In my last post I presented you Rajan Suri’s Power of Six – the relation between turnaround time and product cost. In this post I extend his work to apply it to not the entire value stream but to segments of the value stream. Enjoy!
Time is money. You know that. But with respect to product cost and lead time, there is a rule of thumb that estimates this relation. Let me present to you the “Power of Six,” discovered by Rajan Suri. This gives you a rough estimate of how the lead time of your products influences the cost and vice versa. This first post looks at the original work, and my next post applies this rule also to segments of the value stream.
I am Chris Roser, a professor for production management; a lean expert; a Toyota, Bosch, and McKinsey alumnus; and I’m interested in the past, present, and future of manufacturing. I lived and worked for multiple years in the USA, in Japan, and in Europe. I run a blog, AllAboutLean.com, and just completed my first book, “Faster, Better, Cheaper” in the History of Manufacturing: From the Stone Age to Lean Manufacturing and Beyond.
Your production capacity is one important aspect of your production system. The capacity has to match your demand. If your demand is higher than your capacity, then you will not be able to supply the customer. On the other hand, if your capacity is higher than the demand, then you will have lots of idle workers and machines, which is not good either. The name is actually a bit of a misnomer, since capacity is the ability to contain things, whereas for a production system we are much more interested in the number of parts that are completed. In any case, capacity is important!
The customer takt (or takt time) is one of the fundamentals for determining the speed of a production system. After my post on How to determine Takt Times, this second post on takt times gives a bit of history, and then goes into more details about possible pitfalls and problems when calculating the customer takt. I also added an example for easier understanding.
The customer takt (or takt time) is one of the fundamentals for determining the speed of a production system. It represents the available time divided by the average demand of the customer during that time. Effectively this is the average time between the order of one item. Whenever you design a new production system or change an existing system, one of the early data inputs you need is the customer takt. While the customer takt can be simply calculated by dividing the demand by the time available for production, there are many more details needed to understand it fully.