Takt time and inventory control. What is this?

Take time is the rhythm of the process
Take time, the rhythm of the process

In continuous improvement, there is something called takt time.   Takt is a German word used to indicate the beat of the music.  In CI, we used it to designate the rhythm or beat of a process.  It is intended to tell us the rhythm or cadence at which a product or service should be completed. In other words, how much time between units.  With takt, we try to accomplish two things. One is to produce anything more than what the customer needs. The second is to avoid inventory.

Take time calculation

One challenge to accomplish this is that we never know for sure how much the customer demand will be. Looking at numbers in real-time is the fastest and better indicator of whether things are going as expected.  Historical data tells you what you can expect. By comparing this number against what you are selling, you can adjust the inventory.  You can increase, decrease, or even stop before you have too little or too many.  If you are flexible, you can even swap your focus to the item that is selling more.  What does any of this have to do with takt time?

Takt is the available time divided by customer demand.  The resulting number tells you how often you need to complete one product or service.  It provides some cadence to the process.  Be aware that takt is not the same as cycle time. Cycle time is how much time it takes to complete the product or service.  Let’s see an example of how you can use it.

Example of how to calculate takt time

In Breakfast 24, a cafe that serves sandwiches and breakfast all day. The owner knows that their high-demand days are Tuesday to Thursday.  Those days, they sell between 70 to 80 sandwiches during the first four hours of the morning.  They prepare and have ready some components for the sandwiches, like lettuce, tomato, bacon, and others.  They don’t want to cut too much lettuce and tomatoes because they want to cut them as close as possible to the time the customer requests them.  Not everybody likes salad on their morning sandwich. Historical data said that 45% of their customers do.  With those numbers, they calculated a takt time for those 4 hours.  To satisfy customer demand, the kitchen needs to complete a sandwich with salad every 7 minutes.

On average, every 7 minutes, a customer requests a sandwich with salad.  If they want to have enough lettuce and tomato for, let’s say, the next 30 minutes, they need to prepare enough for four sandwiches (30 ÷ 7 = 4.29). If they want to have enough for one hour, they need enough salad for 8 to 9 sandwiches.

Each hour, they have a visual cue that tells the cook helper if they are selling what they expect or more.  If one day, sales are slower, when the helper comes back to prepare more, he will see that they still have inventory, so he will prepare salad just enough to complete eight, not the entire batch of eight.  If, on the contrary, they are selling more than expected, the cook will notice that he used all the inventory in half an hour, and he will ask the second helper to prepare more.  The inventory number that will trigger the request, as well as who will be responsible to prepare it are part of the standard work for that task.

Standard Work, Inventory Control, and Demand

Takt is a number to use as a reference to learn about the process demand.  Standard work has three components, job sequence to complete the job, how often needs to complete the product or service to meet customer demand (takt time), and the amount of work in process inventory.  Every cook helper will follow the same standard work, which means that all of them will follow the same steps in the same order, and they know how often they need to prepare the amount of salad inventory and how much.  That is how you can control inventory using takt time.  If you don’t like the German word, call it something else, it does not matter.  The important thing is that you are not creating any more inventory than what you need.  

Customer demand, do you want to satisfy it?

Why do you need to understand customer demand?

When you practice continuous improvement, the goal is to provide your customers with the highest quality, at the lowest cost, in the shortest time by eliminating waste.  You aim to provide them with the value they are looking for at the time they need it.  Understand and satisfy customer demand is not an easy task.  To understand customer demand, you need to understand the volume, the mix, and the variability.

Understanding demand

How does the sales volume of your products change over time?  Is it seasonal?  Can you identify peaks and troughs?  For example, the sales of all kinds of outdoor sports gear have their peak during the summer, while arts and crafts increase during the winter.  Fall and winter are baking seasons, while the summer is grill season.  

How the mix of products that you sell looks like?  There is a good chance that 80% of your sales are made up of 20% of your products.  Finally, you need to understand the variability of the demand.  Are those volumes steady, or do they change often?

In a perfect world, you would be able to produce what they need; at the time they need it.  But the world is not perfect, and most probably, you respond to volume, mix, and variation by overproducing and creating inventory.  Both things are waste in the continuous improvement world.

How to respond to demand changes

To respond to all these changes without over-producing, you need to be flexible.  Design the work area to allow for changes.  Consider the use of worktables and equipment on wheels that you can move when you need to change the configuration or layout.  Team flexibility is critical to react to changes in demand or mix.  Make sure that cross-training and people’s development never stop.    

