If you have a flat on your way home, how long will it take you to change the tire - perhaps twenty or thirty minutes - longer if you have to wait for AAA? How long does it take a pit crew to change a tire at Richmond International Raceway - single digit seconds? That's a 99 percent cycle time reduction. The opportunities for significant improvements in cycle times are by no means restricted to the speedway. Virtually all businesses are good candidates to benefit from this exercise.
Admittedly, the pit crew has specially designed wheels and equipment. They change tires for a living. They practice and they are the best in the world at what they do. But, the same kinds of investments can be made in business. For example, we worked with a manufacturer of specialty steel where the average time from accepting an order to shipment was six months. When we analyzed the time that was absolutely required to schedule and produce the product it was less than one week. Obviously, there was massive opportunity!
Cycle time reduction is most often associated with manufacturing processes. But, the concepts are equally applicable in service industries. Fast food restaurants have been a huge success, in part, because their cycle times are much shorter than traditional restaurants. If you have ever stood in line at an airline ticket counter, you have probably wished that these companies would embark on a cycle time reduction effort.
The question becomes, what must change to reduce cycle times so dramatically? There are many sources of opportunity:
Reduce waiting time - In our experience, the single largest contributor to speeding up processes comes from eliminating or greatly reducing waiting time. Whether it is product working its way through a factory or paperwork moving through a back office, things being processed tend to spend a lot of time waiting. But, wait time adds no value and therefore can be squeezed out.
Work in parallel rather than in series - Companies often find that processes which have historically been done one after the other (in series) can be done at the same time (in parallel). For example, pit crews have found that instead of changing tires in series multiple tires can be changed at once. Doing things in parallel rather than in series saves time. Grocery stores that have one person ringing up your purchases and a second person bagging them are getting you checked out more quickly by doing these two processes in parallel rather than in series.
Utilize special or dedicated tools - In some cases, special tools can be designed to make the process quicker. Pit crews use special tools to complete their work more quickly. A bank might create a new form to get all of the information needed to process the transaction in one place. This will speed up processing. Alternatively, tools can be dedicated to a particular job. For example, a company that operates injection molding machines found that the dies could be changed more quickly if the needed wrenches were stored on the same pallet with the dies. This saved the mechanic from having to rummage through his toolbox to find the right wrench, which had often been borrowed by a coworker. It did require purchasing a few more wrenches, but that was a small investment.
Eliminate unnecessary steps - Sometimes companies find that they can rework or eliminate portions of their process to reduce cycle time. One company had a Quality Control step in the middle of a process. But, the instances of poor quality at that point in the process were miniscule. Eliminating this QC step saved time and cost almost nothing.
Automate - A home healthcare provider automated their scheduling process and dramatically reduced the time it took to perform this critically important task. Many small businesses have found that using QuickBooks or a similar product dramatically reduces the time spent on accounting tasks.
Optimize the bottleneck - In total, the output of any operation is limited by the resource with the least capacity, the bottleneck. If the bottleneck process is allowed to sit idle, output is lost. Therefore, the time it takes to produce a given amount of output is increased.
The benefits of reducing cycle time are many:
Increased service levels - The most obvious change is quicker turnaround and shorter lead times. This has the benefit of improving service levels without the need for increased inventory. If cycle times are shorter, product can be replenished more quickly when stocks are low. There will be fewer stock outs.
Improved quality - Cycle time reduction almost always results in simplified processes with fewer steps. It's axiomatic that a process that has 10 steps will yield fewer mistakes than a process that has 100 steps. Simpler processes produce fewer errors.
Reduced labor cost - Simpler processes with fewer steps require less labor and therefore, cost less. Improved quality also results in less rework, which helps to keep costs down. This, of course, increases profit.
Lower inventory - Faster cycles mean shorter lead times which result in the need to hold less inventory (both work-in-process and finished goods).
Less Waste - One source of reduced waste is that scrap and is diminished. Fewer steps mean better quality which results in less scrap. Also, because inventory is lower obsolescence is reduced.
Admittedly, reducing cycle time is not very sexy. In fact, it's a somewhat boring topic. But, essentially all companies are good candidates for cycle time reduction and the benefits described above will result in better service, loyal customers, an improved competitive position and ultimately more profit. Sexy or not, that should cause most small business people to pay attention.