Perceived value of time

Interesting report from TOA technologies claiming that waiting for home services costs the US $37.7 Billion a year.  I'm not going to comment on that, we all know how annoying it is to wait for the cable guy.  I read the report and what got my eye was the way the report valued time.  They asked people to estimate the worth of their time:

Nearly a third (31%)  of respondents who make less than $50K annually estimate their median average cost of waiting for an hour to be $13 (range $11-15); after the average 4.3 hours out of work for one in-home service appointment – it racks up to more than 2 full days lost at work for this hard hit group . Depending on their level of education and the age of the respondent, there is a wide range of opinions on the value of time.

Looking at these figures people do not value their time as they are paid.  Someone on a $100k salary is on approximately a $50/hr rate.  Someone on a $30k salary is on approximately $15/hr.
When we look at the perceived values for 1 hour, the perception is valid up to the $35-50k salary range. The perceived value levels out at about $20/hr before jumping to $26/hr for the high rollers.
What does this mean for us as Lean practitioners, possibly a lot.  For a start we know those below $50k a year understand the labour cost of waiting.  When money is tight we are far more aware of its worth and our own.  For those above $50k/yr there appears to be the start of a disconnect between waiting and its costs.  This is important in Alberta where many skilled workers are to be found in this higher income zone. 
The fact is if you don't know what your time is worth you can't make valid decisions on what the cost of waiting is. The result is that many company are incurring the wrong cost.  Paying out high high dollars to staff to wait to save a few dollars on shipping costs.

What is Lean and Why Do I Care Parts 5, 6 +7

Q5. I thought Lean was about being Lean and mean, one less person?

Some companies have taken this approach, often called “business process re-engineering”, but typically, it doesn’t work out well.  Any productivity gains made disappear quickly as too few people in the company are engaged at a level to see it through to success.  Clever companies use Lean to improve capacity, shorten lead times and improve quality.  These changes are achieved by working collaboratively with staff to map and improve process, or to reorganize a work area to improve work flow.  The best companies revisit previous improvement efforts and look to find opportunities to make further improvements.

Q6. What has Lean got to offer fast growing small and medium companies?

Lots.  Virtually all fast growing Alberta companies share the same operational constraint - finding and keeping competent, qualified people.  To not make the best use of these people, or to have them work inefficiently, makes little sense.  Lean provides the thinking and tools for companies to minimize inefficiencies and enable processes and people to achieve more.  This, in turn, creates a less stressful, more empowered workplace, as well as a more a productive and profitable company.

Q7. If you were to recommend doing one “Lean” activity what would it be?

We would recommend a spaghetti map for a business process or product known to have problems.

A spaghetti map uses a drawing, or layout of the workplace, and would trace, for example, the physical path a purchase order takes through the company, as it travels between departments, from one desk or work station to the next.  A well plotted map will quickly show the amount of back and forth that happens, and where unnecessary steps and delays are visible in the process. One approach is to walk the process backwards, this way it’s possible to capture the actual route not the one that was supposed to happen.

Event to share updated

This is an advert, for a good event. 

Build the Optimal Environment for Business Success

CME is proud to present with Productivity Alberta Don Bell, one of the founders of WestJet to Calgary on June 5th.

Don Bell, one of the founders of WestJet, is widely credited with helping to make the company one of the most successful airlines in North America.

Don strove to create a unique atmosphere for his employees, realising that happy staff members create happy customers. Recently retired, Don encourages business leaders to take their businesses to new heights by aligning the values and interests of their company with those of their employees, along with a little dose of common sense and a large dose of heart.

Come hear Don Bell and how his approach to business applies to your company.

Date:  Tuesday, June 5, 2012

Place: Delta Calgary South

135 Southland Drive SE

Calgary, Alberta

Cost:  $75 plus gst CME Members

$85 plus gst Non-Members

Registration:  11:30 am

Lunch:  12:00 noon

Program 12:00 - 1:30 pm

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A classic oil and gas story of over production

I was given this extreme example of over production this week by a snior staff member with over 30 years experience in manufacturing and field service.  It went along the lines of:

"When I joined the company 30 years ago one of the first jobs I was give to do was make ten 3" valve plates.  We sold the last one 6 years ago, it was rusted to rot.  Actually I think it took us about 4 years to sell the first one."

