Friday, March 2, 2012

The LEAN Dashboard - TIO: "Operational Expense"

Over the past 2 P4 Blog posts, I have suggested a starter set for metrics based on "The Goal". Specifically, "TIO", or thorough-put, inventory, and operational expense. I've suggested things I used at my company for the T and the I, today, I'd like to look at what we did with "operational expense".

One of the most influential lean teachers I've met is a dentist in Jacksonville, FL, named Sami Bahri. DR. Bahri defines lean as "a way to do more with less: less human effort, less time, less equipment, less space while coming closer to providing customers with exactly what they want."

I interpreted operational expense as human effort. When we started our journey at my company, I considered human effort the O. Overtime hours each week had no real correlation to demand. Overtime is OK when we are faced with demand that is extraordinary, it cannot be part of a job description. Unfortunately, people get used to it and work it into their personal budgets and lifestyle demands. For most of us, our people costs are our biggest operational expense. In the beginning, I used this dashboard entry as a measure of hours of labor to achieve demand. It was a weekly metric on all of the value stream dashboards. It caused an uproar, because folks become dependent on the extra hours. This is where you need to use every bit of TRUST equity you have built. Eventually, we were able to increase sales ~ 60% in a 4 year period without adding more people by eliminating the 8 wastes in our processes. What SHOULD this mean to the people who are doing 60% more (without overburden)? More money!! People were making more money in 40 hours than they used to make in 65 or 70!
Tie total human effort into thorough-put by dividing units made by total human effort (in hours). For us, it was pounds produced divided by total hours worked in the value stream. 

DON'T be in a hurry to build colorful, beautiful dashboards. Build them over time and have them reflect the progress of your problem solving. 

Hope I've helped some or given you some ideas. Thank you for all of the feedback. Next week, I will share what the P4 means and how it can jump start your lean thinking. 

No comments:

Post a Comment