Costco Toilet Paper

Costco Toilet Paper, Sandwiches & The Lean Value Stream

A version of this article was originally published in the Summer 2017 edition of the Provender Alliance Journal.

I use to buy Costco toilet paper. I use to spend $20 on 30 very long rolls of TP. That’s $0.67 per roll, plus these rolls are on average twice as long as regular TP. Pretty good right! Yeah, that’s what I thought… until I discovered lean. What the BLEEP does lean have to do with TP buying decisions? Everything has to do with lean! Well, almost everything. Anything and everything that enters your home, be it material or information, is up for scrutinization by lean. Whether we like it or not we are all part of a same value stream at home, at work and everywhere else we make decisions that affect material and informational flow. And don’t even get me started on environmental flow! Ok, hold up, back off.

OK, So What The BLEEP Is Lean?

At it’s root, lean is a way to communicate and engage with the people around you in a way that increases value-added work and reduces waste. In lean we like to define all work into three categories:

  1. Value-Added
  2. Incidental
  3. Waste

Value-added work is anything the customer is willing to pay for. Some non-value added examples: texting on the clock or going the extra mile on those perfectly executed oxford commas in that “quick” email are two examples of non-value added work. Now you can (and to be fair, should) argue that not every customer is willing to pay for the same things. Take organic products for example. In that case, think of “being organic” as an “internal value” and that we and our co-workers are also an end customer being served by this value.

Incidental work is non-value added work that has to be done in order to support the value-added work. Examples are mostly  things that happen behind the scenes like bookkeeping and HR. The customer does not want to pay for it as it’s not adding value to their product but we have to do it anyway. Oh well.

Waste is everything we do that is non-value added or incidental work. Many studies over the last 50 years have shown that it’s not at all uncommon for 95% of our work to be considered waste. Mind you, this is often because what we see as value added is often hiding mostly waste. But think of lean this way. If you take it really seriously you can spend 95% less time working! Well that might be a long shot but 30% more time sipping a beer instead of working late is not crazy at all. That or you can re-invest it in your business but I would not recommend that personally.

The Eight Wastes of Lean

In lean there are only 8 wastes, often remembered by the acronym TIM WOODS who has nothing whatsoever to do with lean:

  1. Transportation
  2. Inventory
  3. Movement
  4. Waiting
  5. Overprocessing
  6. Overproduction
  7. Defects
  8. Skills

I won’t go into the details for each of these as Wikipedia does a good enough job there, but suffice to say that the first seven were defined by Taiichi Ohno of Toyota (a.k.a. the father of lean) in the 1950’s, and the last one “skills” was added more recently to account for the waste of displacing or not fully utilizing people’s skills. It should also be noted that all of the wastes can be applied to different value streams.

The Value Stream

Twenty one years ago Jim Womack and Dan Jones published their book Lean Thinking and changed the way some of us looked at organizational structure from one that is top-down (i.e. I say jump, you say how high) to one focused on the people adding value in the value stream (i.e. you say we should jump as it will add value quicker and I say how can I get you high… hmm… you know what I mean). In Lean Thinking Jim and Dan define the value stream as “the set of all specific actions required to bring a specific product (whether a good or a service) through the management tasks of any business”. Given this and the fact that most lean practitioners are smart enough to know that climate change is probably not a hoax and see the importance of sustainability in business, I like to think of waste-reduction being focused on the following four “value streams” or “flows”:

  1. Material
  2. Informational
  3. Environmental
  4. People (e.g. their time and energy)

Another way to think about lean is that it strives to manage the above four flows to the nth degree in order to give us the agility to react to the one thing we can’t control: reality flow! Which in the case of Portland, means three ice/snow-storms that turned the city into an ice rink/snow park for a cumulative total of 14 snow days or so this year. Did we mention climate change yet?

Cash Flow Savings As A By-Product

Cash flow is not included as a value stream. This is because cash flow savings are not the focus but a by-product of lean thinking. In fact, lean does not look at cost savings in the usual sense of the word at all. It’s does not care about the per piece cost ($0.67 per roll… a really long roll) of your materials or labor. It does not care about the bottom line because the bottom line is the by-product and end of your value streams. Lean works on the upstream issues (or as we like to call them in lean: opportunities!), at the root, which turns the bottom line into the net sum of how well you are able to reduce waste and increase value-added work upstream.

Exposing The Waste

Think of the value stream as an actual river. Unless you live in Southern California, the water flows downstream and hits boulders and tree trunks that are hidden underneath the water which cause the flow to bottleneck and do unexpected things. Kayakers like to call this whitewater or siiiiiiiiiiiiiiiiickkkk! Lean practitioners like to call it very very very undesirable. In the lean value stream we can compare the whitewater to a regular workday turning entirely south on us. This could simply be taking longer than intended to complete a process, to an extreme nightmare day (or days) where all we’re doing is putting out fire after fire with someone else taking all the credit.

Now imagine those boulders and tree trunks representing the waste hidden in our value streams. How do we expose them? We simple lower the level of the water (unless your in Southern California) so that we can see them. In lean we lower the level and control the flow using two concepts that are central to any lean thinker:

  1. Just In Time
  2. Single Piece Flow

Just in time is the idea that you do everything only just in time, as it’s needed, in order to get the product (whether material or informational) to our customer on time at 100% quality, not 99%, as that would not be good enough, and not 101%, as that’s overprocessing waste the customer doesn’t want to pay for.

For example, I did not write this piece two months ago. I wrote it close to the deadline. Two months ago I had other deadlines that were much closer so I put my energy into providing a 100% product that was needed then.

