doing the right things.” “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.” “The most serious mistakes are not being made as a result of wrong answers. The true dangerous thing is asking the wrong question.” -- Peter Drucker.
the goal of a bucket brigade? • What (or rather who) determines the throughput? • Is there always a weakest link? Yes! There is always a slowest person
the goal of a bucket brigade? • What (or rather who) determines the throughput? • Is there always a weakest link? • What is the most effective action to take?
the goal of a bucket brigade? • What (or rather who) determines the throughput? • Is there always a weakest link? • What is the most effective action to take? Make the weakest link stronger
the goal of a bucket brigade? • What (or rather who) determines the throughput? • Is there always a weakest link? • What is the most effective action to take? Make the weakest link stronger Make the slowest person faster
Throughput Return on investment (ROI) = Net profit (NP) ÷ Investment (I) Some common metrics to help you relate the numbers and do the balancing act...
output What is the throughput? How long does it take a bucket to move through the system (“flow time”)? What is the current inventory? What are the operating expenses?
the throughput? How long does it take a bucket to move through the system (“flow time”)? $12/hour $24 $24 $24 $24 $12/hour $12/hour Mr Blue takes 30 min per bucket, and Mr Green takes 20 min, so it takes a bucket 1h 50m to go through the system.
the throughput? How long does it take a bucket to move through the system (“flow time”)? What is the current inventory? $12/hour $24 $24 $24 $24 $12/hour $12/hour
the throughput? How long does it take a bucket to move through the system (“flow time”)? What is the current inventory? $12/hour $24 $24 $24 $24 $12/hour $12/hour Little’s law: inventory = throughput * flow time. So inventory = 1 bucket/hour x 1.83 hours => 1.83 buckets
the throughput? How long does it take a bucket to move through the system (“flow time”)? What is the current inventory? What are the operating expenses? $12/hour $24 $24 $24 $24 $12/hour $12/hour
take a bucket to move through the system (“flow time”)? What is the current inventory? What are the operating expenses? 1 Bucket/hour 2 Buckets/hour 3 Buckets/hour $12/hour $24 $24 $24 $24 $12/hour $12/hour $12/hour x three people = $36/hour
Let’s step back and look at the problem... Mr Pink is working flat out but look at all the idle people! Mr Blue is only working ½ time. And Mr Green is working only a third of the time. Lazy sod!
Let’s step back and look at the problem... Mr Pink is working flat out but look at all the idle people! Mr Blue is only working ½ time. And Mr Green is working only a third of the time. There’s your problem right there!
this time, Mr Blue had a very unfortunate industrial accident – he was cut in half. Luckily he can still work at 2 buckets/hour, But since there is only half of him, his average throughput is now 1 bucket/hr.
this time, Mr Blue had a very unfortunate industrial accident – he was cut in half. Luckily he can still work at 2 buckets/hour, But since there is only half of him, his average throughput is now 1 bucket/hr. As a result, the cruel capitalists who employ him have decided to slash his salary in half as well -- to only $6/hr.
also had a very unfortunate industrial accident – he was cut into one third. His productivity is only a third now. Just like Mr Blue, his average is now 1 bucket/hr. The cruel capitalists have decided to slash his salary even more -- to only $4/hr.
setup. Mr Blue and Mr Green have been rehired at lower wages, corresponding to their lower throughput. 1 Bucket/hour 1 Bucket/hour 1 Bucket/hour $6/hour $24 $24 $24 $24 $12/hour $4/hour
How long does it take a bucket to move through the system (“flow time”)? Mr Blue and Mr Green have lower throughputs, but their latency is still the same. so the flow time is unchanged at 1h 50min. 1 Bucket/hour 1 Bucket/hour 1 Bucket/hour $6/hour $24 $24 $24 $24 $12/hour $4/hour
How long does it take a bucket to move through the system (“flow time”)? What is the current inventory? Same as before. 1 Bucket/hour 1 Bucket/hour 1 Bucket/hour $6/hour $24 $24 $24 $24 $12/hour $4/hour
How long does it take a bucket to move through the system (“flow time”)? What is the current inventory? What are the operating expenses? $6 + $12 + $4 = $22/hour 1 Bucket/hour 1 Bucket/hour 1 Bucket/hour $6/hour $24 $24 $24 $24 $12/hour $4/hour
“Adding extra staff on the bottleneck” That is -- bring the weakest links up to speed 1 Bucket/hour 2 Buckets/hour 3 Buckets/hour $12/hour $24 $24 $24 $24 $12/hour $12/hour
is the bottleneck. Luckily he has a half-brother who can help. Literally! 3 Buckets/hour 2 Buckets/hour 3 Buckets/hour $12/hour $24 $24 $24 $24 $36/hour $12/hour
time Inventory (buckets) Opex (money/hr) Net Profit (money/hr) = T - OE Inventory turns = T/I 3/hr or $72/hr 1h 50m 5.5 $66/hr +$6/hr 0.54 Here are the numbers for this approach. 3 Buckets/hour 3 Buckets/hour 3 Buckets/hour $18/hour $24 $24 $24 $24 $36/hour $12/hour
be more profitable than reducing staff – if you know where to add them. Adding also gives economies of scale, because there are other fixed costs like buildings, etc., which don’t need to be scaled at the same rate.
be more profitable than reducing staff – if you know where to add them. Adding also gives economies of scale, because there are other fixed costs like buildings, etc., which don’t need to be scaled at the same rate. Question: Under what circumstances can you NOT add staff?
be more profitable than reducing staff – if you know where to add them. Adding also gives economies of scale, because there are other fixed costs like buildings, etc., which don’t need to be scaled at the same rate. But can we do even better?
$24 $12/hour $12/hour Fixing the problem by changing the process What happens if we get rid of the second step in the process and merge it into the first?
Mr Pink now work together on step 1. Their combined throughput is now 3 buckets/hour. $12/hour $24 $24 $24 $12/hour 3 Buckets/hour 3 Buckets/hour $12/hour
Mr Pink now work together on step 1. Their combined throughput is now 3 buckets/hour. $12/hour $24 $24 $24 $12/hour 3 Buckets/hour 3 Buckets/hour $12/hour
throughput? How long does it take a bucket to move through the system (“flow time”)? Mr Blue and Mr Pink have a combined latency of 40 mins so the total flow time is now 1 hour. $12/hour $24 $24 $24 $12/hour 3 Buckets/hour 3 Buckets/hour $12/hour
throughput? How long does it take a bucket to move through the system (“flow time”)? What is the current inventory? Little’s law: inventory = throughput * flow time. So inventory = 3 bucket/hour x 1 hours => 3 buckets $12/hour $24 $24 $24 $12/hour 3 Buckets/hour 3 Buckets/hour $12/hour
throughput? How long does it take a bucket to move through the system (“flow time”)? What is the current inventory? What are the operating expenses? $12 x three = $36/hour $12/hour $24 $24 $24 $12/hour 3 Buckets/hour 3 Buckets/hour $12/hour
might an HR team add value? How can HR help throughput? • Reduce purchase costs by hiring or training expert purchasers. • Better throughput by encouraging employee feedback and learning. • Promoting and managing continuous improvement. How can HR help capex? - Reduce need for facilities by helping people work remotely. How can HR help opex? • Reduce turnover with better working conditions, training, employee morale.
might an HR team add value? How can HR help throughput? • Reduce purchase costs by hiring or training expert purchasers. • Better throughput by encouraging employee feedback and learning. • Promoting and managing continuous improvement. How can HR help capex? - Reduce need for facilities by helping people work remotely. How can HR help opex? • Reduce turnover with better working conditions, training, employee morale.