The Batch Myth of Centralization!
We love to group things up that perform the same function - Sales, Marketing, Service, Production, Finance, etc. This grouping up creates batches of work. And we think that this is good because the cost per each item goes down. What actually occurs is that the process slows down and the total costs go up because we introduce waste into the system.
Using the "Lean Thinking" foundation concept of "single piece flow" we can see in the simple example below the amazing difference between conventional thinking and lean thinking.
The diagram below shows a batch of five items going through three processes. Each item takes one minute to be processed and when the five items are completed they move to the next process and so on.
This could be five orders in sales being entered into the company's ERP system, followed by distribution scheduling the delivery and completed by finance issuing the invoices. Or an insurance claim process or a home loan process, etc.
In our example it takes a total of 15 minutes to complete all the orders and the first completed order takes 11 minutes (lead time) before it is finished.
Do you want to guess how long it takes to process all five items this way compared to the 15 minutes it took in the batch system?
Do you want to guess how long it takes to complete the first item this way compared to the eleven minutes in the batch system?
In the single piece flow system there are only two items which are "work in progress".
Using the "Lean Thinking" foundation concept of "single piece flow" we can see in the simple example below the amazing difference between conventional thinking and lean thinking.
The diagram below shows a batch of five items going through three processes. Each item takes one minute to be processed and when the five items are completed they move to the next process and so on.
This could be five orders in sales being entered into the company's ERP system, followed by distribution scheduling the delivery and completed by finance issuing the invoices. Or an insurance claim process or a home loan process, etc.
In our example it takes a total of 15 minutes to complete all the orders and the first completed order takes 11 minutes (lead time) before it is finished.
In single piece flow the first person processes only one item and passes it on. The second person processes that single item and passes it on and so on. The first person only processes the next item once the second person has started to process the previous item. This way there is never any batching of work at any stage through the end to end system.
Do you want to guess how long it takes to process all five items this way compared to the 15 minutes it took in the batch system?
Do you want to guess how long it takes to complete the first item this way compared to the eleven minutes in the batch system?
It takes 7 minutes to process all items, less than half the batch approach!
It takes 3 minutes to complete the first item, less than a third of the batch approach!
If these items were materials being processed the amount of "work in progress" material is also dramatically reduced. In the batch system there is ten items which are "work in progress". This is ten items tying up financial capital and taking up space.
In the single piece flow system there are only two items which are "work in progress".
Lead time is a third less, total completed work done in under half the time and one fifth of the financial capital tied up taking up one fifth of the space!
Pretty amazing and it works, just look at Toyota's financial results and that they are now the number 1 car manufacturer in the world.
Or read the HBR article October 2003 the Lean Service Machine (link may need you to be a subscriber to work) on how Jefferson Pilot Financial used these techniques in their industry.
Toyota have been doing this since the 50's, the Jefferson article is nearly four years old!
When is the rest of the world going to catch up?
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