Flow Metrics In Five Minutes

One of the more frequent comments I get with the LAD metrics is I want to use them, but I don’t feel comfortable that I know what they mean or how to use them. When I hear that I tell them give me five minutes and I can teach you enough that you can start utilizing this dashboard to your team’s benefit.

What are these metrics and why are they important?

Cycle Time, Work In Process(WIP), and Throughput are referred to as flow metrics meaning they help measure the flow of our value delivery process. Our goal obviously is to have a consistent flow of value delivery and these metrics will help us understand how well our process is flowing and where we have opportunities to improve. They are the foundation of 80% of all the metrics in the LAD so if you can understand these three then you can understand almost everything else.

Cycle Time — The amount of time it takes to complete an individual item. It is a measurement of responsiveness and thus our ability to pivot and capitalize on new opportunities. Cycle time is probably the most important of the three metrics because cycle time represents value delivery either directly or indirectly.

WIP — The number of issues that are in process(being worked on) over a given period of time. In the case of the LAD we use weeks as our unit of measurement for time. WIP is the second most important of the three metrics because WIP is the biggest lever we have available to us in influencing cycle time.

Throughput — The number of items that are completed(closed) in a given period of time. Throughput is a measure of productivity and while it is important it is secondary to cycle time. Productivity in the absence of responsiveness doesn’t mean a lot. For example if I own a restaurant that kicks out 200 dinners/night, but each one of those dinners takes on average 1 hour and a half to get out then I likely won’t be in business very long.

Little’s Law — Avg Cycle Time = Avg WIP / Avg Throughput This actually an adaptation of Little’s Law which comes from queuing theory. It provides us the relationship between the three metrics. By understanding this you can begin to determine the amount of impact changing one or two of the metrics will have on the third

How do I interpret this dashboard?

The first thing you should look at are the arrows in the upper right or left hand corners of the exhibit. They indicate the direction of the trend. Green means the trend is going in the right direction, red means it is going in the wrong direction. You will probably want to start with the metrics with red arrows.

Next look at the trend lines. The arrows tell you if the direction is good or bad, but by looking at the trend line itself you can get an idea of the magnitude of the trend. In the image above I can see that WIP and Cycle Time are both trending up, but the trend is only slightly upward. Throughput on the other hand has a more substantial upward trend.

The third thing you can glean with just a glance is consistency. Consistency = predictability. For instance I would much rather see a team that has higher cycle times, but is consistent week to week than a team where you have no idea what you are going to get on any given week even if some of those weeks their cycle time is great. The consistent team will be more predictable and likely has a more stable process. In the charts above you see there is a fair amount of variance in all the metrics week to week.

So, given that small amount of knowledge I know right away there are two things I can have the team work on that can have significant benefit. First that the cycle time is moving in the wrong direction along with WIP. Since we know WIP is the best opportunity we have to bring down cycle time can start discussing opportunities to reduce our WIP. Second that we have a lot of variation week to week which we know will make us far less predictable and may also indicate we have instabilities in our process. The team can start to look at why they have inconsistencies and opportunities for addressing them. Pulling on those two threads alone will start to uncover a lot of opportunities for improvement. There you have it. Five minutes and will have enough information to likely fill your process improvement plate for quite a while.

There is obviously a lot more information we can dig into on this dashboard alone, but the point was to lower the barrier of entry to begin using it. I hope this helps and would love to hear your feedback.

Enjoy!