This is Lean: Resolving the Efficency Paradox

I thought this was a great book, a fabulous introduction to help you understand what lean is all about and, just as importantly, what it is not.

The base premise is that lean is about “flow efficiency” as opposed to resources efficiency in how work gets done. Flow efficiency focuses on the amount of time it takes from identifying a need to satisfying that need, whereas resource efficiency focuses on efficiently using the resources that add value within an organization.

Why is this important? For more than two hundred years, industrial development has been built around increasing the utilization of resources. Efficient use of resources has long been the most common way of looking at efficiency. It continues to dominate the way in which organizations in different industries and sectors are organized, controlled, and managed. From an economic perspective, it makes sense to strive for the most efficient possible use of resources. The reason for this is the opportunity cost.

Flow efficiency is defined as a new form of efficiency. Flow efficiency is new in that it breaks with the historical and natural focus on the efficient utilization of resources. Flow efficiency is important because the focus is on the unit that “flows” through the organization: the flow unit. Flow efficiency is a measurement of how much a flow unit is processed during a specific time period. The time period is defined from the time a need is identified to the time it is satisfied.

In a process, something is moved forward; we call these flow units. A flow unit can be material, information, or people. The difference in the dependence is the key factor that differentiates the two forms of efficiency. In resource efficiency, it is more important to “attach work to people” to ensure that each resource always has a flow unit to process. In flow efficiency, however, it is more important to “attach people to work,” that is, to ensure that each flow unit is always being processed by a resource.

The discussion then moves to a a look at Little’s Law, which states that:

Throughput time = flow units in process × cycle time

A couple of definitions:

• “Flow units in process” are all the flow units within the chosen system boundaries: all the flow units that have begun the process but have not yet exited it
• Cycle time is the average time between two flow units’ completing the process and refers to the pace at which flow units move through the process.

And then looks at the theory of constraints - the law of bottlenecks states that throughput time in a process is primarily affected by the stage of the process that has the longest cycle time

Processes with bottlenecks have two key characteristics: Immediately prior to a bottleneck, there is always a line, regardless of whether it is material, information, or people flowing through the process. It is often clear which stage in the process is the bottleneck, particularly when the flow units are material or people. It can be more difficult to see the line at the bottleneck when the flow unit is information, but the line is there. The stages of activity after the bottleneck must wait to be activated, which means they will not be fully utilized. Because the bottleneck is the stage of activity that has the slowest throughput, the stages after the bottleneck will work at a slower pace than they could have.

Bottlenecks lengthen the throughput time as a line of flow units forms and waits to be processed. This can be understood using Little’s Law. As there is a line, there are flow units in process. Given that we do not change the cycle time (by adding extra resources or working faster), adding flow units in process will increase throughput time.

There are two reasons bottlenecks appear in processes. The first condition for bottlenecks is fulfilled if the stages in the process must be performed in a certain order. The second reason bottlenecks exist is variation. There needs to be variation in the process. In principle, it is impossible to eliminate variation, and it has been shown to have a very negative effect on processes and flow efficiency.

This relationship was formalized in the 1960s by Sir John Kingman in his famous Kingman’s Formula (see What Is Wrong With 100% Utilization Thinking? for more information). The figure shows how throughput time (on the vertical axis) is dependent on utilization (on the horizontal axis): Throughput time increases the higher we move up the vertical axis. Utilization (which we call resource efficiency) on the horizontal axis is a measure of how efficiently the resources are utilized. The closer to one hundred percent, the higher the resource efficiency.

Of course this is a particular problem for software systems - there is a lot of variation.

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