Lead time, cycle time, downtime, set-up time, run time, mean-time-to-failure, dock-to-dock time, and other variations of time-based measures are commonplace in the world of operations management. These measures can potentially tell us a lot about the efficiency with which we consume a limited and often very expensive resource called TIME.
TIME is closely related to the concept of speed which is a potential game changer for business. High quality and low cost alone are not enough to gain a competitive advantage. According to George Stalk and Thomas Hout, former advisors at the Boston Consulting Group and authors of the research-based book, ‘Competing Against Time: How time-based competition is reshaping global markets’, the manner in which leading companies manage time – in Production, in new product development, and in sales and distribution – represent a powerful source of competitive advantage. Highly competitive companies manage ‘time’ with the same diligence and accuracy as they manage their inventory and finances. Why? Being ‘first-to-market’ provides you with an advantage plus, ‘time’ is an expensive resource – a resource that cannot be retrieved or recycled. Once ‘time’ is consumed by value-adding or non-value-adding activities it is gone – forever.
Stalk and Hout formulated four ‘rules’ which demonstrate the return on investment (ROI) that can be attained via the reduction of ‘lead time’ in operations.
The ¼ : 2 : 20 rule states that if you quarter your lead time you will double (x 2) your productivity and take 20% off your cost base. Assuming it is true, research suggests that it is, then it is worth actively managing the ‘flow’ of orders or requests through the manufacturing- or service delivery process. Agree?
The 0.05 to 5 rule states that value is added to products and services in the manufacturing or service delivery process only 0,05 to 5% of the total lead time. This ‘rule’ seems to indicate that most of the total lead time is consumed by non-value-adding issues such as delays, rework, idle time, and related issues. Focusing on reducing delays, rework and idle time can improve ‘flow,’ reduce lead time and improve operational- and financial performance. Agree?
The 3 / 3 rule states that the ‘waiting time’ that products or services are subjected to during the process of manufacturing or service delivery can be divided into three sections namely:
- Waiting time stems from the completion of an order for which the product/service is part of the time arising from waiting for an order or service ahead of the current one to be completed.
- Waiting time stems from physical or mental/intellectual rework that must be done.
- Waiting time stems from management decisions regarding an order or service request that needs to be finalized before the actual delivery process can proceed.
The 3 x 2 rule states that businesses that manage to reduce the consumption of time during the product- or service-delivery processes can expect growth rates of three times the average of their industry with two times the industry profit margins. Exciting prospect?
Capitalizing on the potential benefits to be derived from actively managing ‘time’ as a key resource requires, amongst others, that relevant monitoring and measurement systems should be in place. More critical is that competent supervisors and managers who fully understand the importance of time in workflow management should be in place.
Finally, the book, ‘Competing Against Time: How time-based competition is reshaping global markets’ is relatively old – it was published in the late 1980s. Yet, it is today still regarded as a ‘seminal’ business publication’. Tim Cook, CEO of Apple Inc, to this day apparently hands this book to colleagues. The examples cited might be ‘old and dated’ but the message is as applicable today as it was 30-odd years ago.
Ask yourself: ‘How diligently do we monitor and measure lead time, cycle time, downtime, set-up time, run time, mean-time-to-failure, dock-to-dock time, and other variations of time-based measures?’ ‘How competitive are we in terms of time?’
A thought: What is the use of a low-cost high-quality product or service if it is not delivered on TIME?
Author: Albert Brink
The key concepts of Key 16 of the 20 Keys Management Improvement System are:
- High levels of on-time delivery of products and services
- Flexibility to quickly accommodate fluctuating market requirements
- Planning, scheduling, and control of all resources in the process of converting raw materials into
- Highly integrated with other Keys, especially Keys 8 and 18
Time management is one of the principles covered in ODI’s NQF4 Generic Management learnership. To view our learnerships, click here.
To read ODI’s MD: Huibie Jones’ blog on Time management – rocks, pebbles, and sand… click here.