If You Don’t Have Standardized Processes You’re Wasting Money

Posted on June 5, 2012 | in Concession Stand, Lean Tools, Lean Wastes, Manufacturing, Motion, Overprocessing, Small Business, Standardized Work, Time Savings | by

That’s a very bold proclamation, but it’s true.

It applies to every type of process – manufacturing toys, cooking burgers, coding medical charts, delivering mail, checking a customer out at the cash register, washing dishes, unloading delivery trucks, everything. Anywhere you’re not being efficient with your time in a process, you’re being wasteful.

And time is more valuable than money.

How can I make such an overarching statement? A couple reasons.

First, by not doing things the same way every time, by “process of elimination” there will be iterations where you complete the process the fastest and iterations where you complete the process the slowest.

Second, this means that the best practice – typically the iterations where the process is completed in the shortest amount of time – isn’t being applied to every iteration and every operator for this process.

Let’s create an example – say you have a manufacturing process for a toy. You receive parts, complete three value-adding process steps (perhaps assembly?) and place into shipping container. You use three different operators for producing these toys, and you’re paying them $10 per hour. The overall margin for each toy is $1.00 and you produce one at a time. The order of value-adding process steps is:

Each finished product should take 40 seconds to complete. Here’s how your three operators complete this process:

Operator 1 completes the process in 40 seconds, but Operator 2 takes 42 seconds. Maybe Operator 2 takes a little extra time picking up a tool and putting it back down between step A and step B for every part. Operator 3 takes 45 seconds – maybe he or she takes longer to fully thread the screws into place or believes there is a rough edge on a part that requires sanding (where Operator 1 and 2 don’t think so).

Here’s a graphical representation of the process completed by each operator:

Operator 2 takes two extra seconds to get started on step B, and Operator 3 takes five extra seconds to get started on step C. Working in the same conditions, three different operators are achieving different results.

Maybe five seconds isn’t such a big difference…or is it?

Over the course of an hour, if the operators continue to complete the process in their respective manners, here is what you can expect each operator to produce:

Operator 2 will complete 4 fewer units than Operator 1 in an hour’s worth of work, and Operator 3 will complete 10 fewer units per hour.

How much is that worth? Well, if each unit has a $1 margin, you’re generating $10 less per hour with Operator 3 than with Operator 1. That little waste activity between step B and C that takes five seconds actually costs you $10. Over the course of an 8-hour shift, that’s $80.

In this scenario, clearly Operator 1 is demonstrating the best practice. By standardizing the process used by Operators 2 and 3 to that used by Operator 1, they’ll be able to hit the 90 parts per hour standard.

Not only that, if Operator 3 goes from 80 to 90 units per hour and you’re spending $10 per hour on his/her services, you’ve automatically broken even every hour he/she is in service because you’ve recouped the labor charge.

Want to see an example of this applied to a concession stand? I’ll share one tomorrow.

Standardize your processes across multiple operators and reduce waste activities, and you won’t be wasting as much money!

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3 Responses to “If You Don’t Have Standardized Processes You’re Wasting Money”

  1. Pingback: If You Don’t Have Standardized Processes You’re Wasting Money – Part II | Lean Blitz – Do it better.

  2. Pingback: How Do We Establish A Standardized Process? | Lean Blitz – Do it better.

  3. Pingback: Lean Tools: Standardized Work and Best Practices | Lean Blitz – Do it better.

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