Regardless of industry, the cornerstone of this philosophy is labeling all activities across all business divisions, as being either value-added or non-value-added through the eyes of the customer. Lean processes and thinking can help you eliminate the non-value activities making your organization more profitable and more productive.
In his article, Eliminate Non-Value Added Activities in Your Organization, Allan Ung, Certified Management Consultant in Productivity Improvement, explains that value added activities are those that “bring additional value to products or services such as entering orders, ordering materials, laying foundations, creating codes, assembling parts and shipping goods to customers.” Ung notes that non-value-added activities are those that “do not increase market form or function such as filing, copying, waiting, counting, checking, inspecting, testing, reviewing and obtaining approvals.” In order for companies to gain a competitive edge, Ung argues that they need to cut all non-value added activities.
Lean manufacturing classifies non-value-added activities as waste and groups them into 7 categories, or sources, of waste. A blog titled 7 Wastes of Lean Manufacturing describes the types of waste:
- Transport: Moving materials is considered a waste because it does not add value to a product.
- Inventory: Raw materials, supplies, and products are considered a cost to the company until they are sold. Excess inventory is a waste.
- Motion: Any non-essential motion or movements done by man or machine are waste. Eliminate unnecessary travel, machine movements by looking for ways to have materials close at hand.
- Waiting: Waiting for deliverables or lag time between tasks is a waste.
- Over-Processing: When you use the wrong tool for a job, such as oversized equipment, it is waste. Performing any tasks not required by the customer is a waste of time and materials.
- Overproduction: Making too large of a batch, making the batch too early or poor inventory control can lead to excess inventory and waste.
- Defects: Quality errors are costly and mean repeating processes, creating new products, and the waste of time and materials.
Finding and Eliminating Waste
The first step in removing waste, or non-value-added activities, is identifying where waste exists. In his blog, Stop Doing That: Non-Value Added Activities, Edward Boze, President of CrowdPowered, explains 7 things to stop doing to find and eliminate waste. Stop creating products that are not demanded by the customer. Stop making products so fast that customers cannot consume them leading to excess inventory. Stop duplicative tasks. Stop any reports or output that are not timely. Stop “tweaking” products and instead focus on getting the specifications right before production. Stop requiring approvals and inspections.
Boze’s seven areas are a good place to start identifying and eliminating waste. It is likely there are more areas, across various business functions, that can benefit from an inventory designed to find waste. A final thought from Allan Ung sums up why it is necessary to eliminate non-value-added activities: “By tackling wastes from an end-to-end business process, not only can your company improve the value of its products and services, you can also achieve significant cost reduction, strengthen cash flow and emerge from the downturn with a stronger and more competitive profile.”