How much Value do we Add in our processes?
Many studies have shown that we only add value to a product for less than 5% of the time, the rest of the time is wasted! If you were to do a value stream map of your value stream you may be surprised (horrified) at what you would find.
Having done this study myself many times for many companies I have yet to find one that reaches 5%! This is a terrible figure, so imagine if you could improve on this!
But what is waste, we have already defined the seven wastes, muda, mura and muri on other pages within this site but there are still times when we are not sure.
Wasted Time and Money
Within every process there are two elements, those that add value and those that add no value, both take time and cost us money but only one earns us money.
Defining Value and Waste
So how do we define waste or non-value adding processes?
Toyota (Taiichi Ohno) define waste as;
- “anything other than the minimum amount of equipment, materials, parts, and working time absolutely essential to production.”
Another definition of waste is;
- “anything other than the absolute minimum resources of materials, machines, and manpower required to add value to the product.” (Hay 1988)
However both of these are subjective definitions, what is “the absolute minimum”?
A better definition of value adding and non-value adding would be;
- “Only an activity that physically changes the shape or character of a product or assembly can add value.”
- “Any activity that does not change the product or assembly is waste.”
However even this can fall short in some areas, consider the case of conducting a roughing cut, or in over polishing a surface that will never been seen. These change the character and shape of the product but are not necessarily the most efficient use of our time.
Therefore; every activity should be considered to be waste unless it;
- Meets an explicit customer requirement
- Cannot be shown to be performed more economically
Value According to our Customers
The first principle of Lean is to identify value as perceived by our customer. What does our customer really want? What are they willing to pay for? After all if we are doing something that our customer does not explicitly require we are being wasteful.
So what does our customer want? Well this usually can be broken down into three areas; Quality, Cost and Delivery.
Quality
Quality can be more than just “does it function or look as described” it can also be does the product or service have all of the functions and deliver everything that you wanted. Buying a cell phone that has the ability to run all of the latest applications with a fantastic screen and everything else is great, but if it has lousy reception it will not satisfy the customer. Products and services have to deliver exactly what the customer wants, not a compromise that best suits your processes.
Value therefore is having everything that the customer expects and needs. It is also everyone of those attributes working perfectly and reliably.
Delivery
A satisfied customer is one that gets their product or service when they want it, this can be immediate or it may be off in the future. Far too often companies make consumers wait for products when the customer really wants it now. Being able to reduce your lead times can be a real order winner in many industries. Value therefore is giving the customer what they want when they want it.
Cost
No one wants to pay more than they need to for anything. So value is simply doing things in the most economical way without creating waste.
Who is our Customer?
Our Customer is often more than just the company that takes delivery of our products or the consumer that uses them. We also have to consider all of the other “stakeholders” in our business. Society as a whole has an expectation on every business and we as responsible business owners and employees have to consider those needs also.
This can mean ensuring that we don’t pollute our environment or over-consume our resources as well as ensuring that we keep our employees safe. All of these customer requirements are value that we must ensure that we include within our value stream.
We also have to consider our shareholders and business owners who want to see a profit from everything that we do and even the tax man who wants to see auditable records to prove our liabilities.
A value adding process therefore is one that satisfies the needs of one of our many customers or stakeholders, not just the final consumer.
Identifying Value
There are a number of different ways to identify value as well as non-value adding steps. We can use Quality Function Deployment to identify value according to the customers and we can use Value Stream Mapping and process mapping to highlight the different steps in our processes and highlight where the value is being added.
Eliminating Non-Value Adding Processes
So when you examine each step of a process you should be asking these questions;
Is this step changing the form or character of the product?
Does this step meet an explicit customer requirement?
If the answer is “yes” then we should then ask ourselves if there is a more economic way to perform this step. This is where the many lean manufacturing tools come into play to help you identify those steps that don’t add value and to eliminate them.
