm.
Keep in mind that LEAN is not an acronym for Less Employees Are Needed. I have seen this model used without improving the flow or scope of work tasks and within a short time the number of people were back to original levels. This type of activity reduces the trust in you from your team members and would be labeled as L.A.M.E., a concept developed by Mark Graban, a blogger at Lean Blog.
If we are going to sell your improvement as a cost savings, there should be a reduction in the final price of the product for manufacturing or service organizations, or elimination of unneeded assets, or reduction in the tax rate for tax payers. If the money is "intercepted" and used somewhere else, this is no longer a savings.
Although money is a great way to talk about projects, Lean Transformation is reflected in the Customer and the employees working in the information processes. Don't ignore elimination of the other wastes just because you cannot quantify a financial figure. If reducing the wait time a report experiences in the flow improves customer satisfaction, then you learn what you can about the flow stopper and improve your process.
What are your thoughts and what have you experienced?
No comments:
Post a Comment