Page 60 - Lean six sigma demystified

Chapter 2 Lean Demy S tifie D 39

In Competing Against Time (Free Press, 1990), authors Stauk and Hout present
compelling evidence for the power laws of speed. I don’t know about you, but
I grew up on the wisdom of Henry Ford: mass production and the economies of
scale. But while I was learning about Ford in the ‘50s, Toyota was developing
and mastering what is now known as the Toyota Production System (TPS) and
the economies of speed. Stauk and Hout distilled the essence of Lean down to a
few key rules and I’ve tweaked them a little.

The 3-57 Rule. The amount of time it takes to deliver a product or service is
far greater than the time spent adding value to the product or service. Most
products and services are worked on for only 3 minutes out of every
60 minutes of total elapsed time. Those 3 minutes are considered value
added, the rest (57 minutes), non-value added. This is why it makes no sense
whatsoever to try to make employees work faster; cutting employee time by
half will only save 1.5 minutes per hour. Why does it take so long? Delay.
What’s happening during the other 57 minutes? The product or service is
sitting idle waiting for the next step in its journey. This 57-minute gap is
unnecessarily wasteful.
Examples. A manufacturer of heavy vehicles only spends 2 days assembling
a vehicle, but 45 days preparing the order. A claims processing group only
spends 7 hours processing a claim, but it takes 140 days for each claim. A
human resources group takes 82 days to fill an entry level job vacancy, but
there’s only 8 hours of actual work.
The 15-2-20 Rule. Every time you reduce the time required to provide a
product or service by 15 minutes per hour, you double productivity and cut
costs by 20%. It has been my experience that most of the time you can

reduce cycle and lead times by 30 to 50 minutes per hour, so productivity
increases, costs fall, and profit margins improves by 20% to 60% or more.
The 3 × 2 Rule. When you slash your cycle time for your mission-critical
processes, you enjoy growth rates three times the industry average and twice
the profit margins. This is a good thing, because most companies find that
they only need about two-thirds of the people to run the business after
applying Lean, but if you’re going to grow three times faster than the indus-
try, you’re going to need all of those displaced employees to meet the
demand.

HINt The fear of job losses is the single biggest barrier to implementing Lean.