Tag Archives: why quantifying is important

Why Quantify

quantify

When engaged in Continuous Improvement (CI), a key objective is to identify, quantify, and eliminate waste.

People often ask why it is so important to quantify the waste – and the answer is straightforward: quantifying the waste does three things for you.

  1. First, it helps you distinguish between the “big‐hitters” and the nice‐to‐have improvements so you focus on the most important opportunities first.
  2. Second, it makes the organization aware of the cost of a delay in tackling a ‘big‐hitter’. If a problem is wasting $5 million a year, every week of delay is wasting nearly $100,000, so the organization wants to make sure nothing slows this improvement effort.
  3. And third, quantifying the waste enables you to have more meaningful discussions with other parts of the organization whose support you need to change the processes that cause the waste.

If you’re wondering about how to go about the process of quantification, here are three simple guidelines:

  1. Identify if and how the problem affects the four forms of waste: lost sales, material costs, time, and capital costs. If the problem causes delays, think through and estimate the form of waste that the delay results in. Does it increase capital such as inventory or receivables? Does it delay sales and revenue? Does it cost you customers and future business? Does it require additional people time? Many problems will affect more than one of the four forms — lost sales, material, time, and/or capital. For example, excess inventory not only ties up capital, but may increase the number of people who need to manage it, the warehouse costs to store it, and the probability of scrapping it. All these factors can be reasonably estimated with some historical data and getting close enough to the work.
  2. Quantify the impact, recognizing that assumptions and estimates will probably have to be made. If you have or can gather data, use the data and document where you got it. If you must use assumptions or estimates, document how you came up with that — who did you talk to? Perhaps document a range that you are pretty confident about.
  3. Do the math to roll it up into annual dollars.

How Much Time Do We Waste & How Can We Find Out?

question

Recent posts have focused on time management. So today we ask, “how much time is wasted each day within your organization?”

Most of us can estimate the amount of time that might be wasted within our department or business, but few are able to be precise. Similarly, few are able to quantify most of the waste that exists within their work processes.

Quantifying the waste helps organization focus on the right things. More specifically, quantification does three things for you. 

  1. First, it helps you distinguish between the big hitters and the nice to have improvements so you focus on the most important opportunities first.
  2. Second, it makes the organization aware of the cost of a delay in tackling a ‘big hitter. If a problem is wasting $5 million dollars per year, then every week of delay is wasting nearly $10,000! Clearly the organization wants to make sure nothing slows down the improvement effort.
  3. Third, quantifying the waste enables you to have more meaningful discussions with other parts of the organization whose support you need to change the processes that cause the waste.  

So now that we’ve established “why” quantifying waste is important, here are three straightforward steps for doing so:

  1. Identify if and how the problem affects the four forms of waste: lost sales, material costs, time, and capital costs. If the problem causes delays, think through and estimate the form of waste that the delay results in. Does it increase capital such as inventory or receivables? Does it delay sales and revenue? Does it cost you customers and future business? Does it require additional people time? Many problems will affect more than one of the four forms — lost sales, material, time, and/or capital. For example, excess inventory not only ties up capital, but may increase the number of people who need to manage it, the warehouse costs to store it, and the probability of scrapping it. All these factors can be reasonably estimated with some historical data and getting close enough to the work.
  2. Quantify the impact, recognizing that assumptions and estimates will probably have to be made. If you have or can gather data, use the data and document where you got it. If you must use assumptions or estimates, document how you came up with that — who did you talk to? Perhaps document a range that you are pretty confident about. The Conway Waste Calculator can help with the documentation.
  3. Do the math to roll it up into annual dollars.

Are You Working on the Right Things?

At least 50% of improvement is working on the right things. Organizations that are able to engage people in making good, fact-based decisions about what to work on and then execute with laser focus reap huge gains.

An opportunity search is key.

That means that we must identify and act upon the opportunities for improvement that will potentially yield the greatest results. In other words, we must identify and then quantify the waste.

Quantifying the waste helps in three specific ways:

  1. It helps you distinguish between the big‐hitters and the nice‐to‐have improvements so you focus on the most important opportunities first.
  2. It makes the organization aware of the cost of a delay in tackling a ‘big‐hitter’.  If a problem is wasting $5 million a year, every week of delay is wasting nearly $100,000, so the organization wants to make sure nothing slows this improvement effort.
  3. Quantifying the waste enables you to have more meaningful discussions with other parts of the organization whose support you need to change the processes that cause the waste.

Now that we’ve identified “why” quantifying the waste and working on the right things is so important, our next post will focus on some of the best ways to go about doing so.

Quantifying Waste: “If a Tree Falls…”

quantifyWe’re all familiar with Irish philosopher George Berkeley’s quote, “If a tree falls in a forest and no one is around to hear it, does it make a sound?”  While we’re all certain that there is, in fact, a sound, can we really know for sure?

Well a similar concept can apply to the critically-important step of quantifying waste, that being “If we haven’t quantified an opportunity for improvement, can we really be sure it’s the best choice of what to work on?”

At least 50% of improvement is working on the right things. Organizations that are able to engage people in making good, fact-based decisions about what to work on and then execute with laser focus reap huge gains. That means that we must identify and act upon the opportunities for improvement that will potentially yield the greatest results.

Quantifying the waste does three things for you. First, it helps you distinguish between the big-hitters and the nice-to-have improvements so you focus on the most important opportunities first.

Second, it makes the organization aware of the cost of a delay in tackling a ‘big-hitter’. If a problem is wasting $5 million a year, every week of delay is wasting nearly $100,000, so the organization wants to make sure  nothing slows this improvement effort.

And third, quantifying the waste enables you to have more meaningful discussions with other parts of the organization whose support you need to change the processes that cause the waste.