Any waste removal project will identify literally hundreds of instances of waste. There is a serious risk that such a vast quantity of information will overwhelm the business operator’s ability to manage it in the best interests of the business. We need to discuss ways to identify the most important wastes to remove first.
This is a Yellow Belt article.
We have outlined the 8 categories of waste in business operation in the L1.1 Eight Types of Waste article and how to record it in the L1.2 Capturing Waste in the Wild article. if you haven't read these previously, you will need to in order for this article to be useful for you.
Waste identification and removal is an entire industry with very advanced techniques and hordes of consultants and specialist staff. Likely you won't be able to afford any of these people; and probably don't warrant them at the scale of your business anyway.
These articles are a Yellow Belt introduction that gives you a process that is workable and that you can use on a day to day basis
Focusing on the Constraint
The Theory of Constraints (see TOC Menu) explains, quite clearly, that there is generally only one point in your production cycle that acts as a constraint or bottle neck.
While there is a constraint, it doesn't matter how productive you are on either side of the constraint, your productivity will not go up due to the restrictive nature of the constraint. Wine can only come out of a the bottle neck (constraint) at a certain maximum speed no matter how hard you try to make it pour faster..
Therefore, it makes very good sense to initially focus on the wastes that occur in relation to your constraint. Any production waste that can be removed from the constraint, should lead to an immediate and permanent improvement of the entire productivity of your production system.
Any production waste removed elsewhere, will not have much effect on the throughput of the production system while waste remains at the constraint so we suggest starting there.
80/20 Rule for Fastest Waste Reduction
The 80/20 Rule (see Amazing 80/20 Rule Tool article) points out that a comparatively small percentage (typically 20%) of any group of items will lead to up to 80% of the outcomes.
If we apply the 80/20 Rule to the removal of waste, we want to focus on the 20% of wastes that will have 80% of the impact.
So the first step might be to measure the 80/20 contribution of each of the oft-times hundreds of items of waste you identify in the steps discussed in the earlier articles in this series.
Collecting Data on the Impact of Wastes
If you have collected the waste information as a number of rows in a spreadsheet, as was previously suggested (see L1.2 Capturing Waste in the Wild article), you will already have a column for "Impact" and another for "Ease of Removal".
We argue in many places in Profit Savvy that a primary focus of your business should be maximising the Value of your business’s products in the minds of your customers.
Value is composed of 3 measures; Quality, Cost and Delivery, which are collectively referred to as QCD.
If you have two equally scoring, or similar, wastes from your 80/20 process, you would be best to focus on addressing the ones that have the greatest improvement in the Value of your products first.
That is they strongly impact on quality and/or Cost and/or Delivery.
So, if you want to also factor in Value, you could add a third column to your spreadsheet labelled "Value"
Scoring the Impacts for Each Waste Item
You could rely on 'gut feel' for working out the first lot of waste reduction to focus on but it is likely to be a bit hit and miss.
Fortunately, we can use a simple scoring techniques to make the choice more "scientific".
We suggest you consider making a 'score' for each waste that can be used to work out the priority order with the 80/20 approach.
You might have scored these as you were first entering them but it will pay to go back over those scores now that you have a complete list and rescore them where appropriate.
The reason for this is that, when you did the scores originally, you may not have been able to rate them against other waste items you found later.
To make this scoring process easier and more consistent, try to pick the easiest waste to remove and score it with a 10.
Then score all the others in declining order of their ease to remove compared to the one you gave a 10.
Something with a mid-range ease of removal might score a 5 and low range might score a 1. Try to use widely differing numbers in the score (use 1,5,10 rather than 7,8,9 for example).
The same thing would apply to scoring the Impact.
Find the highest impact (greatest increase in profit) and give it a score of 10. All other items are scored with a lesser amount to reflect their relative importance.
Lastly, if you want to incorporate allowing for Value, score each waste item in the range of 1 to 10 on the contribution of each waste item to Value (the highest contributor to improving value scores a 10).
Compile an Overall Score for each Waste Item
Add a "Overall Score" column to your spreadsheet and put the formula below into each cell in the column.
This will indicate the most important waste items to remove first:
- Multiply the number for "Impact" by the number for "Ease of Removal" and again by "Value" if you used it
- This gives a score for each of the Productive Waste items in your system.
Impact = a high 10 (on a 1-10 scale)
Ease of Removal = a 10 for easiest to remove
Impact x Ease of Removal = 10 x 10 = 100 - this indicates the item is one of the most important wastes to remove.
In comparison, where Impact = 7 and Ease = 3, the Overall Score is 21 so this item is well down on the 80/20 score.
When incorporating value, the math might be Impact = 7, Ease = 9 and Value = 7 giving an Overall Score of 7 x 9 x 7=441.
Sort Waste Items by Overall Score
The 80/20 Rule tells us we would start at the highest scoring waste item and work downwards from there towards the lowest scoring.
If your spreadsheet skills are up to it, sort the whole spreadsheet on the contents of the Overall Score column from big to small (descending order).
If you are a spreadsheet virtuoso, you can also add columns to calculate the Cumulative Overall Score which will eventually show the 80/20 cutoff point. See the 80/20 Data Analysis Methods article for insights.
Off You Go
So now we know the best wastes to focus on first and in descending order of importance.
Applying the 80/20 Rule ensures we focus on the so-called ‘low hanging fruit” first. This way we make the fastest inroads into waste.
You will have multiple demands on your time from all over your business so waste reduction needs to be factored into the overall workload with whatever priority you see fit.
Our favourite technique for handling these multiple demands on your time is outlined in this Agile Planning article.
Enough is Enough
Building on our 80/20 analysis above, we know that focusing on anything more than the highest scoring 20% of waste items will become increasingly expensive. This will occur as you try to remove increasingly smaller and more difficult items of waste which add less and less value to your customers.
Traditional Lean Management is notorious for setting up programs of waste reduction that operate over several years. Clearly, although waste continues to be found, its impact is likely to be less and less effective.
At some point, it is entirely possible that the overhead costs of running the waste removal search and destroy mission exceeds the value of the waste that is removed. This would definitely be the case when expending resources (at some cost) on the ‘unproductive’ group of wastes whose removal makes no contribution to the productivity.
Also, in a smaller business, there are many other calls on the manager’s time. At some point, it becomes more profitable to work on some other activity (say sales) than it is to continue to remove waste.
There are Blue Belt mathematical ways to work out where this point is but a sensible person can probably make a judgement call about when waste removal has become less productive than some other activity.
In other articles at Blue Belt level, we talk about the science of more advanced ways to removal. See the series of articles on Kaizen (Kaizen Leads to Continuous Incremental Improvement)
At a small business level, it is entirely possible that you never want to get to a more sophisticated approach to prioritising the waste to remove, than has been described is this Yellow Belt series on Waste Removal
A useful book is "Lean for Dummies" which is pitched at our Yellow Belt level.
There are many, many other more advance books that cover the topic to Blue and higher belt levels if you would like to take the removal of waste further.