Wednesday, January 13, 2010

Value and the 5R's

When you first began to implement a Pull or Just In Time (JIT) system, you probably learned about the 5R’s.  The 5R’s help to define all the criteria really required for a JIT system to function properly.

The traditional 5R’s are:

Right Part

Right Quality

Right Quantity

Right Price

Right Place

These are pretty well understood and agreed upon in the lean community.  However, as lean is now being applied in all types of enterprises and all areas of an organization, we may need to rethink our terminology.  When working with groups like engineering, finance, software development and legal for example, as soon as you say anything that remotely sounds like manufacturing, you may be dismissed and the group shuts down. 

This is a challenge lean change agents face daily.  We must remember that not everyone understands and thinks in terms of a process.  For these people, if it’s not physical discrete manufacturing, then process stuff just doesn’t apply.  There’s nothing wrong with their thinking, they just think different from us and we need people with different ways of thinking to be successful in solving problems.  However, our challenge as change agents is to connect with them and get them to understand how processes apply to everything.

I was recently asked to develop some information around the 5R’s. 

Simple enough I figured.  But then I started to look at the wording from the audiences perspective, a non-manufacturing audience.  I looked at the 5R’s from a more general sense of what it means and came up with what I feel is a better approach to the 5R’s.  It’s not earth shaking, radical or even all that brilliant, maybe brilliant in its simplicity (to throw myself a bone) and I really only made one change.  I even debated on whether it was worth a blog entry, but since I haven’t posted anything for a little while, it seemed like a good idea. 

The difference is the Right Part.  The Right Part is the part that seems to rub people the wrong way.  When we, as change agents say Part, we understand that Part is generic, like a widget.  The Part is just a place holder to represent the thing that the customer is looking for from the previous step in the process.  That thing they are looking for is the Value Add (VA) that comes from the supplier. 

Therefore, let’s refer to it as the Right Value instead of Part.  The Right Value is more accurate, less manufacturing centric and it opens the door to some good discussion.  What’s the difference between the Right Part and Right Value?  Do you really know your customer and when was the last time you truly heard the voice of your customer?  Are you providing only one thing to your customer?  To truly provide value, do you need a mix of information, services and products?  You may be ignoring your customers’ true needs and a potential revenue stream.

This change would make the 5R’s:

Right Value- Truly understanding the value you provide to the customer

Right Quality- Hitting the proper balance between the Wow factor and diminishing returns of scarce resources

Right Quantity- Proper amount and resolution of deliverable to the customer

Right Price- Maximizing the ROI for the value provided

Right Place- Proper location for efficient use by the customer and reduced lead times

So with a simple change, I think your messaging can be much more effective and accepted.