“Time is money” has never been so topical as today; particularly in operations and in logistics. Although this used to be mainly true for manufacturing companies, especially those with expensive “WIP” (Work-in-Progress) – say expensive semi-finished products -, it has become increasingly the case for service and distribution organisations as well. Indeed, customers seem to have less patience. Think of online shops which promise to deliver the next day when the order is made e.g. by 5 pm.

I like to draw the parallel between the Lean meaning of Flow and the psychology one (according to wikipedia: Flow is the mental state of operation in which a person performing an activity is fully immersed in a feeling of energized focus). In both cases, focus is the main characteristic and Flow contributes to the well-being; either of the person, or of the organisation. Hence, the title of this blog: is your organisation in Flow? This blog obviously describes Lean’s third principle, according to Womack & Jones.

Lean’s meaning of Flow

In a nutshell, Flow refers to an optimal overall throughput rate of a process; think about the word ‘workflow’. For a physical product, this usually means the shortest time to convert raw materials to the end product. Considering – or including – (customer) services, this means the quickest responsiveness between a customer request – e.g. an order – to delivery.

The numerous effects of Flow

Though Flow may seem to be a rather abstract concept, it is the basis for many – if not most of – the Lean tools. Some of these effects are:

One-piece or one-document flow

Even though batches may be unavoidable in some cases – think of an oven in a bakery or think of the processing of an actual report in an accounting or financial department – continuous flow should be the rule whenever possible. Even ovens may operate in a continuous flow, as it is often the case in cookies factories. Batches means queuing and is thus considered as a waste of time, one of Lean’s 8 types of waste.

Driving out any waste

Flow will not only help to eliminate the time wastes. It will indeed implicitly help to banish all types of waste. Indeed, by focussing on the shortest as possible process lead time, you will drive out the other types of waste as a consequence. Like mentioned already, batch activities, but also (too much) inventory will decrease flow. And (unnecessary) motion and transport will more easily be discovered, as those decrease the overall process lead time and efficiency. This latest example leads us to next effect…

Align the value-adding or primary activities

Wherever possible, put the process steps which are creating value physically ‘in line’. Think of an assembly line, where only primary activities (to assemble the product) are concentrated and where any other – e.g. supporting – activity is excluded from the line. This will really help to uncover ‘flow interruptions’ and to act upon those.

Also in an office or administrative environment which is not yet paperless, this may help. And even if it is paperless, Flow interruptions may be discovered thanks to more advanced techniques like process mining; see also the paragraph “Variability in flow” of this blog. On the other hand, it will also most often be more efficient to put people who execute activities sequentially in a same office, for communication reasons. Indeed, you will not be surprised that separating employees working at a same process in different rooms – or even worse, in different buildings – will most often decrease Flow and thus efficiency; given the dependency of their activities.

Stalk & Hout’s golden rule

Quite similar to previous subject, Stalk & Hout’s golden rule advocates that a value creating – say primary – activity should never be delayed by a non value adding one. Just like an assembly line should never be stopped or delayed by e.g. an administrative task; even not by a repairing activity. Hence, the importance of Total Productive Maintenance (TPM), the next topic.

Total Productive Maintenance

The relation between optimal maintenance and flow? Well… no flow disruption: a well-managed maintenance prevents breakdowns. This may seem obvious for manufacturing environments where machines need maintenance, but this is also applicable to service organisations, even in purely administrative environments. Indeed, how motivated will people work when the heating is not functioning in the middle of the winter? Or what will they do when the entire network is down because the IT-department did not take care of recent security patches or anti-malware software?

SMED (Single-Minute Exchange of Die)

A concept very well known in manufacturing, particularly on production lines which are used for several products or product variants and where adapting the production line for another product must be as fast as possible. SMED can also be applied in service environments, however. For instance, airlines all aim to changeover airplanes in a shortest time as possible when on the ground; so to get the maximum benefit of the airplane capacity (one of the most expensive assets of an airline company).

Just-in-time

Also the just-in-time (JIT) concept may be considered as an effect of Lean’s Flow principle. Indeed, JIT’s main objective is to reduce flow times, by removing inventories (which mean standstill) in as many processes as possible. And if you think that JIT is only applicable in manufacturing environments, then think about the importance of JIT for instance in (fast-)food restaurants or home delivery services like parcel service companies.

Kanban

This is again a Lean tool, more especially a scheduling tool to manage Flow. And though Kanban (like most other Lean tools) initially was applied in Manufacturing, it is a nice illustration of how Lean tools have spread towards service organisations. Indeed, my personal experience is that nearly every software company – or software department of larger organisations – apply Kanban for development; at least they very often use visual Kanban boards, to manage the Flow of their software development process.  

Little’s law

Even Little’s law, maybe a less popular concept – not really specific to Lean, but rather better known in the ‘Queuing theory’ domain – is strongly related to Flow; as it aims at minimizing process lead times.

A more systemic view on Flow  

Because Flow is not only a matter of own (internal) processes, I like the “Flow framework” illustrated by Bicheno and Holweg in their book “The Lean Toolbox”.  Through this framework, they recommend a more structural – even systemic – approach towards Flow.

Indeed, your organisation is never an island, but operates in a supply chain, where customers determine the takt-time, say the pacemaker of your operations. Even when your customers are citizens, you are probably part of – something like – a supply chain.

Hence, they recommend to start with an analysis of your (operational) capacity, and how you present it in ‘the market’. This means that you should understand the variation of demand and whether you have the capacity to handle it; so to avoid bottlenecks and unsatisfied customers. As I cannot explain this entire Framework in one blog, I concisely illustrate the essence of how Demand Management may help to optimise Flow.  

