"Time is the only scarce resource in the world today."
— Thorton May
"Historically, most American companies have emphasized customer satisfaction, price realization, and cost reduction to increase sales and margins. The Westinghouse Cost-Time perspective adds total cycle time of the business to this list and uniquely focuses on investment management, as an operational issue."
— Westinghouse Vice President Jack H. Fooks
Recognizing the importance of time.
Today's managers typically recognize the importance of cycle time when evaluating white and blue collar activities. Few, however, know how to measure the impact of cycle time on their day-to-day operations – or how to use this analysis in their strategic planning.
Why is an accurate understanding of cost-time important? Competitive position can be easily upset with dramatic shifts in the product cycle time (order through delivery through payment). Customer value and loyalty improve when cycle times are shortened and consistent. Costs can be squeezed out of the process by doing things right the first time, thus eliminating the use of overtime to meet the end-of-month crunch and minimizing rush orders.
One of the major innovations of the Westinghouse Productivity and Quality
Center (WPQC) was the invention of cost-time methodology. The cost and cycle
time for every business process is directly related to its activity. Unlike
traditional methods of measuring process improvement – which can be cumbersome
and subjective – the WPQC method accurately and simultaneously evaluates
three key production areas: direct costs, labor and cycle time. In the pictured
chart (profile), vertical lines represent purchased materials or outside services,
the diagonal lines are labor or work performed, and the horizontal lines are
The same process is used to profile the
redesigned process’ cost and cycle time. Recommendations
for investments can then be judged from a “what if” return-on-investment
vantage point during the redesign process, and only those that
make good business sense survive and are recommended for management
The Cost-Time Profile diagrams the accumulation
of cash during each unit of time across the entire business
cycle. Cycle time reduction is the principal driver for shrinking
investment and increasing operating profit margins. Typically,
a 50% reduction in cycle time produces a dramatic reduction
in the cost of labor and material, while increasing process
speed and the capacity to grow.
Performance Associates has taken this Cost-Time analysis to a new level by
integrating activity cost management into the analysis. While functional departments
are hierarchical in their activity, processes are horizontal as they zigzag
across the entire organization. Measuring both the process and the total employee
activity time can target dramatic opportunities for improvement. PAI’s
performance methodology expands the original methodology’s improvement
focus to now encompass all activity. Processes consume portions of employee
time; activity profiles define their total time allocation. Whenever capacity
is freed up, it must be managed or the return is diminished. See our white paper on Improving People
Performance improvement is enhanced
by managing the new-found capacity through changes in activity,
roles and responsibilities – i.e., doing more with
less. Value-added or revenue-producing activity is expanded,
while essential activity is reduced through simplification
or automation, and non-essential activity is eliminated.
Thus the effectiveness of all activity – not just processes – improves,
while revenues increase and costs are reduced. See our white paper on Strategic
Embedding systematic investment decision-making
practices within the organization is paramount to optimizing
limited investment monies and organizational capacity. Accountability
can only occur through measurement, learning through reflection
and improved performance through success.