I was asked a challenging question from the back of a seminar room a while ago, before the lockdown, at the end of a conversation about the importance of flow.
The questioner asked, and I quote: ‘I get the theoretical stuff, but how do I go about measuring flow in real life”
It is a good question, with a simple answer that is challenging to implement. It is all about the approach taken to measurement.
The more granular the measurement the better, but the Pareto rule applies. It is also sensible to bother measuring only things that can be changed to improve performance in some way. Measuring for the sake of measuring without the intention to manage by the results only feeds vanity and ego.
The two core measures of flow are:
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- Inventory
- Cycle time.
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In my experience, these two parameters are core to every process, in every business. Manufacturing is where they are most obvious, but they apply equally to service businesses.
While these two items are intimately connected, measuring separately enables improvement.
Inventory comes in many forms. Finished goods, Work in progress, raw materials, and in the case of service providers, projects and tasks that are waiting, being done, or completed but not delivered. In some cases, it will be measured in dollars, others, in units of some sort. Granularity enables greater scope for optimisation. For example, a factory with 3 stations in a line that has 3,000 units of WIP, 500 at the first station, none at the second, and 2,500 at the third, clearly has an impediment of some sort at the third station that requires investigation, and improvement.
Cycle time is the time it takes to move inventory from one point in the process to the next. Again, this can be measured for a whole process, or individual parts of the process.
Comparing the cycle times and inventory numbers, will give you a measure of line, or part line throughput, and therefore the productivity, and will highlight the opportunity to remove waste, and generate improved ‘flow’
This sort of analysis of flow is as valid in a management process as it is in a factory.
For example: In a sense, your debtors ledger is inventory. The faster you can get paid, the lower the ‘debtors inventory’ the better the financial results. So, ask yourself how you get paid faster?
You ensure invoices are sent with goods.
You maintain constant and friendly relationships with customers.
You send a reminder a few days before the invoice is due to be paid with a thank you in advance for paying on time.
You ‘deselect’ customers who habitually do not pay on time.
Applying the discipline of ‘Inventory’ and ‘Flow’ to every part of an enterprise will radically improve results.
None of this is too complex for even a modest business. The challenge is to give it the priority it deserves, collect the data, and implement progressively. Incremental improvements compound over time to deliver significant improvement in financial and strategic outcomes.
The header photo is of the Alligator river in NT. It flows unencumbered.
