Business Analysis and Stockless Production

Imageby Jason Questor
Founding Partner and EVP Learning Systems

Business Analyst professionals spend a lot of time helping businesses become more efficient through formal or informal process engineering. This may be done within the context of a specific project, or as part of ongoing efforts in continuous improvement.  Because business processes produce value only through the deliverables they create, it makes sense to reverse engineer all business processes from precise definition of those deliverables. Deliverables exist to create value for someone, either the business itself (internal customers) or external clients / customers.  As such, it is through the production of value-centric deliverables that enterprises establish and maintain their reason for being.

An important component of continuous improvement efforts is the identification and elimination of waste. LEAN identifies 9 types of waste:

  • Overproduction
  • Waiting
  • Transport
  • Extra processing
  • Inventory
  • Motion
  • Defects
  • No-value products and services
  • Talent underutilization

When it comes to inventory, you enter the realm of Stockless Production. This is based on the fundamentals of push versus pull.

The basic idea of push versus pull is this. Suppose you are creating a mass mailing. Two of the task steps would be to sign the letter and then fold/put the letter in the envelope/seal the envelope.  And you would have to do these in order (you can’t sign a letter once it is sealed in an envelope). Suppose you have two different people doing these tasks.

  • Person 1: signs letters
  • Person 2: folds letters, puts them in envelopes, seals envelopes. (in fact, this might be considered a task group)

If you look at these two tasks, you will see that the envelope stuffing and sealing likely takes longer to do than just signing. So you would end up with a bunch of signed letters sitting around waiting to be stuffed. And the stack would grow and grow.  So you might go to extra expense and have 2 people stuffing and sealing just to keep up.

PUSH

In a traditional manufacturing situation, the process is based on push. That means that the person signing letters does so with no regard for whether the person folding, stuffing and sealing is ready for another letter.  Person 1 signs a letter and pushes it on to an In Basket for Person 2. The result is inventory (a stack of letters waiting to be stuffed).  Inventory is expensive because it takes up storage space and must be monitored for spoilage (in the case of “best before date” items like food) or damage from just sitting around. Also, suppose the person who needs to sign the letter changes because that person has left the company. Now you have a stack of obsolete signed letters that need to be shredded. This is waste.  LEAN is all about identifying and reducing waste.

PULL

In a pull environment, product is produced only on demand from the person who needs that product. So Person 1 does not sign a letter until Person 2 indicates they are ready for one. This means:

  • Person 1 can be doing other work in the meantime
  • No inventory (which is why this is called Stockless Production)

Many manufacturing companies, such as Dell Computers and Hewlett Packard, deploy stockless production / pull techniques to maintain cost effectiveness. For example, Dell does not build your computer until you order it.

VALUE

The process flow is like a river. Rivers flow downstream.  So the task of signing the letter is UPSTREAM from the task of stuffing and sealing.  Also, the task of signing a letter provides VALUE to the task of stuffing/sealing, meaning that an unsigned letter would have no value if we just stuffed it in an envelope.  This implies that you should never do a task unless the next step in the process gets value from having you do it. When you look at all the tasks together, you create what is called a VALUE STREAM.  You do all of this work to ultimately create value for somebody.

From Business Analysis for Business Performance ©2012 Jason Questor. Jason is Founding President of the Toronto Chapter of the International Institute of Business Analysis, and writes and speaks extensively on the subject.

ACHIEVEBLUE’s Business Analysis Program of Courses can be fully customized  to your organizational needs. Our Lead to Succeed Program includes coverage of LEAN and Stockless Production principles in the Continuous Improvement for Managers course.