Charging Extra for Waste

A consulting outfit helped the folks at the University of Virginia shorten the cycle time of the document editing process for such things as case studies and other teaching materials. The article in the Washington Post describing the improvement says they cut the time from about six months to one, and reduced the number of documents in process from 140 or so to about 26. (Note the correlation between cycle time and work in process – this is why JIT is at the heart of lean – not because inventory is so important but because it is a direct measure of the cycle time of processes.)

There is a lot not to like about the exercise – blathering about cost centers and profit centers and drawing distinctions between manufacturing and service centers. You also have to raise your eyebrow at optimizing editing, which is basically rework, rather then figuring out how to eliminate it. In fact, there are only processes and processes have products and none of this terminology has any meaning; but they are academics and we have to make allowances.

While the article doesn’t say it the exercise was little more than a classic application of the Theory of Constraints. They balanced flow, rather than sought to balance capacity; and they identified the professors submitting the documents as critical constraints and optimized the flow through them. All good stuff – especially the results.

The opposite approach is just about anyone who charges expediting fees. There are few thing more non-lean – more non-waste eliminating – than essentially acknowledging to your customers that you can execute value creation fast, but your normal process includes a lot of waste and creates value slow …. So for an additional charge you can execute in a lean manner and execute in that short, high value cycle time.

The poster children for this are UPS and FedEx. IN fact, their business model is based around the principle that you are going to have to pay extra – quite a bit extra – if you want them to do the job without a lot of non-value adding waste.

UPS FedEx

As the chart indicates, for a five pound box shipped from my home in Illinois to my son in Tucson costs a lot if you want it there in a day – not so much if you are willing to wait a few days. The time to get anything from my house to Tucson, however, is actually 24 hours if you drive straight through, down to about 8 hours if you drive to the airport, fly then drive to an address in Tucson.

Now there are lots of obstacles making it challenging to get a package from an address in Illinois to one in Arizona in 24 hours but the fact that it is difficult doesn’t change the fact that anything over 24 hours means waiting time for that package, which means space, handling, tracking, racks and conveyors and other forms of waste. In fact, a case can be made for inverting their price chart – the slower they execute the more money they waste.

The worst part is that most organization expedite by moving your job to the head of the pack in the queue in front of the constraint. All of the packages from Illinois to Arizona go by iar these days. The big difference in delivery time is that the overnight stuff gets to go first. Of course this just means everything else waits longer, making the longer lead times something of a self-fulfilling prophecy. The wiser – leaner – approach is to optimize the flow through the constraint – to do something like the academics did … identify obstacles to flow and break through them … faster service with lower cost.

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