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July 1999

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Teams That Work And Those That Don't

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Cycle-Time Redesign

Baldrige Winner Wins Again



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by Peter Block
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Cycle-Time Redesign
A speedy approach to cycle-time sluggishness may be the boost to get you ahead of the pack.

Here's a quiz:

What do FedEx, Jiffy Lube, H & R Block and Domino's Pizza have in common? (Okay, aside from the fact that they're all businesses, smarty.)

Answer: Each one of these companies has reduced its production time to provide its product or service in less time than its competitors. And each company uses its new-found quickness to beat the competition and gain market share. That means FedEx, Jiffy Lube, H & R Block and Domino's Pizza are now raking in the profits, leaving the rest of the delivery services, oil changers, tax consultants and pizza guys with their heads spinning, trying to figure out just how, when and why they started getting blown away. It may be a conundrum for the competition, but don't let reduced production time be a mystery to you.

To reduce your production time and beat the competition, you need to undergo rapid-cycle time redesign, and Paul Debetaz, senior manager at Southwest Consulting, can take you through the paces in a hurry. Five days, to be exact.

A Redesign To Make Your Head Spin
Wait a minute. Did someone say five days? What kind of redesign can you get in five days? It sounds like, to quote that musical moppet of the 70's, Meatloaf, a Coupe DeVille hiding at the bottom of a Cracker Jack's box. But Debetaz can show you that, indeed, he's not bluffing. Those four big players-FedEx, Jiffy Lube, H & R Block and Domino's Pizza-all underwent successful cycle-time reduction. And they're not the only ones. Southwest Consulting's success stories include: on-time deliveries to customers improved from 82 to 96 percent for one company; order management cycle-time reduced from 6 to 3 days for another and price quotes to customer cycle-time reduction of 50 percent in yet another case.

In general terms, the advantages to compressing process cycle-time are four-fold. You'll get increased productivity (as production time decreases, output per unit of time increases); price premiums (customers perceive products and services provided in less time as more valuable); reduced risk (by producing products and services faster, firms can rely on shorter forecasts, which are more accurate than long-range ones); and increased market share (consumers tend to have more confidence in responsive suppliers, and reward them with their business accordingly).

If the rapid cycle-time redesign works so well, and if it only takes five days, why isn't every business doing it? Rapid cycle-time redesign is not for the faint at heart. If your bottom lip begins to quiver at the thought of relocating your desk, if you cower at criticism or feel faint at the idea of new job tasks, Debetaz's program is not for you. That's because, according to Debetaz, to make rapid cycle-time redesigns work you've got to address and often alter some or all organizational components which contribute to process cycle-times. Including organizational structure, reporting relationships, decision authority, physical layout and employee skill levels. Ouch.

When faced with such an intimidating and all-encompassing redesign, it's easy to see why Southwest's policy of getting the process done in five days is popular. You've got to be pretty brave to undergo the process, and standard six to 18 month long processes leave room for enthusiasm to wane.

How Rapid Cycle-Time Redesign Works
Southwest's rapid cycle-time redesign requires careful planning and a clearly written charter before the redesign begins. Once a plan and charter are in place, 10 to 12 employees are chosen from the commissioning company to participate on the redesign team.
These members should represent the various levels and functions of the organization, so that the team can do four things: get input from those working closely with external customers, get input from those who intimately understand the intricacies of the day-to-day operations, gain the support of those most affected by the redesign plan and avoid redesigning in a vacuum.

Southwest consultants serve as facilitators to guide these team
members through the redesign process and to maintain the aggressive pace necessary for successful completion. Typically, the program consists of three consecutive days to begin the redesign process, and then two more days after a one-and-a-half week break. "The break is great as a soak-time for team members," says Debetaz. "They collect some additional data and talk to workers outside the redesign team."
After the five-day redesign, about 50 percent of the new process is designed. Selected design team members then finalize the remaining 50 percent with process owners in the workplace and the subsequent redesign process and organizational changes are implemented within 90 days.

