Friday, April 18, 2008

Maximizing Value-Added Time in PD

Is it desirable to have a high percentage of time adding value in a product development process? Not if you understand queueing theory. Processes with variability produce large queues when they have no excess capacity. A queue on the critical path generates cost equal to the cost of delay of the items in the queue. When we increasing levels of utilization we linearly decrease non-value added but we exponentially raise the cost of the queue. It is very easy to create queues that are much more expensive than the savings associated with higher utilization.

The central fallacy in maximizing value-added time in product development is that it focuses exclusively on efficiency which is a single measure of performance, and one of very little significance in product development. Unfortunately, efficiency and capacity utilization can be inversely with queue size. We optimize PD processes by focusing on overall system level effects, not single measures of performance.

No comments: