Let’s first consider the question of what we are attempting to do. I started my book by stating that the basic goal of all “for profit” organizations is to make money now and in the future. If you’re already making money, perhaps your goal might be better stated as to make more money now and more money in the future. If this is your goal, then the question I would ask myself is, “What is preventing me from making more money now and more money in the future?” My experience tells me that there are a host of things that prevent companies from making more money.
Since Little’s Law states that Cycle time equals WIP divided by Throughput (i.e. CT = WIP/TH) it should be clear that reducing cycle time implies reducing WIP as long as throughput remains constant. So if you have large amounts of WIP, then clearly you have an opportunity to reduce cycle time. But what if you don’t have large amounts of WIP in your plant (I’m betting you do though)? How else might we reduce cycle times?
We know that cycle time is equal to the sum of all processing times for each process step. We also know that cycle time is the sum of all value-added time plus all non-value-added time in the total process. So if we want to decrease cycle time, then we have three choices:
- We can reduce value-added time
- Reduce non-value-added time
- Do some of both
- Transport time – moving product from point A to point B
- Set-up time – converting a process from one configuration to another
- Queue time – time spent waiting to be processed
- Process batch time – time waiting within a batch
- Move batch time – time waiting to move a batch to the next operation which could also include time in storage
- Wait-to-match time – time waiting for another component to be ready for assembly
- Drying time – time waiting for things like adhesives to become ready to be assembled
- Inspection time – time waiting for products to be inspected
But even if we were successful in reducing cycle time, we would not realize a single piece of throughput unless we reduced the processing time and non-value-added time of the operation that is constraining the throughput, the constraint. In my opinion, any attempts to reduce processing times in operations that are not constraining throughput are quite simply wasted effort.
The key to making more money now and in the future is, in reality, tied to two single beliefs, focus and leverage. In TOC terminology these two beliefs of leverage and focus are fundamental to the idea of exploiting the constraint. If you want to increase your throughput, then there is only one effective way to accomplish it. You must leverage the operation that is limiting your throughput, your constraint operation! And how do you leverage your constraining operation? You do so by focusing your available resources on your constraint and reduce the non-value-added and value-added times within the current cycle time. It’s really that simple!
In my next posting, I’m going to discuss what I call the 10 Prerequisite Beliefs for becoming more profitable and having a successful company.