Process Improvement

Calculations & Tools

Quick Reference

Process Improvement Calculations & Tools

Steps to Lean Improvement

1. Identify the customers and determine how the process provides value to them
2. Reduce obvious waste with layout, better information-sharing, smaller batches, 5S, visual management, &
scheduling
3. Separate repetitive processes from unique processes and find ways to make unique processes repetitive
4. Map the process flow to determine value-added and non-value-added activities
5. Identify bottlenecks and causes of variability
6. Focus Kaizen projects on processes that cause bottlenecks and variability
7. Identify opportunities for cross-training to improve process performance

Hierarchy of Process Discovery

This is the evolution of detail of analysis:
1. SIPOC—to provide high-level scoping of the process
2. Swimlane Diagram—to document process steps, and illustrate wastes of hand-offs
3. Value Stream Map—to identify product, process, and information flows with value-add percentage
4. Process Map—to illustrate key inputs needed for detailed problem-solving

Name Description When to Use

Process Discovery
SIPOC A diagram that provides high-level scoping of the Start with this diagram to
process. determine the process
Suppliers—provide inputs to the process scope and stakeholders.
Input—required resources Reference and update
Process—transforms inputs to outputs throughout the process
Outputs—delivered products or services. maturity states.
Customers—stakeholders; identify what
the process provides and delivers to the
customer.
Example:

Last updated: 12/14/2010 1 of 12

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Swimlane Diagram Create a flow chart of activities that includes Use during process
roles. Example: discovery to understand
how things currently
operate. It provides the
foundation for the future
state.

Value Stream Mapping A technique of diagramming the flow of Start with this diagram to
information and materials representing a process determine flow. Reference
to provide a product or service to identify product, and update throughout the
process, and information flows with value-add process maturity states.
percentage. [run on sentence; break up
sentence] Use to visually illustrate waste and
apply costs to the process. Example:

Process Mapping The activity of representing processes so that the Develop a process map to
current process may be analyzed and improved. capture the current state.
Example: Reference throughout the
process maturity states.

2 of 12 Last updated: 12/14/2010

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Selecting Process Metrics

Select the metrics that best help visualize a process and address the specific issues of interest.
• While documenting the current state, quantify cost, service, and quality.
• Highlight areas of value, waste, and bottlenecks.
• Consider metrics that are relevant to the specific business process.
• Consider establishing simple, quick ways to collect performance data on an ongoing basis.

Operational Measures Customer Priorities Financial Measures

• Flow time • Price • Profits (absolute)
• Throughput • Quality • ROI, ROA (relative)
• Inventory • Time • Cash flow (survival)
• Process cost • Variety
• Quality
• Utilization

Name Description When to Use

Selected Process Improvement Tools—There are many tools and measurements you may use to
analyze process performance and identify issues. This is a selected list of tools and calculations we
are likely to use.
5S Method for organizing the workplace This is one of
the first steps
1. Sort—get rid of anything unnecessary
of continuous
2. Set-in-Order—make important items visible and self-explanatory improvement.
It is useful from
3. Shine—clean the work space and equipment
initial process
4. Standardize—establish guidelines for sorting, ordering, and improvement
shining. throughout the
life of a
5. Sustain—adhere to these rules. Develop an audit system or rating process.
system if needed.
5 Whys Ask “Why?” until you get to the root cause. Five iterations of questioning Use during the
usually achieve identification of the root cause. This could be conducted by early stages of
one person who is knowledgeable about the process or among a team. process
maturity.
Analysis of A statistical test to determine if the means of several groups are equal. Use to analyze
Variance variability.
(ANOVA)
Available The amount of time an organization is open for business and able to Collect during
Time process the work. Remove time dedicated to other processes and break process
time. discovery. This
is a common
value stream
metric.

