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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.

Customer Focus Eliminates Waste

Recently, my wife had an experience with supplier that wasn’t focused on us as a customer and it created great waste for the supplier.

The shop was low on a particular candle that we buy from a local handmade supplier.  The product is great and it sells really well.  My wife emailed the owner to order more candles.  In the email, she asked if the owner could send a list of spring related scents as we phase out the holiday related scents, so we could pick out what we think our customers would like.

We didn’t hear from the owner for about a week or more.  Then the owner shows up with the candles we ordered plus three new spring scents.  We didn’t like one of the scents.  We said we wouldn’t take that one and discussed other possibilities to choose from.  A different scent was picked and a few days later the owner returned with the new scent.

When the issue of not responding was brought up to the owner, the reply was they were so concerned that we needed the candles right away that they just made them as quick as possible and brought them over.  My wife explained that we don’t need things immediately, especially after the holidays and if there is ever any question to just ask.

The owner wanted to please us, but didn’t focus on what was truly important to us which is the scent selection.  The owner ended up causing waste of defects/rework (making new candles she hadn’t made), waiting (us waiting longer to get the order filled) and transportation (driving to our store twice).

Have you or your company ever rushed a product or service to market because YOU thought that was what the customer needed and then if failed?  What were you focused on?

If you aren’t sure what your customer needs are…ask.  Be clear and focus on what they need, not what you think they need.

Guest Post: Eliminating TIMWOOD

blogphotoToday’s post is from Tony Ferraro, on behalf of Creative Safety Supply based in Portland, OR (www.creativesafetysupply.com). Tony strives to provide helpful information to create safer and more efficient industrial work environments. His knowledge base focuses primarily on practices such as 5S, Six Sigma, Kaizen, and the Lean mindset. Tony believes in being proactive and that for positive change to happen, we must be willing to be transparent and actively seek out areas in need of improvement. An organized, safe, and well-planned work space leads to increased productivity, quality products and happier employees.

Unfortunately, waste is something that is all around us. However, even though waste is common it does not make it any more acceptable. When businesses implement lean tactics in order to enhance productivity and efficiency, the elimination of waste is usually one of the biggest challenges, yet offers the highest rewards when done effectively. The elimination of TIMWOOD can help save your business time and money, while also helping to add value and increase customer satisfaction. When we mention eliminating TIMWOOD, we are not talking about eliminating a particular employee or person. Instead, the mnemonic TIMWOOD refers to the elimination of seven different wastes. When it comes to productivity, the sad truth is that only about 5% of employee work time each day is spent on value added tasks that actually benefit the customer. However, knowing that statistic, it leaves many of us wondering “What are employees doing with the other 95% of daily work time?” Some may insist the rest of the time is spent on waste or tasks that essentially add no value to customer satisfaction. In order to combat unwanted losses in productivity and waste, we must first identify and understand TIMWOOD and how the elimination of the seven wastes can make a difference.

What Does TIMWOOD Stand For?

Many people choose to use mnemonics in order to help them quickly and easily identify multiple items. The mnemonic TIMWOOD is also used for that purpose. Let’s take a look at each letter and how it contributes towards the elimination of waste.

  • T- Transport: Even though product transportation is virtually unavoidable, the time and distance are both controlled variables. Many times products are moved multiple times before reaching their final destinations. However, each time a product is moved it runs the risk of being lost or damaged which in turn eliminates value.
  • I – Inventory: When working towards lean, it is important to avoid an abundance unused and unsold inventory that just sits around on shelves or in storage. Whether the inventory is of parts, partially finished products, or finished items, the more inventory there is, the higher the loss in value since funds are tied up in unsold goods.
  • M – Movement: This waste is similar to transportation waste, but instead of focusing on the loss of value with products in transport, this waste focuses on transportation or movement equipment. When trucks, hauling vehicles, and other movement devices are used for unnecessary long amounts of time and for unneeded tasks the value goes down while the opportunity for damage increases.
  • W – Waiting and Delays: When products are sitting in limbo, somewhere between the start and finish of production they are not adding value to the business and are thus creating waste.
  • O – Overproduction: The waste of overproduction has been considered one of the worst wastes. Money is wasted because businesses must pay employees to manufacture the parts, find places to store them, inventory them, etc. All of these are redundant costs that could be avoided.
  • O – Over Processing: Over Processing basically means to do more to a product than technically needed, and if a product is not 100% perfect it is rejected and therefore wasted. Even though businesses aim to provide customers with high quality products that operate as intended, small imperfections that would not impede function, use, or aesthetics should not be automatically disposed of and reworked.
  • D – Defects: Defects do not add value. When products are created with a defect that hampers the function they must be reworked and remanufactured. This causes a waste in production, materials, and other resources such as electricity and machine wear and tear.

Waste is Avoidable!

With the right amount of dedication and drive, anyone can succeed with the elimination of waste. However, the first step is to identify the areas of waste so tactics can be implemented to revamp processes and practices to help reduce waste and start improving productivity. The best part is that any business can benefit from waste removal; TIMWOOD is not geared only towards industrial or manufacturing businesses as it can also be effectively implemented in nearly any work environment.

Granddaddy of Them All

If you are a Big Ten or PAC-10 college football fan, I am not referring to the Rose Bowl.  I am referring to Over Production.  The granddaddy of all types of waste in the lean world.

Transportation, Inventory, Motion, Waiting, Over Production, Over Processing and Defects.  These are the 7 types of waste.

Free image courtesy of FreeDigitalPhotos.net

Why is Over Production the granddaddy of them all, because Over Production can lead to more of each of the other 6 types of waste.

Transportation: If you are over producing then you are transporting more product then you need to transport.  This could lead to paying for more trailers then you need affecting the bottom line directly.

Inventory: This is the direct result of over production.  If more is produced than needed, the extra product goes into storage and sits and waits until it is needed if ever.

Motion: Storing all the extra product in inventory takes up more room.  This means a bigger space is needed to do the same amount of work which leads to all the extra motion around the inventory.  If you put 10 skids between two machines instead of two skids then when the operator moves between the two machines there is an extra 8 skids of distance to walk.

Waiting: If the product is not needed, it goes into inventory where it sits and waits.  Waits to be sold.  Waits to be finished.  Waits to be thrown out.

Over Processing: The excess product can be reworked into a similar product with a few modifications.  This over processing what is needed to get the product right would not have happened if there was not excess product to modify.

Defects: Storing inventory can lead to crushed boxes destroying product or product that becomes outdated and must be thrown out.

Over production is the worst of the worst.  As hard as it might be to shift the mentality, it is better to see people standing around than it is to watch them produce more than is needed in order to look busy.