Another critical piece is to schedule your product to respond to those changes without the ups and downs of demand.  You do that by using production leveling.  Using the volume, mix, and variability information, you can classify your products this way.

  1. Runners – Top sellers, orders with high volume and high frequency with little to no variability.
  2. Repeaters which are moderate volume and order frequency.  Their variability is moderate too.
  3. Cats and dogs or strangers which are low volume and frequency with high variability.

After you classify your products within one of these categories, you are ready to design your leveled schedule.  Your goal is to set up a series of workstations that build products as per demand.  You can have dedicated lines for your runners while grouping similar repeaters with similar ingredients or materials in the same work area or lines.  Cats and dogs are so infrequent that you should consider making them to order.

Use your data to understand your customers, the customers or their buying habits give you the answer you need to improve your processes.  Knowing all the details about demand will help to satisfy your customer demand without incurring high inventory costs and all kinds of waste caused by overproduction, which is the worst of the 7 wastes.

Do you know what is the best thing you can do to achieve Customer Satisfaction?

If you have a business, then you know how important it is to know how much the customers like your service or product. They are the best source for learning about improvement opportunities, their ideas tell you what needs to be improved, and sometimes they even suggest solutions. You need to listen to the Voice of the Customer, if you and your team understand this, you won half of the battle, already.

I remember a situation years ago when one of our most important clients was complaining about a recurring problem. The plant was consistently delivering late, causing them problems with their customers. The root cause analysis pointed to the packaging department, where the team was encouraged to have larger runs. Their goal was to avoid changing products to minimize downtime.

In a different case, the warehouse team was ignoring the 360º inspection before shipping to save time. The customer was receiving products with defects. They wanted to achieve the goal of two hours trucks turn around. The problem with these two examples is that neither of those team leaders understood the relationship between what they do and customer satisfaction.

As a business owner, you need to ensure that your business strategy and goals are aligned. Your team must know the priorities. Encourage asking questions when they have doubts. Talked with them about customer expectations and how their work affects them.

The best thing you can do to achieve your customer satisfaction goals is to accept that your team is first. It has to be a priority for you to train and develop your people. Provide them with the tools and information they need to do their job and opportunities to learn more and grow. If the team feels appreciated, they will be your secret weapon to achieve success. When you take care of your team, they take care of the customers.

Customer value, what is, and how you define it?

The journey to transform your business into a continuous improvement enterprise should start with the definition of value. The CI business management model defines the value of a product or service from the customer’s point of view. How much your product or service is worth for the customer? What are the expectations?

How you find your customer expectations?

Only the customers themselves can tell you. There are a couple of ways to get their input, talking with them, or using social media. The best time for a conversation is right after they received the product or service. Ask about their experience. What do they like? Do they have any suggestions? Listen to what they have to say and watch their demeanor. Social media accounts are another way to receive feedback from customers. Review the comments and ratings often. You can also create polls to survey their opinion.

Customer Value Definition

The information from these three different sources will give you the value definition from the customers’ point of view. Value definition is a critical piece to start your continuous improvement quest. You will use it to classify each process as value-added or non-value-added. Value-added activities are those that transform input into output or change materials or information. In other words, the customers are willing to pay for it. Everything else is non-value-added or waste.

Example of value-add activities

When you go to a restaurant, you expect to receive in a reasonable amount of time the plate you ask for. You also expect that the staff follows any special instructions like cooking the meat the way you request it. You will pay for the food and the service without hesitation. If the restaurant messed up with your plate, that is a defect. Now they have to prepare a second plate, which is overproduction. Both things are waste or non-value-added activities. I bet that you, the customer, are not willing to pay for them.

Businesses need to complete various processes that are critical for operation but do not add value to the customers. Examples of necessary non-value added activities are hiring, payroll, and month-end financials.

Customer value and your business

The entire flow from the customer order to the product or service received is drawn using a value-stream map (VSM). VSM is a special type of flow chart where you can visualize the flow of information and materials. This map is a tool that allows you to see waste and plan how to eliminate it. How to create a VSM will be the subject of a future post.

The priority of continuous improvement is to eliminate waste. Waste elimination will create faster and bigger results. Second, it is to challenge and reduce the necessary non-value-added activities. Minimize the quantity of non-value-added steps will further improve flow and reduce costs. Finally, you will work on optimizing value-added steps.