2.  Consultant – We help clients deploy Lean
management & achieve business performance
excellence.
 Author & Speaker:
Karen Martin, President
The Karen Martin Group, Inc.
@karenmartinopex
2
www.ksmartin.com/subscribe
Shingo Award
winner!
Shingo Award
winner!

3. You will learn…
• How to calculate the financial impact of your
improvement efforts.
• Ways for improving margins (profit) through
expense reduction (but not layoffs!).
• Improvements that help grow your top line
(revenue/sales).
• How to engage executives in the process

4. Why Does
Measuring
Matter?

5. © 2015 The Karen Martin Group, Inc. 5
Engage
Executives
Create Job
Security
Engage
Employees

6. © 2015 The Karen Martin Group, Inc. 6
Improved
processes can’t just
feel better.
They need to be
measurably better.
p. 117, The Kaizen Event Planner
Karen Martin & Mike Osterling

7. 7
When Does Money Matter?

8. ALWAYS

9. Proper Financial Priorities
© 2015 The Karen Martin Group, Inc. 9
1. Grow Margins
(Profit)
2. Grow Top Line
(Gross Sales)
0
2
4
6
8
10
12
2011 2012 2013 2014
Gross Sales
Expenses
Profit

10. Ways to Reduce Expenses
Hard Dollars; Bottom-Line Results
• Less expensive processing
• Reduced paid overtime
• Less expensive shipping
• Eliminate unused software licenses
• Insourcing to existing teams
• Less electricity/water use
• Reduced rent due to smaller
footprint needed
• Supplier renegotiation
• Attrition without backfilling
Soft Dollars; Cost Avoidance; Freed
Capacity
• Lower turnover
• Fewer sick days
• Fewer workers comp claims
• Litigation mitigation
• Fine avoidance
• Reduced proportional hiring
• Reduce reliance on third parties
for greater bandwidth
• Freed capacity

11. © 2015 The Karen Martin Group Inc. 11
Key Metrics:
Lead Time and Process Time
Lead Time (LT)
Work
Received
Work passed to
next process or
department
Process Time
(PT)
Lead Time – aka Elapsed Time; Throughput Time; Turnaround Time
Process Time – aka Touch Time; Work Time; Cycle Time
Work is Idle Work is Idle

12. Value-Adding
Process Time
Necessary
Non-Value-Adding
Process Time
Delivery
Unnecessary
Non-Value-Adding
Process Time
Work is idle
Request
Lead Time
Three Types of Process time

13. (Current State PT in hrs – Future State PT in hrs) x occurrences/year
Available work hours per year *
Calculating Freed Capacity
Time
FTEs
(annualized)
Labor
Dollars
(annualized &
unburdened)
(Current State PT – Future State PT) x occurrences per time period
(Current State PT in hrs – Future State PT in hrs) x occurrences/year x hourly pay
* Next slide

14. Available Hours Per Year
© 2015 The Karen Martin Group, Inc. 14
# hours paid per year
# hours paid holidays
# hours paid time off
# hours standing meetings
# hours required training
Minus
Minus
Minus
Minus
(Typically 2,080 hrs)
(Typically 48-88 hrs)
(Varies widely)
Typically ranges from 1,750-1,975 hours per year

15. SNAP
Main
Tech
DEPT
HEAD
C.O.
SK
DAAS
BO1
ITEM
MGR
ISEA
SUPV
CRANE
SUPPLY
PEO
IWS2
CRANE
DEPOT
STOCK
POINT
Main
Tech
C.O.
ISEA
SUPV
PEO
IWS2
STOCK
POINT
SNAPDEPT
HEAD
SK
DAAS
BO1
CRANE
SUPPLY
DOCKSIDE
Current State Future State
Process Touch Points
Handoffs = 47
Lead Time = 486 hrs (60.7 days)
Process Time = 108 hrs (13.5 days)
Handoffs = 10 (78% improvement)
Lead Time = 90 hrs (11.3 days)
Process Time = 58 hrs (7.3 days)

16. P/U
AFrame
Power Pole
Water
Before:
Floor hand walk distance =
3,095 feet per rig-up
• Reduction of 2600 feet walked per floor
hand per rig-up.
• Reduction of >5,900 miles of walking
per year (1000 rig-ups per month).
After:
Walk distance = 300 - 500 feet

17. 50 hours x 250 occurrences per year
1,750 hours per employee per year
Calculating Freed Capacity
= 7 FTEs
• Absorb additional growth without commensurate labor expense gain
• Reduce paid overtime
• Reduce unpaid overtime; better work-life balance
• Get to know one’s customers better
• Add greater customer value in new ways
• Make improvements

18. Ways to Reduce Expenses
Hard Dollars; Bottom-Line Results
• Less expensive processing
• Reduced paid overtime
• Less expensive shipping
• Eliminate unused software licenses
• Insourcing to existing teams
• Less electricity/water use
• Reduced rent due to smaller
footprint needed
• Supplier renegotiation
• Attrition without backfilling
Soft Dollars; Cost Avoidance; Freed
Capacity
• Lower turnover
• Fewer sick days
• Fewer workers comp claims
• Litigation mitigation
• Fine avoidance
• Reduced proportional hiring
• Reduce reliance on third parties
for greater bandwidth
• Freed capacity

19. © 2015 The Karen Martin Group, Inc. 19
Why isn’t
inventory
reduction on
your list?

20. Top Line Improvements
• Create new products (goods and services).
• Command max price for existing products.
• Create new product features for existing products.
• Go into new markets.
• Attract new customers in existing markets.
• Retain existing customers (reduce churn).
• Increase sales volume/frequency per customer.
• Charge for all chargeable services.
• Reduce write-offs; improve collections.

21. © 2015 The Karen Martin Group, Inc. 21
Annualized freed capacity = 1,150 hrs = 28.8 wks = 0.6 FTEs = $36,937 labor dollars (unburdened)

22. © 2015 The Karen Martin Group, Inc. 22
Should you
calculate financial
results for daily
kaizen?

23. The Bottom Line
It’s tough for anyone to take
improvement seriously if you
don’t measure and communicate
real, tangible results.

24. © 2015 The Karen Martin Group, Inc. 24
Karen Martin, President
858.677.6799
@karenmartinopex
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