Things to know before we start -
TOTAL LEAD TIME
(also called total cycle time, process lead time, or total cycle time): The time from when
a work item enters a process until it exits.
EXAMPLE: Total Lead Time of a mortgage process could be measured as the elapsed
time from when an applicant calls until the mortgage closes (average = 33 days).
THINGS IN PROCESS (TIP) or WORK IN PROCESS (WIP):
Any work item that has entered the process and not yet exited. Can be anything:
materials, orders, applications, emails, etc.
EXAMPLE: There were 3300 refinance applications in process at the end of the month.
AVERAGE COMPLETION RATE (Exit Rate or Throughput):
The output of a process over a defined period of time.
EXAMPLE: Average completion rate of the mortgage process = 100 refinance
applications closed/day last month.
CAPACITY:
The maximum amount of product or service (output) a process can deliver over a
continuous period of time. EXAMPLE: The capacity of the process is 120 mortgages
applications/day.
TAKT RATE (customer demand rate):
The amount of service or product required by customers over a continuous period of
time. Process should be timed to produce at the Takt rate. Any lower and customers
are disappointed, any higher and products or service is produced that cannot be used.
EXAMPLE: The Takt rate for mortgage applications is 130/day.
TIME TRAP:
Any process step (activity) that inserts delay time into a process. EXAMPLE: Gathering
up all mortgage applications once/day before entering them into a computer system.
This causes delays for mortgages received during the day, which is a time trap.
CAPACITY CONSTRAINT:
Any activity in the process that is unable to produce at the completion (exit) rate
required to meet customer demand (takt rate). EXAMPLE: Property appraisers can
evaluate 120 properties/day, but customer demand
is currently 130/day. Appraisers are a capacity constraint.
VALUE ADD (VA) TIME:
Any process step or activity that transforms the form, fit, or function of the service or
product for which the customer is willing to pay. EXAMPLE: The sum of the value add
times in the mortgage refinancing process is 3.2 hours.
NON-VALUE-ADD (NVA) TIME:
Waste in a process. Customers would be willing to buy a product or service that did
not have these costs if it meant a lower price. EXAMPLE: Walking paperwork to the
appraisers’ offices. Should be electronic.
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