Another example is purchasing raw materials. Lean actually encourages you to buy less and pay more per piece in order to have the materials on hand closer to just in time, thus eliminating the waste of inventory. But why would we buy less and spend more per piece; how does that help our bottom line? Did we mention Costco TP paper yet? Remember how I said lean is not focused on the bottom line? Well this is a shining example. We often forget that buying less saves cash. We may spend more per piece, but we end up spending less cash overall. And when we apply this thinking to the entire business it adds up.

Besides the upfront cash savings, we’ve all experienced this. We do something ahead of time and then the needs for that product (whether material or informational) change on us the week/day/hour before it’s due. So we end up having to either ditch it altogether or spend a lot of time reworking it to change it and hence exposing major defect waste. Lean recognizes that we’re really (REALLY) bad at seeing that this happens so much more than we care to admit. By thinking just in time we’re forcing ourselves to reduce the number of potential defect waste occurrences from happening, leading to more beer sipping in the sun.

Lean Sandwich Making

Single piece flow is the concept of aiming to do any task one item or piece at a time. Besides reducing work in process inventory waste, it has many other benefits. Let’s say you’re making ten sandwiches and you start by laying out ten slices of bread, then applying mayo, etc. Now let’s have another person make those same ten sandwiches but one sandwich at a time. The person making one at a time will have the first sandwich to the customer around ten times faster than the person making all ten in one go. Still with me? Great! Now you may ask about potentially saving time by batching as it means I have to pick up the spreading knife and jar of mayo only once to spread the ten slices. That’s true. But you also need ten times as much space to lay out 10 sandwiches as opposed to one. And when I batch, I may also walk three feet to grab the mayo without thinking about it, as I only have to do it once every ten sandwiches. According to my just in time, back of the piece of scrap paper calculation, that three feet there and back of walking twenty times per day over a working lifetime of 55 years is equal to 229 full hours of sipping beer in the California sunshine.

Care about lean yet? Back to the sandwiches. If I was only making one I would use less space and expose the wasted movement of walking three feet and move the mayo closer. Now you give the first sandwich to the first person in your ten person line, they take a bite and you find out you put on mustard instead of mayo. But the good news is that you care more about sipping beer in the sun than making ten sandwiches in one go so you avoided some major defect waste! In fact, it’s once we introduce defects into the equation that single piece flow vs. batching really starts to make sense. And if you’re still not convinced here’s a video link at the bottom that does a great job of graphically representing the superiority of single piece flow (a.k.a. sipping more beer in the sun) vs. batching (sipping far far far less beer): www.vimeo.com/163151099.

So are you convinced yet that buying Costco TP does not make sense? No? Here’s four quick lean reasons:

  1. Cashflow
  2. Space
  3. Interest
  4. Environmental Impact

Instead of spending $20 on a 30 pack of double-length rolls of TP from Costco that will last a household of two people 10 weeks, go to your local supermarket and spend $5 on 12 rolls that will last you 4 weeks. And $20 – $5 = $15 extra cash in your bank account that you can spend on anything you want, instead of tying that $15 up in inventory that you’re not going to use up for 4 to 10 weeks

What about the space? You’ll need extra shelf space to store those extra 18 rolls. This may seem somewhat inconsequential but lean is about lots of tiny improvements having a huge impact. $15 here, a little shelf-space there and before you know it you have no need to borrow money and/or move into a bigger space. Have you ever borrowed money to do anything? Well, then you’re paying interest on that extra $15 of TP that sat on your shelf. Instead you could invest that money and have it gain interest.

Still not convinced? Ok, I get it. Single piece flow and just in time thinking are difficult to grasp. It took me years to truly “believe” that they really do apply to (almost) everything. To be clear we’re not saying that it should be exactly “single” piece flow. It most likely is small batch flow (e.g. doing 2 at a time instead of 10). And just in time is about bringing the number down as far as is possible, it’s not about buying supplies every day, but it’s also not about letting “economies of scale” fool us into purchasing in bulk. You allow demand to let you grow into purchasing in bulk. When demand dictates that you buy in bulk in order to have a two week supply of raw materials then we’ll benefit from bulk purchasing, but not before!

In addition to your cashflow, space requirements and interest on borrowed cash, one last reason to purchase in less quantities is the environmental impact. Here’s the data:

  • Costco TP a household of two uses per week: 3 rolls
  • Rolls inventory in one pack of Costco TP: 30
  • Weeks inventory in one pack of Costco TP: 10
  • Extra TP inventory: 27 rolls
  • Amount of rolls Costco sells in a year: 1.4 billion rolls 1
  • Amount of excess inventory (more than 1 week) of TP if 10% of the people buying TP are couples: 125 million rolls
  • Amount of TP from a 40 foot pine that is 18 inches wide: 2,500 rolls 2
  • Amount of trees tied up on excess inventory: 50,000 trees

This means that if we stopped buying Costco TP as couples we would be stopping those 50,000 extra trees from being felled before they need to be. It means at any given time from that day forward there are 50,000 more trees on the planet that are currently on people’s shelves in the form of Costco TP. Still not ready to give up on the Costco TP? Ok, how about you buy 30 rolls and share them with neighbors and friends? That way you can be lean, save a buck or two, and enjoy the soft comfort of that sweet sweet Costco TP.

When you go about your day I encourage you to start thinking about lowering the level of your value streams to expose the opportunities to reduce all forms of the 8 wastes. In doing so you can sip more beer in the sun knowing that you’re doing the planet a favor. Please do share your discoveries with me.

1 Source: https://www.facebook.com/Costco/posts/10150243076709947
2 Source: http://www.utopiamechanicus.com/article/how-many-toilet-paper-rolls-per-tree