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The break-even point is the point (number of units sold) where the company can “break-even” and start earning profit. When a product or service is sold to a customer, the company incurs both fixed and variable costs. Fixed costs are the same regardless of the number of units sold. Variable Read more…
The tools, machines, software, or other resources you use to do your job fall into two basic categories. The first type is the most common and contains “off the shelf” resources. The second category includes custom built or highly modified tools, equipment, or even software. Off the shelf items tend Read more…
Delivery is one of the legs of the QDC (quality, cost, delivery) acronym. It is a very simple concept—to get paid, you have to get your product to your customer. For such a simple concept, delivery plays a large role in a company’s performance. Doing well at delivering quickly can Read more…
Backflushing is an accounting method that applies costs to production but can also be used to manage inventory. It is also known as “postproduction issuing.” When an operation is completed, the appropriate materials and other resources are issued against the production order. The inventory levels in the system of all Read more…
Any product or service you purchase has a useful life. After that, the value of continuing to use it declines until it makes sense to move to something more modern. The most common example of this is computers. Software becomes outdated at a regular pace as new hardware is developed. Read more…
Dedicated pieces of equipment are machines and tools that are specified for specific tasks or workstations. The primary purpose of dedicating equipment to a specific process step is to facilitate flow. If a machine is shared, it may not be available when needed, causing items to wait in a queue. Read more…
“WIFM” is a near-acronym for “What’s in it for me?” People tend to be rather logical, cause-and-effect types of creatures. They act when there is a reason to act. The basic premise of this acronym is that when that result of an action is in the best interest of a Read more…
Warehouses are organized storage locations. They can store both finished goods or raw materials and components. While some warehousing can be unavoidable, in general, these types of storage facilities go against most Lean principles. Raw materials and components should be ordered just-in-time and stored at the point of use. If Read more…
One of the basic goals of lean is to create flow. The rationale is that the more that material sits in one place, the more waste it creates. In most cases, this means a single piece of work moving through a connected process. This is where the term “one-piece flow” Read more…
A strong continuous improvement culture requires extensive teamwork, and teamwork requires strong relationships. First of all, let’s start by defining what a relationship is. And its surface, a relationship is simply the way people or organizations behave toward each other. But there is also a deeper layer to relationships. They Read more…
Schedules are an important part of a continuous improvement culture. Daily schedules are used for communication and coordination as well as to highlight problems and improvement activity. For example, many teams start the day with scheduled time to get their work areas checked out and ready to go. They also Read more…
A priority matrix is a decision-making tool that helps, as the name implies, with prioritization. A common matrix will include the importance of an action (or problem) and the urgency of it. The goal is to work on the tasks that will deliver the biggest bang for the buck first. Read more…