Last updated: 12/14/2010 3 of 12

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Name Description When to Use

Batch Size This refers to employees completing tasks for several components before You may wish
providing them to the next step in the process. For example, scheduling to calculate or
specific work to be done only on certain days, or completing ten documents estimate batch
before sending them to an editor. If completed work is passed along to the size for the
next process immediately or in small batches, the process flow becomes value stream
more efficient. map to identify
waste. Reduce
batch size as a
strategy for
process
improvement.
Cash Flow Movement of cash into or out of an organization during a specific time This is a
period. In ITS, this would likely focus on operational cash flows; cash financial
received or expended as a result of business activities. measure you
may wish to
use to identify
process
concerns.
Capacity The ability to produce an output. It is derived from the output produced and Collect during
the potential output which could be produced if the capacity were fully process
recognized. discovery. This
is a common
value stream
metric.
Cellular Put different functional performers in the same physical location. This Use as a
Layout (a.k.a. reduces hand-off and transportation delays. strategy for
Production process
Cell Layout) improvement.
Changeover The time it takes to change from one activity to the next. This is analogous Collect during
Time to setup time. It may refer to changing from one task to another, setting process
aside the first task. This requires some re-acclimation time. discovery. This
is a common
value stream
metric.
Coefficient of This is a good measure of variability. It is the ratio of standard deviation to Use to
Variation average. We measure it both for customer arrivals and services. If you determine
don’t have variability data, assuming a coefficients of variation of 1 results variability.
in a practical worst-case estimate.
Cs = Std Dev / Average
Continuous Designing a work environment so people who provide hand-offs to others Use as a
Flow are located close to each other to avoid delay. Process work in small process
Processing batches or avoid batching all together. improvement
technique
when
appropriate.
Review
throughout the
maturity states.

4 of 12 Last updated: 12/14/2010

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Name Description When to Use

Defects Per Identify specific opportunities for defects in order to eliminate defects. In an Use this to
Million office environment, this can apply to deliverables that require correction or measure
Opportunities rework. process
(DPMO) performance.
DPMO=Total Number of Defects/Total Number of Opportunities for a
Defect, then multiply by 1 million.
Demand Rate The number of transactions or outputs per a specified time period. For Collect during
example, 500 items per year. You may also provide this as an average on process
a value stream map. discovery. Re-
evaluate
Demand Rate = 1 / Takt Time
throughout the
process
lifecycle.
First Pass Multiply the individual quality measures for each process. This represents Collect during
Yield (FPY) the likelihood that a deliverable will go through all process steps without a process
quality-related problem. discovery. This
is a common
value stream
metric.
Flow Time It is the sum of all process time. Collect the actual time it takes a performer Use to
or process to complete an activity, and total the activity times for the critical determine the
path. effects of
variation and
operational
performance.
Gantt Charts A bar chart that illustrates a project schedule. Use to
illustrate time
performance.

Information This describes the software tools needed to process information at each Collect during
Technology process box in a value stream map. Record this in a lower corner of the process
Used process box. discovery. This
is a common
value stream
metric.
Inventory In an office environment, this can refer to queues of information, Collect during
paperwork, electronic files, or project work in-development. On a financial process
report, you can use Accounts Receivable to indicate inventory. In inventory discovery. This
was sold, you have to look at actual revenue rather than Cost Of Goods is a common
Sold. value stream
metric.
Inventory = Throughput x Flow Time
Inventory Turns = Throughput / Inventory

Last updated: 12/14/2010 5 of 12

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Name Description When to Use

Kaizen Use throughout

Events the process
In the service industry, it refers to activities that continually maturity states.
improve business functions. This is often executed as a meeting with key
participants in a particular process to brainstorm improvements.
Kanban A scheduling system that prescribes what to produce, when, and how Use when
much. You may use kanban cards to indicate what supplies to reorder. A implementing a
kanban card is a physical card that contains product details that can be pull system.
used to order more materials when needed. Constant awareness of the
demand rate is critical to this approach.
Lead Time The amount of time between the completion of one activity and the start of Collect during
(L/T) another. It often represents waiting time. process
discovery. This
is a common
value stream
metric.
Leveling Balancing workload among different employees or over time. This may Use as a
require cross-training. strategy for
process
improvement.
Multi Vari Represent variability in a visual way with a series of charts. [I don’t recall Use during
this one. any opportunity for an example?] process
discovery and
redesign.
Number of This may represent the number of people who are capable and trained to Collect during
People do the work, or the number of FTEs needed to perform the process. process
discovery. This
is a common
value stream
metric.
Takt Time Expected rate of demand (customer need). It is the rate of completing work Use when
based on customer need. planning the
future state.
Takt Time=Effective Working Time per specified time period / Requirement
per specified time period
Effective working time refers to the time of availability and resources that
can be dedicated to producing the customer requirement. The time period
you specify can be whatever is appropriate for that process.

