In the pursuit of business growth, we all want to boost our capacity, profitability, and sales. But here's the kicker: the quickest way to achieve these goals isn't always by acquiring new equipment or hiring more staff. Surprised? You shouldn't be. Let's dive into why.
Assess Current Resource Efficiency
Before you jump the gun, take a closer look at how efficiently your existing resources are being used. This should be your first move, not the last. For instance, if an employee spends 6.5 out of an 8-hour workday at a machine, that's great – but how much of that time adds value that customers are willing to pay for?
Defining Value-Added Time
Value-Added Time is the golden metric. It includes activities that:
- Change the form or function of the product or service.
- Customers are willing to pay for.
- Represent the first time the work is being done.
Now, let's flip the coin. What falls outside the realm of value-added time?
- Rework.
- Verification and checking.
- All the walking, moving, and transporting.
- Storage and waiting.
The list doesn't end there.
A Medical Practice Example
Consider a medical practice. Patients pay for answers and solutions, typically derived from:
- Tests.
- Analysis.
- Shared results with explanations.
Yet, a significant portion of a physician's time is consumed by:
- Walking between rooms.
- Gathering information from previous visits or pre-visit nurse notes.
- Writing and documentation.
Beyond the physician's time, there's waiting on lab results, transporting specimens, and the buildup of specimens at the lab waiting to be tested. Non-value time lurks everywhere.
Manufacturing Clarity
In manufacturing, spotting non-value-added time is more straightforward. If the product isn't undergoing transformation (we say "machine to metal"), it's a prime candidate for minimization or elimination.
Real-World Impact
Let's break it down further with a real-life example. I once worked with a home services company ready to invest in a new van and hire another technician. However, upon closer inspection, the biggest non-value-added time culprit was drive time between appointments.
By implementing basic route optimization, we slashed drive time by 20%. This translated to an additional visit per technician per day, resulting in a direct 20% boost in sales. Remarkably, this growth came with minimal cost increases, and a whopping 85% of it flowed straight to the bottom line.
For a $2,000,000 HVAC company, that equates to a staggering $400,000 annual revenue increase, with a remarkable $340,000 hitting the bottom line!
The Takeaway
Non-value-added activities are all around us. Don't underestimate the power of minimizing these inefficiencies – often, it's a bigger opportunity than simply throwing money at new capacity.