Demand management for optimizing Flow

Know and understand the demand

List the sources of demand: listing the sources of demand by product type, customer type and/or by geography – or possibly still other sources – will help you to acquire better insights on how you may manage the demand in a more targeted way. Ex.: when you have overcapacity for a product group or for a region, you may stimulate sales for this group or area. If on the contrary, you have undercapacity, you obviously better not promote this product group too much.

Especially when you are in a business with less, but more important customers, know and listen carefully to your customers. Ex.: I used to work for a power (electricity) producing company which was dealing with industrial customers. The power company used to follow their largest customers very closely, to be able to forecast the impact on the power demand by “special events” – like strikes or shutdowns – with their customers.

Distinguish “value demand” and “failure demand”: value demand is when your operational capacity is used to respond to customer demand; while failure demand is when you are using capacity for example to repair a poor delivery or a failed product that must be replaced. By knowing the % of your capacity which is used for “failure demand”, downtimes, etc. you can better focus on optimising it towards a higher % of “value demand”. Unneeded to mention that other Lean concepts like “right the 1st time”, root-cause analysis, etc. will help you to optimise the degree of “value demand”.

Determine and monitor demand variation over time (per hour, day, week, month, year) thanks to charts and draw control limits, so to find ‘out of control’ peaks and their causes). Ex.: Power supply companies continuously monitor their demand, not only because they have to supply (in real-time) according to the demand; but also to determine the many parameters impacting the demand fluctuation: weather, temperature, time of the day, bank holiday periods, etc. They even use artificial neural networks to continuously improve demand forecasts, based on past demand variation.

Measure ‘end-to-end response time’, i.e. the time taken to meet customer demands end-to-end. This is particularly even more important when you have Service-Level Agreements with your customers.

Level the demand:

Manage (~ level) External Demand

• Reward fidelity: replace quantity discounts by discounts for regular orders instead.
• Simarly, avoid periodic (e.g. monthly, quaterly, yearly) sales & marketing incentives, and rather give incentives for regular orders & deals.
• Organise marketing & sales campaigns to boost (too) calm periods instead. Ex.: a bank which got considerably less saving money in the month of September promoted savings in September by offering a higher interest rate for money saved in that month.
• Apply the “variety as late as possible” principle; i.e. when you offer variety in your products or services, put the ‘customer order decoupling point’ as late as possible in the process. Ex. when you want to offer a personalized product – like rather exceptional options – find out how you may personalize it at the end of the process, so you can keep the largest part of the process common (standard) for all variants.
• When possible, offer Revenue management or Yield management conditions, useful techniques to optimize the capacity usage. A typical example is when airlines offer Early-bird discounts or last-minute flights, so to maximize capacity usage of airplanes and thus revenue.
• Know – or anticipate on – the variation as far as possible upward in the supply-chain; see the bullwhip effect in the beer game like explained in blog of 29th of March 2015. Hence, expect from your supply chain partners to share information, and share information yourself with your supply chain partners.
• Vanish the inventory valuation principle, where inventories seem to be a (kind of) value creation for the company; which is in reality, in contrary, a cost. Indeed, still too often, accounting rules have a perverse effect of valuing inventories, while those are most often a kind of waste. Applying Lean Accounting may help to avoid this.

Manage (~ level) Internal Demand

• In Manufacturing environments, try to decrease the number of parts (i.e. work down the bill of materials) and to increase ‘commonality’; this kind of standardization is obviously also applicable in service organisations. You can even get a paper on this (see end of this blog). Ex.: using the same frame or power train for different car models; or keep the assortment of your business services as standard as possible. Service-oriented architecture (SOA) in the software industry is a nice example of re-usability of software code through ‘commonality’.
• Avoid ‘handovers’ wherever possible: not only in manufacturing; also in service and administrative processes: e.g. avoid too many transitions between actors who have to hand over partly finished work. This corresponds to many transitions between (swim) lanes in a process diagram.
• Use a ‘pacemaker’ for the main process(es) or for the entire supply chain so to smooth the flow.
• Have a “RRS policy”, i.e. find out how to convert ‘strangers’ into ‘repeaters’, and ‘repeaters’ into ‘runners. Give priority to regular orders anyway in your planning, so you do not ‘let bad drive out good’. Following explanations may help you to understand:
  • Strangers: are those products or services which are processed irregularly, and at unpredictable intervals.
  • Repeaters: are items processed somehow regularly, but less frequently, i.e. at longer time intervals.
  • Runners: are products or services which are processed quite frequently, such as every week.

You may read more on this from following slides.

• Avoid large orders that tend to disrupt regular schedules; you may consider splitting (too) large orders in smaller ones.
• You may use control charts, including “control limits”, like UCL (= Upper Control Limit) and LCL (= Lower Control Limit), which are usually applied to quality criteria; but use these now to detect causes of changes to underlying demand, like you would do to identify causes of changes in quality.

Conclusion

Though this list of effects related to Lean’s basic principle Flow is most probably not exhaustive, I hope it illustrates the importance of it. If you have even more interest in this subject, another book may help you: “It’s About Time – The competitive Advantage of Quick Response Manufacturing” by Rajan Suri.

Please share your own experience with the principle of Flow, or feel free to add other consequences of Flow you know and which I may have ignored to mention in this blog. And receive an interesting paper on (process) standardization for services in a global market.

P.S.: Please share this information with your Facebook friends and fans, LinkedIn contacts,Twitter followers and Google+ circles, through the share buttons below. Thank you!