6 of 12 Last updated: 12/14/2010

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Name Description When to Use

Pareto Charts Chart based on Pareto’s Law: 20% of the causes contribute to 80% of the
problems. A graphical technique used to quantify problems. Used to
identify the “vital few” problems causing the greatest impact, so that
correction effort can be focused at these, as opposed to fixing the “trivial
many”.

Percent This metric reflects the frequency of complete and accurate information Collect during
Complete and received for processing. Calculate this as simple percent of total. process
Accurate discovery. This
% C&A = (# Complete & Accurate / Total) * 100
(%C&A or is a common
%C/A) value stream
metric.
Pitch The duration of schedule we release to our system. Schedule work in short Identify during
durations and check status at the end of the scheduled timeframe. Address process
workflow problems. discovery. Use
when planning
the future
state.
Reference and
monitor
throughout the
process
maturity
stages.
Poka Yoke Mistake-proofing. Example: designing a software screen or field so users Use as a
cannot enter invalid information. strategy for
process
improvement.
Price Compensation in return for goods or services. This is a
measure used
to indicate
customer
priorities.

Last updated: 12/14/2010 7 of 12

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Name Description When to Use

Process Cost Total the direct and indirect costs incurred during a process. This is an
operational
measure that
can indicate
operational
performance
and in planning
improvements.
Process Time This is a measure of the actual time to complete or process an activity. It is Collect during
(P/T) the amount of time required for one person to complete and review an process
activity or process. This may be presented as a range to indicate variation, discovery. This
along with a description of variation causes. is a common
value stream
metric.
Profits Revenue that exceeds input costs: Use as a
financial metric
Profit = Revenue - Cost
where these
measures are
relevant
process
improvement
drivers.
Project A board in a visible area close to the work that is used to record progress. Implement as a
Tracking Include metrics such as lead time, complete and accurate results, rework, process
Center time, etc. improvement
strategy, and
review
throughout the
process.
Pull System A system of producing outputs based on customer requests. Execute work Use when
according to first-in/first-out prioritization. there is a high
degree of
demand
variability.
Implement to
reduce
inventory.
Push System Produce according to forecasting needs. This may lead to large Use when
inventories. In an office environment, this would refer to scheduling work demand is
according to due dates, monetary value, or some specific criteria. fairly
predictable and
production
variability is
low.
Quality A measure of correctness. Quality may have some objective measures, This is an
such as delivering a product or service accurately according to operational
specifications. There may also be subjective measures due to comparison measure that
to other products and services. Compare outputs or services to can be used
specification guidelines, and survey customers or end users as throughout the
appropriate. process.

8 of 12 Last updated: 12/14/2010

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Name Description When to Use

Reliability The percentage of time that equipment is available when needed. For Collect during
example, the percentage of time that the network is available or the process
computer is functioning properly. discovery. This
is a common
value stream
metric.
Return on A measure of how profitable an organization is in relation to total assets. Use as a
Assets financial
ROA = Net Income / Total Assets
(ROA) measure to
determine
value.
Return on The ratio of gain or loss relative to the investment, usually expressed as a Use as a
Investment percentage. financial
(ROI) measure to
ROI = (gains – costs) /costs x 100
determine
value.
Standard A measure of variability. It indicates the range variation from the average. Use to
Deviation determine
Calculate the mean, then the difference of each data point from the mean,
variability.
then compute the average of the difference values and calculate the
square root.
Standardized Develop job aids and support materials to establish standard procedures Use throughout
Work the evolution
through
process
maturity.
Throughput The rate of good products or services produced per unit time that the Collect during
customer is willing to invest time, money, or resources to obtain. process
discovery.
Throughput = Inventory / Flow Time
Time Collect time measurements for value-added time as well as queue time for This is an
activities within a process. operational
measure that
can indicate
areas to target
for
improvement.
Time in CTq depends on: Determine wait
Queue (CTq) time.
Cd=Coefficient of variation of customer arrivals
Cs=Coefficient of variation of service
u=Utilization of the servers
m=Number of servers
ts=Average service time
CTq = approx. V x U x T
2+ 2 u�2(m+1)−1
CTq = approx. ((Cd Cs )/2) ( ) ts
m(1−u)

Last updated: 12/14/2010 9 of 12

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Name Description When to Use

Trend Charts A chart that reveals performance trends as you can draw a line between Illustrates
two or more pivot points. performance
over time. Use
during process
discovery and
evaluation.

