{"id":535,"date":"2010-11-13T23:58:48","date_gmt":"2010-11-13T23:58:48","guid":{"rendered":"http:\/\/www.saasoft.com\/blog\/?p=535"},"modified":"2010-11-13T23:58:48","modified_gmt":"2010-11-13T23:58:48","slug":"how-do-we-measure-the-cost-of-waste","status":"publish","type":"post","link":"https:\/\/hcse.blog\/?p=535","title":{"rendered":"How Do We Measure the Cost of Waste?"},"content":{"rendered":"

\"\"<\/a>There is a saying in Yorkshire “Where there’s muck there’s brass<\/em>” which means that\u00a0muck or waste is expensive to create and to clean up.\u00a0<\/p>\n

Improvement science provides the theory, techniques and tools\u00a0to\u00a0reduce the cost of waste and to re-invest the savings in\u00a0further improvement.\u00a0 But how much does waste cost us? How much can we expect to\u00a0release\u00a0to re-invest?\u00a0\u00a0The answer is deceptively simple to work out and decidedly alarming when\u00a0we\u00a0do.<\/p>\n

We start with the conventional measurement of cost – the expenses –\u00a0be they materials, direct labour, indirect labour,\u00a0whatever. We just\u00a0add up all the costs for a period of time\u00a0to give the total\u00a0spend –\u00a0let us call that the\u00a0stage<\/em>\u00a0cost<\/em>. The next step requires some new thinking – it\u00a0requires looking from the perspective of the job or customer – and following the path backwards<\/strong> from the intended outcome, recording what was done, how much resource-time and material it required and how much that required work actually cost.\u00a0 This is what\u00a0one satisfied customer\u00a0is prepared to pay for; so let us call this the required stream cost<\/em>.\u00a0We now just multiply\u00a0the output or activity for\u00a0the period of time by the required stream cost and we will call that the\u00a0total stream cost<\/em>. We now\u00a0just compare the\u00a0stage cost<\/em> and the stream cost<\/em> –\u00a0the difference is the cost of waste<\/em> – the cost of all the resources\u00a0consumed that did not contribute to the\u00a0intended outcome. The difference is usually large;\u00a0the stream cost is typically only 20%-50% of the\u00a0stage cost!<\/p>\n

This may sound\u00a0unbelieveable but\u00a0it is true –\u00a0and the only\u00a0way to prove it\u00a0to go and observe\u00a0the process and do the calculation –\u00a0just looking at our conventional finanical reports will not give us the answer.\u00a0 Once\u00a0we\u00a0do this simple experiment we\u00a0will see the opportunity that Improvement Science offers – to reduce the cost of waste in a planned and predictable manner.<\/p>\n

But if\u00a0we are not prepared to challenge our assumptions by testing them against reality\u00a0then we will deny ourselves that opportunity. The choice is ours.<\/p>\n

One of the commonest\u00a0assumptions we make is called the Flaw of Averages<\/em>: the assumption that it is always<\/em> valid to use averages\u00a0when developing business cases. This assumption is incorrect.\u00a0 But it is not immediately obvious why it is incorrect and the explanation sounds\u00a0counter-intuitive. So, one way to illustrate is with a real example and here is one that has been created using a process\u00a0simulation tool – virtual reality:<\/p>\n

<\/object><\/p>\n","protected":false},"excerpt":{"rendered":"

There is a saying in Yorkshire “Where there’s muck there’s brass” which means that\u00a0muck or waste is expensive to create and to clean up.\u00a0 Improvement science provides the theory, techniques and tools\u00a0to\u00a0reduce the cost of waste and to re-invest the savings in\u00a0further improvement.\u00a0 But how much does waste cost us? How much can we expect … <\/p>\n

Continue reading “How Do We Measure the Cost of Waste?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10,18,25,42,43,45],"tags":[52,53,78,114,300,307],"class_list":["post-535","post","type-post","status-publish","format-standard","hentry","category-business","category-finance","category-information","category-how","category-why","category-what","tag-accounting","tag-activity","tag-cost","tag-finance","tag-value-stream","tag-waste"],"_links":{"self":[{"href":"https:\/\/hcse.blog\/index.php?rest_route=\/wp\/v2\/posts\/535","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hcse.blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hcse.blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hcse.blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hcse.blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=535"}],"version-history":[{"count":0,"href":"https:\/\/hcse.blog\/index.php?rest_route=\/wp\/v2\/posts\/535\/revisions"}],"wp:attachment":[{"href":"https:\/\/hcse.blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=535"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hcse.blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=535"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hcse.blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=535"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}