Who is your Vice President of Delay?

Posted on October 24, 2013 by David Anderson

Flow efficiency is the measure of the percentage of time we actually spend actively adding value by working on an item as it flows through a system, as illustrated on this kanban board.

Flow efficiencies of as low as 2% have been commonly reported by managers and consultants reporting at Lean Kanban conferences over the last 2 years. My own personal experience is that firms I encounter exhibit 5% - 15% flow efficiency. After considerable efforts to make improvements we see this improve but 40% is still very good.

Little's Law, illustrated here, shows the relationship between work-in-progress, average lead time and average delivery rate. If flow efficiency in only 2% in your organiation then the good news is that you have a lot of room for improvement - theoretically a 50x improvement! Assuming work-in-progress is fixed, as it is with a kanban system, then low flow efficiency means your delivery rate is very low in comparison to its ideal level.

It is evident from an understanding of flow efficiency that the biggest leverage in improving delivery rate (often referred to as "productivity") is not to improve the motivation of the workers, or to improve the working practices to reduce the local cycle times in the activity columns, rather the biggest leverage is to focus on reducing delay - reducing multi-tasking, shrinking queues, and eliminating sources of blocking and waiting or reduce the effects of blocking or waiting.

So, if eliminating delay provides the highest leverage in improving productivity in creative knowledge worker industries, it must surely be very important to your business and there must be a senior executive in charge of such an important aspect of your operation? So, please introduce me to your Vice President of Delay?

Oh! You don't have anyone with that title? Hmmm. I see. So what do you do instead?

To compensate for low flow efficiency, most firms simply start more work, in order to keep workers busy (referred to as "utilization"). They increase the numerator in the Little's Law equation, in order to keep productivity rates high. However, there is a side-effect. As more WIP enters the system, the overheads of communication and the multi-tasking and queuing that are inevitable as more work enters the system begin to increase lead times. Firms compensate for the overhead increase by hiring more people to manage the greater WIP, and renting more space to house these people - costs rise. Communication overheads increase, again as more people are involved and more WIP means more invisible carrying cost. Lead times increase again. So the cycle repeats. This would be fine if their system was an open system that could continue infinite expansion. Unfortunately their business is a closed system. Eventually they run out of ability to fund this vicious cycle of ever increasing WIP, increasing people and cost, increasing lead times. As they can no longer fund expansions, what has to give is lead time, it gets longer and longer, and delivery rates drop accordingly. Eventually, everything grinds to an almost standstill. The system is unsustainable and crashes into chaos. A large reorganization, lots of layoffs, and many cancelled projects follow. It's painful for many and it damages the business with its customers and market share and brand equity suffer accordingly.

So, who is your Vice President of Delay? And if you don't have one yet, isn't it time you considered such an appointment?