TIMWOODS was recently seen at a Dunkin’Ⓡ , ordering the option of 10 MunchkinsⓇ. Like previous times, TIMWOODS did not get ten when 10 were ordered or received 25 in the box when 25 were ordered. Instead, there was always more. At this most recent purchase, TIMWOODS got 16 instead of 10! TIMWOODS is the only consumer that doesn’t get excited because they saw this as one of the eight-deadly waste; overproduction. This is a winning scenario for every other consumer, yet TIMWOODS isn’t happy. Regardless of TIMWOODS' opinion, this is a good discussion to review as we eat our ordered quantity and overproduction. Let’s run the math and make some assumptions as we eat all 16.
Dunkin’Ⓡ indicates that they sell one billion MunchkinsⓇ per year. One would have to assume this is the transacted amount and not the actual amount boxed or bagged. Additionally, one would also have to imagine that they rarely, if ever, give less than the ordered amount. I would have to assume I would have seen at least one revolt in my life from an individual claiming they received less than they ordered. I would have referenced the moment as if it was George Costanza complaining about not getting bread with his order in The Soup Nazi episode.
Excuse me. I think you forgot my bread.
Instead, it is safe to assume that the employees always deliver a supply of either the exact amount or more. Using three personal visits as our dataset, we averaged 15% to 60% more. This isn’t a valid dataset of an intense study due to its size and cannot be statistically measured, but let’s keep going as we continue to eat them. 11 left.
TIMWOODS, and the eight deadly waste (eight versus seven when considering Skill as a waste), would call this overproduction. We have tasty evidence of producing more than what is being sold. Any financial controller could not disagree that Dunkin’Ⓡ is giving away purchased raw material.
During this delicious analysis, we considered a conversation with a bartender at a favorite bar on this subject. They could instantly relate to this discussion emphasizing that this is why you measure out liquor with a jigger versus free-pouring mixed cocktails. But, sometimes, good bartenders free-pour. 9 left.
Let’s think about another one. LegoⓇ gives a few extra pieces to supplement lost small ones. These are all valid examples of overproduction and indeed a waste, but is the waste good for the business? Regardless, the consumer of the MunchkinⓇ is happier for the overproduction and likely to physically count this victory on each occurrence. But what is it worth to Dunkin’? 7 left.
Let’s run the math under the assumption that Dunkin’Ⓡ gives away approximately 15% more on every order. So you buy a box of 25, you get 29. You order a bag of 10, you get 12. So if they are claiming that they sell one billion per year, they are bagging or boxing approximately 1.15 billion. Is Dunkin’ getting a return on their investment for giving away 150 million MunchkinsⓇ per year? 6 left.
Let’s assume that a Munchkin’sⓇ price is $0.10 each, which gives us roughly $15 million in lost revenue. To fill up a box of 25 MunchkinsⓇ with an approximate strategy, I will assume that an employee is grabbing ~5 to 7 per grab at 4 seconds per grab. At 4 seconds per grab, for 5 grabs, that’s 20 seconds for an order of 25 MunchkinsⓇ with anywhere between 25 and 35 in the box. However, we will maintain our hypothesis that it is, on average, approximately 15% more or a total of 29. Now let’s assume that they grab 25 accurately versus approximately, we will assume that it takes an additional 10 seconds to verify the 25. So an accurate 25 MunchkinsⓇ takes 30 seconds and approximate 25 MunchkinsⓇ takes 20 seconds. The 4 MunchkinsⓇ of overproduction are worth 10 seconds. Speaking of 4, 4 are left.
Now let’s assume that an employee makes $10/hour. So for one billion MunchkinsⓇ “sold” each year at the rate of 20 seconds cost $2.2M of the fixed labor, whereas the 30 seconds is $3.3M of the fixed labor. So roughly $1.1M in fixed labor is being avoided at the value of $15 million of missed revenue due to the overproduction. 2 left.
Of course, the argument will be that the math is too vague or the dataset is too small. Or the value of the velocity is worth more because Dunnkin’Ⓡ is applying the ~110,000 labor hours selling a higher-margin product like donuts or above-average black coffee. Regardless, I feel that this is a valid exercise to talk about applying TIMWOODS and how he assesses the waste of four extra MunchkinsⓇ in the purchased box of 25. TIMWOODS might not like MunchkinsⓇ but everyone else does. All gone.