Sunday, March 14, 2010

Times is Money, Use it to Your Advantage

One of the central elements in Lean is the reduction in lead time.  Bruce Hamilton, president of the Greater Boston Manufacturing Partnership, calls this the time between paying and getting paid.

George Stalk and Thomas Hout, both of The Boston Consulting Group, wrote, Competing Against Time: How Time-Based Competition Is Reshaping the Global Economy in 1990.  This book was one of the first to identify the importance of time as a competitive advantage.

Based on their research, they outline four rules of responsiveness that the value-delivery systems of corporations are subject to:

The .05 to 5 Rule
Most products and many services are actually receiving value for only 0.05 to 5 percent of the time they are in the value-delivery systems of their companies.

The 3/3 Rule
The waiting time has 3 components, which are the time lost while waiting for:
- Completion of the batch a particular product or service is part of
- Completion of
the batch ahead of the batch a particular product or service is part of
- Management to get around to making and executing the decision to send the batch on to the next step of the value added process

The ¼-2-20 Rule
For every quartering of the time interval required to provide a service or product, the productivity of labor and of working capital can often double, resulting is as much as a 20% reduction in costs.

The 3 x 2 Rule
Companies that cut the time consumption of their value-delivery systems experience growth rates of 3 times the industry average and 2 times the profit margins.

Companies and their management must understand these how these rules of response apply to their business and use this to their advantage.  Reducing the cycle time of the value-delivery process can result in the following benefits:
            1)     First to market for new products
      2)     Increased market share becoming closer to customer
3)     Price premiums for reduced delivery times
4)     Increased productivity from increased capacity and lower cost

The golden rule of time based competitiveness is to never delay a customer value adding step by a non-value adding step.  Process mapping the value-delivery process is recommended to eliminate and reduce non-value added steps.

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  1. are doing a great job with your blog. Good relevant posts.

    Robert Edward Cenek

  2. Thanks Robert. I am gald you see value here. I checked out your recent post on the Litmus Test for Commitment. You are spot on with this. They must ask questions, speak it, and of course practice it. Without these commitment is fake.