Taiichi Ohno, father of the Toyota Production System, once said of the lean approach that “All we are doing is looking at the timeline from the moment the customer gives us an order to the point when we collect the cash. And we are reducing the timeline by reducing the non-value added wastes.”
Legions of disciples since then have flocked to follow his precepts, often obscuring the lean concept by overcomplicating it. So it is good to recall what Rajan Suri, the creator of the quick-response manufacturing philosophy writes (while referring specifically to “manufacturing critical path time” but of practical relevance to any lean initiative…) that “knowing the critical path helps focus lean initiatives and reveals the greatest opportunities for waste reduction and lead-time improvement.”
It actually all boils down to taking a step back, that is, taking a ‘macro’ view.
Lean teaches that compressing the timeline increases velocity… reduces inventory… and improves cash flow. Compressed timelines simplify processes by eliminating the many wastes that accrue over time. The quicker the cycle (or lead time), the fewer chances for waste, right? Other benefits accrue to such time savings from “quicker put-away and retrieval, counting and recounting, moving, recording transactions” and so on, notes Joyce Warnacut in a recent article featured in APICS Magazine called “Zoom Out to Build Lean Up.” She notes that compressing the timeline to delivery “adds value for the customer in the form of quicker responses and leads to market opportunities.”
Pretty obvious when you think about it, right?
Warnacut makes the case for taking the macro view, noting that “lead time should not be measured at the operation level, but the system, or macro, level. This is because reducing lead time at one step while leaving work in process (WIP) in queue at the next step is futile.” Lead time must be measured from the point at which resources are committed to the point at which customers receive the goods. This is particularly true in manufacturing.
That means that, unlike traditional on-time delivery schemes that suggest making and holding inventory for better order fulfillment, “a true time-based measure built around when resources are committed to an order [means that] making ahead is not advantageous. It actually increases response time because having people, material and machines allocated to something that is just going to sit on a shelf negatively affects both responsiveness and cash flow.”
The point is, take the macro view and recognize that lead time must be defined as the time to complete and ship an order “from scratch” beginning with order placement and on until receipt. Focus tightly on compressing that time line and you will succeed in increasing velocity, reducing inventory and improving cash flow. Just as Ohno had prescribed.