All organizations have waste, whether they’re a manufacturing company or service company, and I’m going to talk about what those wastes are and how to eliminate them.
D.O.W.N.T.I.M.E.: A Mnemonic for Waste Elimination
There are eight categories of wastes, and we use the word “downtime” to remember the eight categories of waste. Downtime by itself is a waste; downtime of machinery or equipment, downtime of people because they’re out sick or on vacation.
The first letter D stands for defects or errors or mistakes. It costs the same amount of money to produce a bad one as a good one, so if we eliminate all defects we are saving money and we’re making it right the first time.
The second letter is O. O is for overproduction. Overproduction means producing more than what the customer wants, or more than what the demand is. One of the definitions of perfection is making what the customer wants, when they want it, in the quantity that they want it. Anything else is overproduction, and that excess inventory goes to waste. It has to be counted, it runs the risk of being damaged, and it runs the risk of being obsolete. So we don’t want to overproduce; we want to produce whatever the market demands.
The W in downtime is for waiting. Waiting for instructions, waiting for materials, waiting for supplies.
N: Non-utilized People
N is non-utilized people, which really means unused human creativity. Everyone that comes to work has creativity; everyone at work can come up with an improvement idea. However, we never take the time to ask people, “how can we make your job easier? How can we make your job better?”
They know what the problems are, they know how to solve them. But typically we ask them to come to work, check their brain at the door, and just do what we tell them to do, the way we like it. The important thing is to go around and talk to people, get to know them. Ask them what problems and issues they’re dealing with on a day in day out basis, and you’ll be surprised they would have a solution to those problems and issues.
So one of the things we need to do is come up with a system for getting those ideas out of people. The Toyota production system doesn’t have the eighth waste (non-utilized people); they have only seven wastes. Their culture is such that the people already are encouraged to generate improvement ideas. In fact they’re required to generate an improvement idea, one idea per day per employee. This means there’s hundreds of thousands of ideas generated every year! So that’s part of their culture, and what we need to do in the United States is to generate that same culture, a culture of continuous improvement.
T: Transportation or Travel
We talk about form, fit, or function in moving material from one end of the plant to another. We’re not changing the form, fit, or function of the product. So all transportation is a waste because material characteristics are the same when you pick it up and when you lay it down and deposit it.
The next letter is I which is inventory, and that really means excess inventory. Inventory is probably the worst waste you can have because inventory covers up a lot of mistakes.
Think about a pond; let’s drain that pond and take it down 10 feet. When we take it down 10 feet, we will find rocks and sandbars, and these could be analogous to problems in your manufacturing operation or your business. We know the problems are there so we can fix them; we take care of those problems, they’re out of the way. Now let’s drain the pond another 10 feet, and different problems would show up. We have to address those problems and take care of them.
Inventory, or excess inventory, is an insidious waste. It covers up a lot of mistakes, and we need to take care of those mistakes and eliminate them because down the road they will harm the business.
The next letter is M, which stands for motion. And this is excess motion that people are required to do to do their job: overreaching, bending over, traveling back and forth to a pallet to get materials. So we want to reduce motion.
E: Extra Steps
The E is for extra steps or extra processing. We want to make what the customer wants, and what the customer wants is exactly what they want, in the quantities that they want and at the time that they want it. We find that in any lead time, again using the example of ordering a product, it takes 10-12 weeks to get it. 95% of that time is waste.
I can give you an example. One of my first consulting jobs was for a company that produced a piece of test equipment that was the size of a refrigerator. If you ordered one today, you would get it in 10 to 12 weeks. In going through the value stream in identifying waste, we found that the value-added time to assemble that piece of equipment was 4 1/2 hours. So that company could actually assemble the equipment in one day, test it the next day, and ship it that week. So the lead time went from 10 to 12 weeks down to one week.
Would the customer pay extra for that? Sure they would! Would you market share grow because you could turn things around in a week, versus 10 to 12 weeks for the competition? Sure it would! Your business would grow, and your business would become more of a service company than a product company.
Lean Can Turn Your Product Company Into a Service Company
So Lean has that side benefit of turning your company from a product company into a service company, as we saw with the example of the US Post Office and FedEx. People are willing to pay extra for the service, and we know that if you compete on price, all items become a commodity and the price keeps going lower and lower. That puts pressure on profit margins, and puts pressure on the viability of the company. The best way to compete is to compete on service.