Mapping How it is Now
During the first days of the redesign process, the redesign team sits down with Post-It notes and identifies a step with each one. The group then organizes the notes into the order that represents the process as it is now. This process map should illustrate existing process steps, decisions points, work transfers and re-work loops. Then, the group adds further details that will later determine what process steps can be eliminated. These details are:
Real value-added (RVA)- activities that transform inputs into outputs. They're perceived as valuable to the customer, like assembly, packaging and fabrication.
Business value-added (BVA)- process steps that are installed by management, like scheduling, marketing, invoicing and record-keeping. These things are necessary to support and monitor internal business functions, but don¹t have much perceived value to the customer.
Non-value added (NVA)- process steps that contribute to neither customer satisfaction or improved business operations. Things like inspections, excessive transit, waiting and storage are NVAs.
Variances- problems, defects, mistakes or other disturbances that affect efficiency, like getting the wrong parts, or entering data incorrectly.
Key Variances- variances that cause the most significant process problems such as stopping the process or producing defects.
Paperwork- internal documents required to complete steps within the process.

Cycle-Time Opportunities
Once the process map is complete, the redesign team begins to focus on cycle-time. Many of the procedures that redesign members are accustomed to will end up on the cutting room floor at this phase, so Southwest's consultants start by emphasizing just how important cycle-time reduction is. Debetaz likes to present his teams with the four rules of responsiveness:
Rule #1: .05 to 5 rule-value is created in only .05 to 5 percent of the total time employed in a process.
Rule #2: 3/3 rule-time lost in most processes is equally attributed to three sources: waiting for completion of a unit of work; waiting for physical or intellectual rework to be done or waiting for management to make a decision.
Rule #3: ¼-2-20 rule-if time is compressed in a process by one-quarter, labor productivity doubles and costs are reduced by 20 percent.
Rule #4: 3x2 rule-when process times are compressed to be at least 50 percent faster than the competition, growth at three times the industry average is likely and profits of two times the industry average are possible.

Now the team returns to the process map and focuses on breaking all the processes down into sub-processes. For example, order processing begins with a customer placing an order and ends with the customer receiving their goods. Sub-processes to order processing include getting credit approval and order entry.

At this point, redesign team members document process times and cycle times for each sub-process. Both statistics are noted on the map and then the team calculates the overall efficiency for each sub-process using this calculation:

Cycle-time efficiency (CE)= (RVA) Real value added time
(DIVIDED BY)
Total cycle-time (CT= RVA+BVA+NVA)

Based on the results of this calculation for each sub-process, redesign efforts would begin by reducing the highest cycle-time efficiency ratios.

Actual Cycle Time Reduction
Once you've established cycle-time efficiency ratios, says Debetaz, then you have to look for the conditions that contribute to high (or inefficient) ratios. Typical contributing factors are key variances, excessive transfers and rework loops and too much paperwork. The goal at this point is to identify where any of these conditions exist, and to reduce or eliminate them according to their value-added status. For example, real value added activities should be streamlined, business value-added activities should be minimized and non-value added activities like variances and transfers should be eliminated. (Refer to the sidebar to see what this might look like.)
When you reach this stage in your rapid cycle redesign, you might feel like your office is less an office than a demolition derby. It's important to keep momentum up at this point, and use that momentum to a create a map of how the process should be. Construct this map just below the existing map made out of Post-It notes, so you can see the stunning process improvements you've made (this should make you feel proud and boastful. That's good-you deserve it). Now that you have your courage and enthusiasm back, implement the new process. Keep the following in mind:
*Metrics-how are you going to measure this new process?
*Layout-are changes to the office space necessary?
*Team configuration-are your new process-centered teams really practical? How are they configured (by product, by geography etc.)?
*Role responsibilities-which roles are changing? What skills are required for new positions?
*Task/decision transfers-which tasks/decisions should be transferred?
*Training plan-is training necessary to support the new process?
*Implementation-what actions or steps will you take? Who's responsible?
*Communication-the what, when, where and how of communicating the outcomes of the redesign effort.

Once you've gone through the steps of rapid-cycle redesign, you can expect some results that are astounding by any critic's standards. And considering the tremendous benefits of rapid cycle-time redesign, it's no wonder you'd want it done fast. Maybe even five days.


Terms Defined

Cycle-time: The total time elapsed in a process or sub-process required for transforming an input to an output.
Processing time: The time required for activities which directly transform inputs into outputs.
Non-processing time: Non value-added and business value-added activities which add time and cost to processes.

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