The end result of focusing on flow and ignoring local cost considerations is a much lower cost per unit. This may seem counterintuitive, but improving flow and eliminating waste in the production process leads to higher efficiency and productivity, ultimately resulting in lower costs. This is one of the key principles of Lean production. Reducing lead times is a key aspect of improving flow in the production process, a central focus of Lean production and the Theory of Constraints. Drum-Buffer-Rope (DBR) in a manufacturing plant can lead to a drastic reduction in lead time and much better responsiveness, which in turn enables a reduction of inventory in the supply chain. By reducing lead times, companies can improve their due date performance, reduce work-in-process inventory, and ultimately lower their costs per unit. The opposite is the traditional approach to manufacturing, which focuses on maximising resource utilisation and minimising costs at the local level rather than optimising the flow of products through the entire production process. This traditional approach often leads to long lead times, high work-in-process inventory, and poor due-date performance.
What is missing is a template to estimate the value of flow/ cutting lead time. Philip listed the benefits but I believe companies need a template to estimate the bottom line benefit. A big part of the benefit is capacity gains and consequently the added sales that become possible … if the company can actually sell more. Clients benefit too… they can order later, they need less inventory and they have the opportunity to improve their flow by learning from their supplier. A distributor or retailer can benefit from greater/better product availability. Let’s work on showing the value of such actions … flow, lead time cuts, inventory cuts, capacity gains ‘for free’.
It’s funny because the mentality of most of the people is about cost in order to improve efficiencies. Now this leads to local focus and not global efficiency. They are reducing efficiencies in the system and in the end not getting global reduced costs. But how to put this in some formatted people and specially managers heads? I recall Taichi Ohno’s words on costs and accounting. “Worst than removing the accountants from my factories is the accounting in the head of my engineers”
Not sure if traditional manufacturing relies on "utilization". Most just stop making the product when they make demand and, where possible, make another product. -- How do you decide which costs you would cut? Is it not the case that "the process" normally costs what it costs? If we need it we need to pay for it irrespective of the flow rate? Is it not true that even non-value add steps can "flow" smoothly? Does eliminating non-value steps consider cost or just if they are needed? Steve
Peter Karran
1y
Obviously I agree all this is good stuff, I have been practicing it since the last century. The key thing is that you understand the flow through the entire value chain; sales is never a constraint is it? 😀 Michael Porter is credited with creating the value chain in the mid-1980s, but it’s not an end to end business value chain. I created an end to end business value chain in 1989 which contained a RACI matrix too. I came to this from reading Shingo and Imai, a little diagram in Part 4 of BS5750 (now ISO9000) and an understanding that empowerment results from inverting the organisation chart Kevin Bray. My colleagues in Holland used swim lanes to augment this approach, so that is how I approach this analysis now. I have used Results Chain Wovex as a tool to create benefit maps. It becomes really clear if you analyse the benefits properly that increased revenue is much easier to realise than reduced cost unless there is a demand constraint. What do you think about that hypothesis?
Marco Piccio
1y
Thank you for outlining these key lean principles, Philip. Your post perfectly captures the power of optimizing flow over local efficiencies in Lean. Reducing lead times through techniques like Drum-Buffer-Rope may seem counterintuitive but boosts overall efficiency and flexibility. By dramatically cutting end-to-end times, companies can slash inventory while improving on-time delivery and responsiveness to customers.
Thanks for sharing Philip MARRIS Agree totally with the concept of flow in the post. You make it sound easy 🤣 It’s the transition from the traditional approach to a leaner flow/pull type system is the hard bit. The reality is in the organisations that are working towards better flow through their organisation is that there has to be both initially. Keep the local costs under control as the organisation transforms toward better flow and customer lead times. Can’t rock up one day and say “forget local costs were doing flow” 🤣
Great post. Completely agree. I personally witnessed it over and over and over everywhere I was in my 40 year career. Don’t let the skeptics try and convince you otherwise. Making work flow (material, information, and WIP), and subsequently making it flow faster should be a key element of any transformation to excellence.
Totally agree on focusing on flow rather than on local ressource’s efficiency, however I would start by protecting the flow (with inventory under control) and once the system is delivering at the customer demand then we can start optimizing the system by reducing inventory and all the decoupled lead time inside the system
Simon Eagle
1y
Agree (of course) but the term “flow” is a bit glib, it needs defining because many many SC people don’t know what it is - they just nod knowingly and continue to do the wrong things. When they understand what it is they can then understand why your statement is true and, possibly, start to do something about it.
Project Manager at GENEDGE
1yThanks, Philip. As you know, the other counter-intuitive element is that you can often double or triple flow without laying out money for big training programs, problem solving, more resources, tighter controls, etc. Here's an example. THE PROBLEM: I recently walked into a US gov't procurement office that was over a year behind in processing procurement requests (PRs). Each PR worker had an avg stack of 100 "working" PRs on their desk. But nothing ever got finished due to problems with each. THE SOLUTION: To quickly increase flow, we took back all but two PRs from PR worker, hiding the rest in priority order in the supervisor's office. When a PR worker finished one (which meant solving rather than deferring problems encountered), they could request another from the supervisor. Within days, flow of completed PRs increased by nearly 200%. Also, they soon achieved a 50% decrease in avg hours per PR, as overtime was cut to nearly 0. Think of all the consulting money I "missed out" on with this client. I could have probably billed $Millions by offering a lengthy current conditions assessment, delivering a huge LSS training program for the entire workforce, and holding long, drawn out Lean events over the next 3 years. Silly me.