Monday, February 27, 2012

The Lean Dashboard - A Starter Set of Metrics - TIO - Thorough Put

My last blog outlined 5 common mistakes either I've made or seen in establishing process or company metrics - too MANY, no CONNECTION, no WHY, SET in STONE & wrong UNITS. Today, we'll start a 3 part series suggesting a starter set of what to measure. 

Eliyahu M. Goldratt, in his classic 1984 book "The Goal A Process of Ongoing Improvement" (over 3 million copies sold) describes the only three things any business needs to measure.....thorough-put, inventory, and operational expense or TIO. That's it, 3  measurements. If you're one of the over 3 million who read this book, (which is required reading at over 200 colleges and universities), you know that "The Goal" introduced in the novel is from the theory of constraints (in lean, we think of the wastes waiting and inventory, and of course, the tool load leveling). 

Today, let's consider the T or, "thorough-put". My interpretation is how much do we need to "make", and can we do it based on the available time? The rhythm or heartbeat of activity for your process is expressed as takt - available time divided by customer demand-and it becomes very visible while value stream mapping your current condition. I love using takt as a measure because the more STANDARDIZED and "Just-In-Time your process is, the more predictable the thorough-put will be. The more 8 wastes in the process, the less predictable thorough-put will be. This law applies to all processes, no matter how complex or simple, or if they are an office, medical or manufacturing process. Start wringing out waste and the capacity of the process will become clearer and clearer, and will increase. In businesses where there are large variations in customer demand, part of the daily demand may be to re-stock a supermarket (the 20% of your products which represent 80% of your sales for that process-using kanban-I will cover this in a future blog). Quick, stand-up daily meetings at GEMBA will establish demand for the day, and is posted on the dashboard for that process. People doing the actual work update progress hourly. Time is always the preferred unit, but use what works. Measure for a while, then set S.M.A.R.T. goals, and drive out waste using the tools to achieve these goals. It's that simple. If you have a question I can answer, or if you'd like real life examples drop me an e-mail at whgref@gmail.com

Next installment - We will look at the 3 measures we'll use for INVENTORY! (the 9 letter 4 letter word) 

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