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Identify and measure VALUE in Transactions September 8, 2008

Posted by rettema in Free Thoughts, Research Problem.
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Value must be understood in two rather different contexts—the value of the process output to the larger enterprise, and the creation of that value during the carrying out of the individual tasks that make up the process. Measuring progress towards this goal requires metrics.

A Task can be measured by

  • Cycle time (CT): clock or calendar time it takes to do an instance of the task
  • In Process time (IPT): hours of continuous work it take to do the task. Sometimes referred to as Touch Time (TT)
  • Core Process time (CPT): hours (or other time units) of continuous work spent on core task, excluding set up, trouble shooting, information gathering, etc. Sometimes called Value Added time (VAT)
  • Efficiencies such as IPT/CT, CPT/CT or CPT/IPT
  • Lead time: time from known need for task until task completion. Sometimes defined as time from known need until start of active work on task. Use either (but not both!) of these definitions
  • Set up or Changeover time: time needed to prepare resources to do or resume task
  • Fixed or non-recurring costs (what resources must exist for the task to take place, even if they are not used continuously)
  • Cost/job or recurring costs (what resources are expended to do a job)
  • Capacity: how many jobs can be done by a given process or sub-process, with available resources, in a given time.
  • Utilization: at the current workload, how much of the Capacity is actually needed/used.
  • Availability: percentage of time resources are actually available when needed
  • Variation in any of the above (how predictable is the process)
  • Failure rate: percentage chance a task output will be defective, or that a review is failed, resulting in rework
  • Repeat or rework rate: number of times a task needs to be performed in an iterative or rework prone process
  • Downstream task satisfaction (how good is the task output)

Waiting and Inventories can be measured by:

  • Inventory part count: number of jobs in queue (usual factory metric)
  • Delay time: average time a single job waits in queue (typically more useful in PD)
  • Delay time statistics: mean and deviation, or distribution, of wait times (best)

Data can also be collected on the information flows, e.g.:

  • Form: report, computer file (what system?), email, phone call, etc.
  • Format: standard form? Software specific computer file?
  • Size (of file or document)
  • Transmission times and/or costs

Metrics does not identify a value adding step. Chase (1) proposed a list of aspects of value that a task could contribute. Those who add direct value are categorised as “direct value added”:

V1. Definition of End Product with desired Functional Performance
The task affects the definition and/or functionality of the end product delivered to the customer. It contributes directly to either the function or the form that affects the function. For example, requirements specification, design decisions, material/part/subsystem specification, geometry specification, etc.
V2. Definition of Processes to Deliver Product
The task directly affects the processes necessary to deliver the end product to the customer. It includes the design or procurement of the tools and processes necessary for manufacturing, testing, certification and/or other downstream processes, such as the creation of manufacturing and assembly procedures
V3. Reduction of Risks and Uncertainties
The task contributes to eliminating uncertainties in performance, cost, and/or schedule. Typically, tasks include the analysis, prototyping, and testing of the product; the testing of tools/production processes, risk analysis, and cost/schedule management.

Those who still add value referred as “necessary value-added” are:

V4. Forming Final Output
The task directly contributes to the final documentation given to the customer or manufacturer. This typically includes the documentation of the materials, parts, subsystems, and systems, and documentation to meet legal and contractual constraints.
V6. Enabling Other Tasks
The task is necessary for other tasks to proceed, although it does not directly contribute to the design, production, or testing of the product
V10. Other
The task performs a necessary or valuable function not covered in the above categories. Examples may include contributions to work environment, environmental impact reduction, satisfying of regulatory or contractual requirements, the following of mandated processes, or the satisfaction other constraints.

The last category of activities, “necessary non-value-added”

V5. Facilitating Communication
The task aids necessary communication. Typically includes reviews, meetings, and discussions with other company or industry personnel.
V7. Meeting or Reducing Cost and/or Schedule
The task emphasizes maintaining or improving cost and/or schedule, e.g., many management and process improvement tasks.
V8. Learning or Resource Improvement
The task contributes to the skill base necessary to do future work. This definition includes developing greater knowledge, improving tools or processes, creating new technologies, and communicating this knowledge throughout the team.
V9. Enhancing Employee Job Satisfaction
The task is a positive experience that increases the desire of the employee to do similar tasks; it enhances the professional development or skill base of the employee.

These Metrics (measuring progress in value creation) and Value identifying aspects should be mapped to DEMO aspect models.

Source: Product Development Value Stream Mapping (PDVSM) Manual

(1) Chase, James P., “Value Creation in the Product Development Process,” Masters thesis in Aeronautics and Astronautics, Massachusetts Institute of Technology, December 2001.

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