Improving Value, Quality, Time and Cost

Improvement efforts within organizations tend to focus on increasing the value delivered to the customer, or stakeholders, by providing the highest quality product or services in the shortest time and at the lowest cost possible.

Through the years various improvement approaches have been developed for this purpose such as: Total Quality Management (TQM), Kaizen, LEAN, and Six Sigma. These approaches all share at least one common trait, which is that they all promote Continuous Improvement. According to Wikipedia a continuous improvement is a process of ongoing efforts to improve products, services, or processes.

Total quality management (TQM) consists of organization-wide efforts to instill a culture in which the organization continuously improves its ability to deliver high-quality products and services to customers. Kaizen is Japanese and stands for “kai” meaning change and “zen” meaning good. It promotes improvements that are based on many small changes rather than a radical change. Six Sigma was originally developed to increase the quality of goods produced by reducing the number of defects per million units produced while Lean aims to improve time and cost by identifying and removing non value adding activities or “wastes”.

The notion of improving value is often associated to the Lean movement. Activities performed by the organization are evaluated from the perspective of the customer and classified into 3 categories: Value Adding, Value Enabling and Non-Value Adding (or Waste). Value Adding activities are essential to the production and delivery of the product or service to meet the customer’s needs and requirements, where Value Enabling activities are necessary precursors to Value Adding activities. Value Enabling activities may also be activities required by law or regulations to allow the Value Adding activities to be carried out. Non Value Adding activities are considered waste. They do not add value to the customer and do not meet the criteria for Value Adding activities. Waste is basically something that the customer is not willing to pay for.

Various categories of “Muda”, the Japanese word for waste, have been identified by the Lean movement. There are a couple of very well-known and useful mnemonics to help one remember the various types of non-value adding activities, or if you prefer, wastes. The two most popular of these mnemonics are TIMWOOD and DOWNTIME. TIMWOOD capturing a 7 types of wastes categorization, and DOWNTIME capturing an 8 types of wastes categorization.

DOWNTIME stands for:

• Defects or the efforts involved in inspecting for and fixing defects
• Overproduction of things not demanded by actual customers
• Waiting for the previous step in the process to complete
• Non-productive or underutilized resources or employees that are not effectively engaged
• Transportation or handling of products, goods or services not actually required to perform the processing
• Inventory or information that is sitting idle (not being processed)
• Motion of people, information or equipment unnecessary due to workspace layout, ergonomic issues or searching for misplaced items
• Extra processing in performing any activity that is not necessary to produce a functioning product or service

A central concern of Six Sigma is to understand how well your processes, goods or services meet the specified customer expectations. Yield is a metric often used in assessing the quality of goods or services. Yield is often expressed as a percentage and it represents the proportion of results conforming to requirements or specifications of the customer compared to the number of raw inputs. E.g. we meet the customer expectations or specifications 99.999% of the time.

Efficiency is a central theme of any improvement effort. We are all familiar with the expression of “doing more with less”. When it comes to temporal efficiency two basic notions are at play: Lag Time and Processing Time. The Processing Time is the elapsed time from the start of the activity to its completion while the Lag Time is the elapsed time from the completion the preceding activity to the start of the current one.

If your improvement effort is in the context of business then, improving or lowering cost is a prevailing measure of improvement. Costs can generally be divided into Fixed Costs and Variable Costs. A Fixed Cost is a cost not dependent on the level of goods or services produced by the business, while a Variable Cost is a cost that change in proportion to the good or service that a business produces.

With these basic concepts in hand you are now ready to improve the value delivered to your customers, or stakeholders, by providing the highest quality product or services in the shortest time and at the lowest cost possible.