Unlocking the value in your operation starts with a clear understanding of time. Almost all value in business can be directly related to time. There are two reasons why time really is money. First, we pay our resources for time, and second, the pace at which we add value to our product or service is directly correlated to the money we make.
We pay our resources for time
It is hard to think of a resource we use to create products or services that is not paid for in time. Labor, material, equipment, and energy are all measured in time: hourly wages for labor, turns in inventory, utilization of equipment, and energy in kilowatt hours. The less time it takes labor to add value, the less time inventory sits, the more equipment is used, and the less energy is consumed, the less cost for these resources. When we measure, understand, and manage the time of these resources, profit increases.
A grocery store works on a very tight margin. A can of soda may cost the store $0.20 and they can sell it for $0.50. The gross profit the store makes is directly connected to time. A checkout clerk can sell more soda with today’s scanning systems compared to the old process of typing cost into a cash register. The investment in soda in the coolers by the registers is less the faster the cans sell. The ware on the cooler that cools the soda is less per can if more cans are loaded and loaded in the cooler. The energy to cool the soda while sitting in the cooler is less per can the less time it spends on the shelf. All of these resources are more profitable with less time.
The pace at which we add value to our product or service is directly correlated to the money we make
The longer it takes to add value to a product or service, the more money it costs. If a lumberjack not only cut down a tree but also whittled the wood into a board, it may take a full day to make a single 2 x 4 stud. The labor would cost more, the ax sitting in the corner while the wood is being lathed to shape would cost more, the money tied up in the cost of the wood is more, and it would take more kilowatt hours per stud to keep the lights on. Adding additional labor to allow the lumberjack to continue to cut down trees while someone cuts the logs, while someone lathes the wood into shape, and while someone finishes the board, would make the cost per board less expensive. The shorter the flow time, the lower the cost per board.
This simple principle was first employed in the 1820’s with the rise of the factory system and continues to be a key for identifying waste. Looking at all of your processes in the shadow of time highlights opportunities to create value. Observing any process with the lens of time allows the waste to be seen. Tools like the observation sheet and standardize work combination table break down the details of time into finite buckets of waste related to time. Eliminating this waste translates to profit.
In our relentless pursuit of the ideal we find that the safest, highest quality, shortest lead-time, and lowest cost method is often the one that takes the least time. Help your organization begin to see that true value is captured in time.
Learn more in Patrick’s book, “Facilitating Effective Change,” available online through Amazon and Barnes & Noble.
Patrick Putorti
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