Not all examples are as extreme as that.  But the incidental costs here to the company over the 30 years must have added up.  Most companies don't have parts that sit on the shelve for 30 years.  Instead they have 30 parts that sit on a shelf for one year and cost the company even more.
Over production is called the worst of the 7 wastes because it in itself will cause all 6 other wastes.  For many Alberta companies the cause of over production is the unreliability and lack of co-operation within their supply chain. Parts and material are frequently not delivered on time.  From my experience the oil and gas industry has some of the worst supply chain practices I have come across.   So to cover these problems more stock has to be kept in stock.  Which adds to prices and also adds to more batch ordering which itself can contribute further to supply chain issues.
How to escape is another question.  There are two things companies can do.  The first is be open and honest with their customers, at least then their customers can make a good decision.  The second is be reliable themselves.  The more reliable in delivery a company can be then the more confidence the customer can have.  Two small steps that together can make a big difference.

What is Lean and Why Do I Care Parts 3 +4

Q3. How is Lean different from other ways to improve productivity?

Typically when companies look to improve productivity, they look at the big value added things they do, such as machining metal or treating patients.  Then they look to find ways to make these steps more efficient.  While this is a piece of the Lean process called “point improvement”, it won’t meet its full potential in isolation. In contrast, Lean companies look at the “value stream”, which is the whole process a mechanical part or a patient travels through in a plant or medical centre.  By analyzing the value stream, from order taking to delivery, it becomes more apparent where value is created and where waste is diminishing the system.  Understanding the whole process enables companies to identify where efforts will have the greatest impact on reducing waste, and subsequently on increasing productivity.

Q4. Isn’t Lean just a collection of tools such as 5S and Six Sigma?

These tools are a very important part of Lean; they provide the methods through which companies can improve productivity. They are also highly visible and therefore easily recognized.  But Lean is about the bigger picture.  Lean thinking involves taking a holistic view of productivity; it moves away from point improvements and moves toward improving the whole process.  A Lean company is driven by continuous improvement.

 One important Lean tool is the value stream map.  Value stream maps are used to identify the fraction of each step that adds value, the fraction of each step that represents waste, and the targeted ways to improve.

What is Lean and Why Do I Care

I was asked to write an article on Lean for the Petroleum Joint Ventures Association, here is parts 1+2: 
 

Q1. What is Lean?

Lean is a collection of ideas and tools companies use to improve productivity.  It starts with the simple question “What does our customer value?” If the company can determine what its customers value, and if value is defined as the minimum activity that modifies or changes a product or service to meet customer requirements, the activities of the company can then be identified as either adding value or generating waste.   Waste includes reprocessing, searching for information, double checking, fetching, waiting, and so on.  In fact, very little of what most companies do can be classified as value.

n Lean manufacturing focuses on identifying and enhancing value for the customer.  By identifying value we can then identify and eliminate waste throughout the entire value stream.

This assertion is backed by surveys¹ that have found for a typical manufacturing company, only 5-10% of activities add value.  For service companies this number can increase to 30-40%.  Don’t believe it?  Think about having a puncture on your car fixed.  The actual time to fix the puncture takes only a couple minutes, but the whole process of planning and scheduling and traveling, takes much longer. 

Q2. Can Lean be useful for non-manufacturing companies?

Every process has opportunities for improvement. No process is 100% efficient from start to finish. It doesn’t matter if that process is manufacturing a car, preparing a quote for a customer, or drilling an oil well. Lean provides both a framework and the tools for companies to drive out inefficiency. This is why the big hardnosed Oil &Gas companies like Talisman and Shell are executing Lean; they know it‘s going to pay off with higher productivity and increased profits. These companies, in turn, following the examples of Toyota and Honda, are going to look at their partners and suppliers to influence them to implement Lean and drive costs out of the supply chains. This concept is already being embraced in Calgary, Alberta, with both Mount Royal University and the Southern Alberta Institute of Technology offering courses in Lean Management.