Defining Value Added

In the lean lexicon there is a lot of talk of removing waste from processes.  Waste is anything that is not value added.  There is the problem.  What is value added?

In my work, I ask people to define value added for me.  It seems like a simple question, but I get numerous blank stares and answers rarely match across the team or organization.

So if can’t give a standard definition of value added, then what is waste?  How do you look for it?  How do you know what to keep and what to eliminate?

Here is the definition I learned long ago and it never fails me:

1. The customer must be willing to pay for it
2. It changes the form, fit, or function of the product or service
3. It must be done right the first time

ALL THREE MUST BE MET TO BE VALUE ADDED!!!

A customer may find something interesting but isn’t willing to pay the extra price for it.  An example may be an optional built-in DVD player in the mini-van.  Some may find it of value and pay extra for it, while others may not.

A change must be made to the product or service.  Inspection stations on an assembly line are a good example of something that violates the definition.  It may be needed because that is better than a bad product getting out.

Which leads to the last point.  If it isn’t right the first time then it is a defect which is one of the seven types of waste.

Next time you are looking for waste, bounce it against this definition of value added.  You may be surprised to find waste that you haven’t considered before.