Utilization The percentage of time that the process is busy doing value-added work. Collect during
Processes with high utilization indicate bottlenecks. process
discovery. This
Utilization = Demand Rate / Capacity
is a common
value stream
metric.
Value-Added Process time that is spent on value-added activities. Collect during
Time process
discovery. This
is a common
value stream
metric.
This is a tool to relate capacity, variability, and inventory or delays and
Variability Use to
understand waiting times, capacity pooling and investment decisions.
Utilization determine
Utilization Formula=Rate of demand/Rate of service
Time (VUT) variability.
Utilization = Rd / Rs
Variety This refers to customer priorities and demands. The more variety in This is a
demand, the more variety in the process. This information can enable potential
educated decisions for process improvement, such as limiting variety, customer
allocating resources to accommodate the customer needs, or establishing priority
a pull system. measure. Use
this information
to determine
process needs.
Visual Control Establish visual signals in the workplace to control an activity or process. Implement
Signals can take many forms: during the
early stages of
• Outlines for locations of tools or equipment process
• Status indicator lights maturity. Use
throughout a
• Display boards with metrics process
• Direction indicators lifecycle.

Voice of the Capture customer’s needs, and preferences. Organize and prioritize these Use throughout
Customer to guide work production. You can obtain this information by conducting the process
(VOC) individual interviews, focus groups, surveys, etc. lifecycle.

10 of 12 Last updated: 12/14/2010

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Name Description When to Use

X/Y Diagram A chart that compares pairs of values for two separate measurements. Use as a visual
(a.k.a. Scatter representation
chart) of variables to
identify
performance
issues.

Y = f (X) Calculate expected yield. Outputs are a function of the inputs. Use during
process
Y = f (X1, X2, …Xn)
discovery.

Conclusions from Data Analysis

• If throughput is less than the demand rate, all customer demand is not being met!
• The capacity of the process is defined by the rate of the process with the smallest capacity.
• To measure variability, you need to know average and standard deviation.
• Coefficient of Variation is a good measure of variability. It is the ratio of standard deviation to average.
We measure it both for customer arrivals and services. So Cs=Std Dev/Average
• Systems with variability must be buffered by:
o Inventory
o Capacity
o Time
• If you can’t reduce variability, you’ll pay in high inventory, under-utilized capacity, or reduced service

Time and Little’s Law

Inventory = Throughput x Flow Time
Inventory Turns = Throughput / Inventory

Identifying Process Improvements:

• Identify all process improvements that will be necessary to implement the future state
• Create a list of Kaizen opportunities and annotate the map with them (Kaizen bursts)
• Prioritize the process improvement opportunities
• Implement strategies that have immediate impact first
• Track significant efforts as projects
• Consider Six Sigma strategies for projects with unknown solutions and root cause unidentified

Last updated: 12/14/2010 11 of 12

Information and Technology Services Process Improvement
Calculations & Tools
Quick Reference

Future State Questions

• What is the customer need and how are we doing in serving this need?
• Which steps create value and which are waste?
• How can we maintain work flow with fewer interruptions/handoffs?
• How can we manage prioritization and control interruptions and handoffs?
• How can a process team balance the work load and/or different activities?
• What pitch would be most effective? (duration of schedule)
• What process improvements and reviews will be necessary?

References
• Metrics for IT Service Management—A book by the IT Service Management Forum that considers the
design and implementation of metrics in service organizations.
• Duenyas & Lynch, 2008, Lean Office Certificate Program course materials, The University of
Michigan
• Keyte & Locher, 2004, The Complete Lean Enterprise, New York, NY
• http://www.wikipedia.org/

12 of 12 Last updated: 12/14/2010