Waste murders productivity

Whilst few managers measure productivity well, even fewer measure their waste of outputs and costly inputs

Waste arises both internally and externally:

  • Internal waste = When things are not done RFT (Right First Time) and work is rejected or has to be reworked
  • External waste = When things are delivered to customers either not as ordered or not to their satisfaction, so extra costs are incurred for no extra revenue e.g. replacing returns, making second deliveries, dealing with customers more than once to sort out their problems/ queries, patients catching MRSA whilst in hospital being treated

Such waste can be hugely costly viz:

  • Analyse customer demand, especially on service organisations and one can find at least 50% and up to 90% of all customers’ contacts are repeats because their queries were not dealt with right first time
  • To save money, eight London hospitals outsourced thousands of letters to India to be typed from dictaphones, but it didn’t go too well:
    • ‘Eustachian tube malfunction’ became ‘Euston Station Tube malfunction’
    • ‘Below-knee amputation’ became ‘baloney amputation’
    • ‘Phlebitis, left leg’ became ‘flea bite his left leg

The result of such waste is lost sales, extra input resource costs and/ or investment in additional output capacity well before needed

So what are the key measures of waste needed:

  • A% = % Availability of an input resource e.g. % labour not off sick and available for work, % materials in stock, % plant ready to go
  • U% = % Utilisation of said resource e.g. % of total time when at work spent productively rather than sat idle or attending a pointless meeting, say
  • E% = % Efficiency e.g. % actual total good output produced (after rejects, rework or replacements) versus the maximum possible – its capacity – e.g. how fast or slow it worked

The waste multiplier then comes into play viz:

AUE% = % Total net output/ Maximum output possible


It usually gives most managers some very unwelcome surprises – for example:

  • If labour A% was 90%, U% 80% and E% 70%, then the multiplier AUE% would be a mere 50%
  • And if a machine A% was 95%, U% 40% and E% 80%, then the multiplier would be a miserable 30%

In both cases, which are optimistic for many organisations, managers would surely be prompted not only ‘to do something’ but also have a steer on where best to act for biggest effect

But most managers do not have this information – they don’t realise such lost potential is typical, not unusual

In the NHS, for example, managers forever say: “Everyone is working hard and long hours so more cannot be done unless we get more resources” – so the government finds billions more to fund these extra resources, otherwise votes will be lost – taxpayers thus have to pay many more taxes than needed – meanwhile ministers and their advisers dabble with more NHS reforms without understanding what’s really needed or possible

And all because they lack basic measures of the waste of existing resources

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