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Definiton of Value – Part 2

A few weeks ago I posted a blog about the definition of value that I use.  James Lawther posted a great comment about that post with some good questions.  I felt the questions were good enough that it warranted a blog post to highlight the questions and give my thoughts in response.

With James’ permission here is the comment he left:

Matt

Not sure I agree

1. It must be something the customer finds valuable and is willing to pay for

(Yes)

2. It must change the form, fit, or function of the product/service

(If it doesn’t why would I pay for it?)

3. It must be done right the first time

(If it wasn’t, why would I be willing to pay for it?)

Am I being a pedant? Don’t I only need one definition? What am I missing?

James

My thoughts on James’ comment are below.

I see all three points as one single definition with three parts that must be met.  I agree with your assessment on points 2 and 3 of “If it doesn’t, why would I pay be willing to pay for it?”

The issue comes up when discussing value added activities during an improvement event or discussion.  Having a stringent definition helps make the discussion less personal and more objective.  Two examples that I run into are inspection and finance (or any support function).

With inspection, I have heard the argument that people will pay to have the product right.  I would disagree but can understand that argument.  With the stringent definition though inspection immediately fails point number 2.  Inspection does not change the form, fit or function of a product or service.  People tend to agree with this and the discussion ends.

When the discussion becomes about someone’s specific job like finance, people can get very defensive.  Again, a support job like finance fails point number 2 and does not change the form, fit or function of the product or service.  People will argue that it is necessary to run a business.  I completely agree with so at this point we start to discuss necessary versus pure waste.

There are things that are necessary like reporting the company’s finances or even transportation but it is still not value added and it should be made very clear.  Waste is stuff that can be completely eliminate like extra motion or rework.

Point three about doing it right the first time is part of the definition because sometimes the rework has been so engrained into a process that people think it is normal.  This helps to reinforce the notion that anything that is being redone is not value added and should be scrutinized.

What are your thoughts?

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Can I Stop Inspecting?

When educating on the types of waste, I find that most people initially have a hard time seeing inspection as a non-value added activity.  Usually, it is for one of two reasons: 1) making sure the quality is in the product is valuable to the customer or 2) it is a legal requirement.  While there is not much we can do for #2, we can change #1.  I always start with the definition of value added.  I use one that I learned from the Lean Learning Center.

(Full Disclosure: I have worked with Lean Learning Center for about 4 years now, so you will see their influence in some of my definitions.  The link is meant as a credit to my source.)

The Definition of Value Added:

1. Must be something the customer sees as value and is willing to pay for

2. Must alter the process output, the product must change

3. It must be done right the first time

All three criteria must be met in order to for the activity to be value added!

If any of the three criteria are NOT met then it is non-value added. Almost right away people see that inspection does not physically change the product.  This allows them to now see inspection as a non-value added activity and move forward with doing something about it.  Not accepting it as part of the process.

You can’t just eliminate an inspection point because it is non-value added.  Now you have to understand two things: 1) How effective is it? and 2) Why is the inspection point there?

How effective is the inspection? The first questions asked should be: How many defects are we catching at this point?  and What are the consequences of not catching it?  If it is found that the inspection sees a failure rate of under 1% (which I have seen several times), then why do the inspection?  This is where understanding the consequences of not catching a defect comes in.  If you don’t catch the defect does something catastrophic happen?  Or is there now much of an impact on the process/system?  If something catastrophic would happen then you may decide to keep the inspection until you find the root cause of the 1% failures and have confidence in your process not to create the failure.  If there is not much of an impact on the process/system then I would eliminate the inspection.

Why is the inspection point there? If you see a high failure rate at inspection or if a single failure can be catastrophic, then this would be a good place to look at doing some problem solving.  Find out what are the failures at this point and do some problem solving around these issues.  When the failure rate becomes small or zero then revisit the “how effective is the inspection” questions.

Eliminating inspection can really help reduce the waste in your process, but only if you eliminate it for the right reasons.

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