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Calculating reduction in end 2 end proess time

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  • #24104

    Mamph
    Participant

    Quick question!!  How is the best way to calculate savings when reducing an e2e process through reducing the service level?  For example, a process currently has an SLA of 10 working days but is being reduced to 5 working days as 10 is unacceptable. Please help!! 

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    #57728

    Torrance
    Participant

    Mamph – try to think of things that will be
    affected if you reduce your process time, either
    directly or indirectly.
    Some questions to help….
    Does it allow you more capacity? Does it mean less
    people required, or less Overtime? Does it means
    additional revenue potential due to increased
    throughput…….. Or does reducing the time from 10 days to 5
    not really have a cost benefit – it’s purpose is
    more to enhance customer satisfaction.
    You don’t always need cash benefits – a balanced
    scorecard asks you to look from at least 3 other
    perspectives.
    Does this help?Davy T

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    #57731

    Sorour
    Participant

    One option is to Value Stream Map the process. This will allow you to assign times to the various tasks within the process and also to identify the lag time between tasks. If your improvements reduce lag time only then there is no quantifiable €$ benefit but there is a customer impact. If your improvements include reductions to the task times then you can identify the total minutes, hours saved in a year and working with your finance department find out the employee cost per hour. This will be a soft saving if staff numbers remain unchanged.

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    #57733

    Torrance
    Participant

    Paul
    Only if you reduce the headcount and therefore your
    fixed/variable costs, then that could be claimed.
    I’ve heard lots of people claim cost savings based
    on number of hours x cost, but it isn’t real – and
    in my opinion it’s a stretch to call them soft
    savings. I also feel by claiming cost benefits like
    that, it can affect the credibility of Six Sigma or
    Lean. Why not leave the benefit as what it really
    is? E.g. leadtime, cycle time etc.
    I tend to disagree with your thoughts on lag time
    if it is in a manufacuring environment (and some
    service environments where money is paid following
    a service) – if you can show additional revenue as
    a result of reduced lead-times, then that is a real
    cost benefit – from both additional
    capacity/throughput, but if managed well from a
    working capital viewpoint as well – it would depend
    on your cash to cash processes. So reducing lag
    times can have an impact on cost – it’s labour
    hours multiplied by employee cost per hour that is
    dubious, at best.For me, moving costs elsewhere isn’t effective, and
    care should be taken if attempting to argue those
    as savings. Davy T

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