Value Add Video Clip
It was awesome, It helped to build Concept, as It is the New opic added to our Syllabus, and I was studding it for first time. Thanks u so much..
Superb insight of how a VSM can be used
Ive started a business recently, namely a coworking, that is still in the making. I face numerous problems related to production which leads to waste of time and consequently money. Let me breakdown the causes of delay in production, and maybe you can help me do better:
1. The place Im creating this coworking is my own, but the building was developed by a developer company who was supposed to do certain floor finishes as part of my deed agreement with them. After 8 months of ‘processing’ time for their budgeting, and final approval,the MD of the company decided to not provide these due services, and instead demanded i repay a loan i had taken from the company due to their delay in construction and handover of the building. I had already taken a loan and repaid 6 months of the loan by then. So not only was i short on money, but i was also without the floor finish costs they were supposed to supply. They wasted my time, and left me short of money. Had they made this decision of exchange earlier, i could have started production 6-8 months prior to when i actually did.
2. Material delivery delay and unavailability: i live in a 3rd world country where alot of the modern day materials are imported. Import times vary and customers dont “stand in line” to receive them. It’s more like the first grabber with the most connections, gets served first. Also the fact that alot of the products i look for are unavailable, and if available in one or two monopolized stores, they are overpriced, leaving me with no option but to manufacture such products using lical craftsmen and labors. This saves initial cost but can become costly in terms of time and hence eventual or long term cost.
3. Labor inefficiency: the labor force, though abundant, is very unruly. Even when paid on time, they tend to disappear to their village for weeks on end without notice. Replacing them means retraining the new worker which again is a waste of time and money. Other than disappearing, they also delay work and never meet deadlines. And even after that, they make mistakes that sometimes deems the product unusable, so that it has to be sent back to be made again. This is a huge waste of time in the production process especially when there are many steps and craftsmen involved in the making of a product. For ex. Until the metal smith delivers his work, the metal painters have to wait, then the carpenter has to wait, then the tailor who will do the upholstery has to wait. One person’s delay causes a chain of delays in the production process.
4. Labor helper issues: sometimes the helper that a contractor brings along to work, may have zero expertise and i find them sitting around all day whilst getting paid. Some labors may not wish to bring more than one helper because doing so will reduce their own profit. So instead of 4 people working on the job, so that the work can get done faster, they work in pairs. If i ask them to bring more workers, im always told they cant find any.
5. Holidays: where i live, labors enjoy 3 holidays per year, each lasting up to two weeks. And even then, they dont come back till they want to, or more like till they need to – till they run out of money.
6. Inefficient and bias production manager: my manager who is an engineer and whose previous job was least demanding, has little knowledge of time management. He shows up in the morning everday, but no or very little work gets done till i reach the site. In fact i end up managing everyone and everything. And yet, he complains when i ask a helper who has been sitting around all day to clean the edges of our newly made glass fiber shell chair tops. Saying im too picky as a way of masking his inability to get the helper to work on anything. He also supports vendors and contractors even when they delay production and make mistakes, if i yell ir get angry, threatening me that the vendor refuses to work for me for yelling. According to him, if i want the work to get done, i have to be more patient (even after a three week delay) and can never yell – no matter what. So i have asked him to start hus own business where his money will be on the line, so he realizes the value if time and its relation to money – especially the huge loan money iam repaying every month, to say the least.
7. Finally, some may say i could have completed the work by now had i stuck with the production of a more common design scheme. And i agree that i could have. But being my own floor, i used this opportunity to experiment and unleash my creativity. I know i will not get another chance to do so unless i do it on a floor that i own, first. And because if this, eventhough this aspect caused more time to complete my work than usual, everybody says they have learnt a great deal from this project and that they feel spacious and happy when they enter into it. And indeed that has been my goal for my coworking clients. To help make their work environment a home to work in. Yet, i can say most confidently, that if my developer, workers, and managers, did their job correctly and on time, I would not have lost 3/4 of the time I did, because of them.
What do you say?