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How to reduce waste and drive flow in your processes

Harmonising your processes with customer demand

The ultimate objective of a business is to provide what the customer needs in the quantity and quality they need it at the right time and price. This statement seems obvious; however customer demand can vary dramatically and with little or no notice. If our processes are not nimble enough to keep up then managing this complexity can be a nightmare.

Through many years of passed down wisdom it seems that doing things in large batches is more efficient, but this is in fact flawed logic. Producing in large batches slows reaction speed down and increases stock and lead-times dramatically, which in turn increases cost. Consequently, in order to meet customer requirements organisations have to plan production or service provision ahead of time and they seek ever more complex ways of managing scheduling and inventories, which again increases cost, and in turn price...

Trying to satisfy customers whilst dealing with ever increasing complexity and striving to keep prices competitive seems an impossible challenge - but does it have to be this way?

The spiral of increasing complexity to deal with increasing customer demands and become more "efficient" is the mass production philosophy which forces us to focus on 'economic batch sizes', maximising equipment uptime, labour efficiency and target quality levels. However, in most cases the customer is not interested in these internal measures. The customer is much more interested in lead-times, flexibility, value for money and good quality.

To cope with the seemingly opposing requirements of satisfying customers and being efficient, we need to work on reducing waste. In most business processes, less than 10% of the lead time through the process will be spent doing value added work, defined as work that the customer is prepared to pay for. The rest of the time, by definition, will be non-value added activity or waste.

If this sounds implausible, then take one of your own processes and work out the total lead-time from receipt of customer order until it is delivered to the customer. Now add up all of the time, within that lead-time, where the product or service is actually being worked on in order to change it into the product or service that the customer wants - this is the value added time. Then calculate the percentage value added time as a proportion of the lead-time. Typically, this is considerably less than 10%.

So how do you build your processes so that you can more easily manage them to satisfy customer needs? Let us start to answer this question by looking at the 5 principles of Lean:

• Precisely specify customer value by specific product/service;
• Identify the value stream for each product/service;
• Make value flow without interruptions;
• Let the customer pull value from the producer;
• Pursue perfection.

* Lean Thinking - Womack and Jones

The 5 lean principles above are a guiding light to align processes with customer requirements.

First you must identify the customer (sometimes not a trivial exercise). Then you need to identify what the customer values from your product or service - again not always obvious.

Once you think you have worked these things out; then you need to identify the value stream. The value stream is the chain of steps, processes or events which shape your product or service towards the final product/service that the customer wants.

A value stream will typically start off as some order or request from the customer, passed through planning or design, and other administrative processes, into operations which may involve suppliers and then through some delivery process. This series of steps is known as the value stream because this is where the value is added along its route through your organisation.

Once you have identified your value stream the next step is to make that value stream flow. Bottlenecks and sources of unevenness and variation in processes restrict flow. In order to see each stage of the process and identify the potential bottlenecks, a useful tool to use is the value stream map.

Fig 1. Typical Value Stream Map - click to enlarge

So far so good, now comes the tricky bit, how do you make this process flow? There are many tools which can help here and it will probably take someone with a bit of experience to identify the best approach for a particular value stream. However in principle, what you are trying do is to smooth out the unevenness in the process and remove the waste such as waiting time.

To smooth out unevenness we could use load levelling techniques, or producing a mixed product or service plan to balance out lumpiness in the schedule. You could also use Six Sigma methods to reduce process variation.

You will also need to eliminate sources of disruption in your processes which lead to unevenness and stress in your system, such as long set-up times and equipment break downs. These could be caused by lack of maintenance on equipment, high absentee levels or lack of skills. These are the dams which prevent flow, eliminate these, smooth the load through the system and your processes will flow.

In reality achieving perfect flow through the entire value stream is unlikely. Variations and remaining stoppages need to be managed by implementing 'pull' in the process. This means that you must allow the downstream process or 'customer' in the chain to dictate the pace with which the process flows.

You can do this with the aid of two tools. The first being a signalling system, often known by its Japanese name of Kanban (meaning signal). The second tool is often known as standard inventory. The difference between standard inventory and just having stock or work-in-progress is that the amount required is calculated and carefully controlled with the help of the Kanban tool.

If two successive steps in a process take the same time to complete, with no disruptions between them, then there is no need for any standard inventory between them as the downstream process consumes products supplied by the upstream process at exactly the same rate that the upstream process produces it. This is not always possible and if two steps are not perfectly synchronised you will need to use an intermediate standard inventory store to smooth out the imperfections in flow.

The size of the standard inventory store will depend on the amount of unevenness between successive steps. You can calculate what inventory you will need but often a little trial and error is best. The Kanban signalling system is then used to indicate when the downstream process requires the upstream process to continue producing or to stop producing. The signalling system can be as simple as an empty space or a full space, a ticket, an electronic signal or some sort of visual or audible signal.

The process to achieve flow and pull in your value stream will inevitably require you to reduce waste. The 7 classic wastes are:

• Transporting
• Inventory
• Movement
• Waiting
• Overproduction
• Over processing
• Defects

You will notice that this spells the word TIMWOOD, which makes it easier to remember. Long set-ups and break downs in processes cause queues and waiting. This encourages over production (making more than the customer requires or ahead of customer demand). Having the wrong skills or wrong equipment will encourage over processing. Not having a balanced smooth flow will increase inventory and encourage unnecessary transportation. Almost as a by-product of creating flow in your processes quality will often improve markedly; this is because unevenness and variation create complexity which is fertile ground for errors to occur.

A sobering thought is that some of the best processes still only achieve 30% value added, however this is often an order of magnitude better then mass batch production techniques. Pursuing perfection requires the organisation to identify all instances of waste, and work over time to eliminate, or reduce them, so that waste becomes a smaller and smaller percentage of the total lead time. This continuous pursuit of perfection will allow the customer requirements to be satisfied in an efficient way.

So as we have seen, following the 5 lean principles provides a clear frame work to help focus our efforts on removing process waste in a structured way.

Following the 5 lean principles and applying tools such as load levelling, set-up reduction and eliminating sources of break downs in our processes may take months if not years to achieve and should be diligently worked towards through a cycle of continuous improvement.

If you want to know more about creating flow in your processes contact SigmaPro to find out about our comprehensive training and support programmes.

Author Biography

Dr David Cowburn - Lean Six Sigma Specialist

David has 25 years of running companies to Managing Director level and is experienced in utilising Lean Six Sigma in a wide variety of businesses including, manufacturing, process industry, service, and administrative.

In a people based hands-on style, he works and trains at all levels in an organisation from Board to shop floor to bring about rapid measurable step changes in performance.

David was originally trained in the Toyota Production System and has since developed a high level blend of Lean and Six Sigma philosophies and tools through working with businesses all around the World.