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How Much Time is Needed for Process Improvement

Bizmanualz Solutions:

Part 3 of a four-part series

The last article discussed how to identify business metrics and diagnose business situation outcomes needed to drive results. But there is another important metric, time. This week we will discuss how long it should take to achieve our target objectives and what other resources we will need to build our action plan. Then you will be ready to set your objectives for real process improvement .

Process Improvement Half-life

The time it takes to achieve 50% of the target is called the process improvement half-life.

The term explains the diminishing returns that you will realize on your process improvement projects. In the beginning of an improvement project you will typically find the biggest waste up-front. But, as time progresses, you will find fewer big opportunities for improvement and end up focusing on smaller and smaller projects with lower savings.

This dynamic is a quality standard also referred to as the Plan-Do-Check-Act learning loop or ‘PDCA cycle’, which is at the heart of any improvement process such as one for ISO compliance. Improvement teams cycle around the PDCA learning curve. With each new cycle the team identifies and eliminates the largest remaining root cause of defects, then moves on to the remaining sources of defects. As the team moves down the improvement learning curve their results diminish.

Process Improvement Complexity

The actual improvement half-life is a function of the organizational or design complexity of your management systems. Processes with many steps, long cycle times, or that involve many people are complex and will require a lot more time.

For example:

GM’s order-to-delivery cycle was 54 days in 2000. GM cut their order-to-delivery cycle by 50% by 2004. There goal is an order-to-delivery cycle of 7-10 days. How many periods are needed to achieve the goal?

The formula is simple. We add the goal (7 days) to half the difference between where we are today and the goal. In GM’s case they cut their order-to-delivery cycle from 54 to 27 days or by 50% in four years. So, in their next cycle of four years they will be at 17.

–1st cycle: 54 - 27 = 27 in 4 years (2000 to 2004)

–2nd cycle: 7 + (27 - 7)/2 = 17

–3rd cycle: 7 + (17 - 7)/2 = 12

–4th cycle: 7 + (12 - 7)/2 = 9.5

–5th cycle: 7 + (9.5 - 7)/2 = 8.25

–6th cycle: 7 + (8.25 - 7)/2 = 7.625

–7th cycle: 7 + (7.625 - 7)/2 = 7.3125

To reach their goal of 7 to 10 days will take three more cycles or 12 years. We estimate their delivery cycle will go under 10 days in 2016. Of course GM’s real problem is that Toyota is at 12-15 days now, which means that Toyota has a 6-8 year learning curve lead on GM.

Process Improvement Skills

Active improvement will require support from top management, experienced change leaders and everyone else. Top management needs to be reasonably up-to-speed on the topics we have discussed regarding picking the right objectives. Next, change leaders will be needed that are familiar with process improvement methods, tools and techniques such as six sigma, to recruit and facilitate change teams. And finally, everyone will need to be involved and committed in the whole process of change.

Improvement Action Plans

We have discussed the metrics to focus on; the business situations to involve and we should have a pretty good idea by now of whom we think needs to be involved. What we need is an Action Plan. The Plan identifies who does what by when to achieve each objective. We will list each step with a measurement point and utilize the Action Plan to monitor and achieve the objectives.

For example let’s say we are going to increase sales 10% within 12 months. Then we will want to assign the tasks to specific individuals with a date and measure. The plan is used to communicate the schedule and responsibilities. The plan will contain our business metrics, the improvement half-life measures for milestones, and the individuals responsible for the action needed.

Who	What	When
Bob, Marketing	Identify 9 potential customers	14-Jan-04
Bill, Sales	Close 1 customer for 25% plan	31-Mar-04
Bill, Sales	Close 1 customer for 50% plan	30-Jun-04
Bill, Sales	Close 1 customer for 75% plan	30-Sep-04
Bill, Sales	Close 1 customer for 100% plan	31-Dec-04

This week we discussed process improvement half-life or how long it should take to achieve our target objectives. We also introduced what other resources we need to build our action plan. What’s next? You are almost ready to set your objectives for real process improvement at your organization. Next week we will discuss buy-in or how to get everyone involved in the process of improvement and empower employees.

Learn more on process design, implementation and continuous improvement with a How to Create Well-Defined Processes Class coming up June 16-17 in St. Louis , MO.

Part 1: How to Transform Objectives into Results?
Part 2: Identify Business Metrics and Business Situations to Drive Results
Part 3: How Much Time is Needed for Process Improvement
Part 4: How to Get Buy-in to Ensure Results