Friday, April 11, 2008

Competing Against Time

I first heard George Stalk, at the time a Boston Consulting Group Director, speak about time-based competitiveness in 1990. This was shortly after his article "Time -- The Next Source of Competitive Advantage" won the 1989 McKinsey award for the best Harvard Business Review Article of the Year (1989) and the publication of his 1990 book "Competing Against Time". Subsequently, forty-five books have cited this work.

And yet it's still a profound lesson today. Briefly, the premise is this: There are a number of things you can measure and try to manage. In fact, sometimes so many that a manager just gets overwhelmed. The one big thing you can measure and manage that will affect all others positively is the duration (total elapsed time from beginning to end) of any business process.

For example:

  • Time from Order Entry to Shipment
  • Time from Shipment to Billing
  • Time from Billing to Collections
  • Time from beginning of development to first production delivery

Note that there's nothing in this list about man-hours, about productivity, about utilization of manpower or machinery. It's just about the hours, days, weeks or months of elapsed time it takes from the start of an activity to the end.

Think about it. Have you ever had a sales cycle stretch out, and the outcome get better? Ever had a building project stretch out and the costs go down? Ever had a manufacturing process that got longer and the quality improved?

Actually, there's a decent argument that taken down to the basics, there are really only three levers on a manager's control panel:

Quality, Time and Cost -- sometimes translated as "better", "faster" and "cheaper" (the mantra of the electronics business and the metrics of Moore's Law).

Stalk asserts (in my experience, correctly) that if the only one you pay attention to is time, the rest will take care of themselves.

Projects of shorter duration are less likely to take on additional scope & baggage, less likely to suffer from the effects of project team turnover, and less likely to lose focus on the original goal. As a result, they cost less and deliver more of the intended benefits.

Let's talk about inventory -- have you ever seen anything good happen to something that sat in inventory longer? In fact, the common metric of "Inventory Turns" is just the reciprocal of "average days on the shelf". Days Sales Outstanding (DSO) is a measure of average days in accounts receivable.

What about work in process? One of the things I look for when visiting someone's factory is the number of wire baskets full of parts sitting around on the floor. By definition, wire baskets sitting still are not getting better. They're waiting to get damaged, lost, or for 1 or 2 to go "missing", whereupon the final production run will be 1 or 2 finished items short. In an ideal world, a part never stops and waits anywhere from the time it arrives from the supplier until the finished product is headed out to the customer. This is the origin of the concept of manufacturing cells, an idea that's dramatically reduced cost, improved quality, and shortened cycle time in thousands of factories.

How can you reapply this time-proven principle? Look at your business processes. There's surely one of them that your customers (or you) wish happened faster. Go back to the basics. First, chart it -- what are the steps and sequences of steps required to get the process accomplished? Now, here's the important part. On the flow chart, write in the "do-time" for each of the steps (the actual time a part is being "touched" or worked on in the fabrication or assembly process). Then, write in the "wait" time between steps. You'll likely find that the total wait time is 2x to 100x (yes, 100x) of the total "do time". Draw a laser-beam focus on reducing that wait time.

Examples include machine changeover time -- totally lost production, man hours and machine capacity that you'll never get back. We'll never again get to produce the parts we could have produced during those lost hours.

How about the time a sales order waits in a basket for approval, order entry, technical validation, etc.? Time that a customer is waiting and wondering what's become of his order. And, in almost every case, time to make a mistake, lose the paperwork, for the customer to change his mind, or a competitor to stop by and make a sales call.

So, if you have to choose which of several balls to juggle, make it time. Look at everyday processes within your business, measure the total elapsed time of each from beginning to end, and then set a goal to reduce that by half. In many cases you'll find you can reduce it even more than that. You'll be amazed how many other things will get better by having done so.

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Terry Weaver

Chief Executive Boards International
864 527-5917

Chief Executive Boards International: Freedom for business owners & CEOs -- Less Work, More Money, More Freedom to enjoy it

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