Waste

How can you identify the 7 types of waste?

Waste can be deceiving, learn how to identify waste in Lean

Value-added means those activities that change raw material or information into value for the customer. Any step that does not serve the purpose of providing value for the customer is non-value-added or waste. This type of activity adds cost or time but does not add value. One way to identify what areas of your business need change is by identifying waste.

For people with continuous improvement experience, it is easier to identify waste. They will see waste jumping out in front of them. For most people, finding waste is not an easy task. If you are one of those people, use the back-door method.

Waste is everywhere, and probably things that you see now as part of the process, are waste. With the back-door approach, you look for the opposite of waste, work. Work is the value-added activity in the area. When you cannot see waste, find the work, and everything else is waste!

Follow the following five points or steps while focusing on one process.

  1. Look at the three real things, the functional area, the facts, and work-in-process. Do not guess or let the emotions or company culture drive the way, use data-driven thinking. Be in the look-out for excess inventory.  
  2. Ask what the operation is about, what is the purpose of the process?
  3. Ask why the operation is necessary? Is there a better way to accomplish that purpose?
  4. Everything that is not Work is waste. Draw the process steps, and everything that does not execute the function is waste. 
  5. Ask why at least five times to find the root cause or reason for each step to exist. Ask how you can change the process. Create an improvement plan with the information gathered and execute it as soon as possible.

If you follow these steps every time, soon you will grasp the concept. It is important to understand the purpose of the area. Why the process exists and what is the value for the customer are important pieces of information for effective waste identification.

Waste

Are your customers paying for the inefficiencies of your business?

As a customer, I am not willing to pay more than necessary. When I needed to paint the house, I compared service costs and customer reviews between service providers. Around 61% of internet users research a product online before making a purchase. These days is easier than ever to compare prices, which is why price strategy is so important. Most business owners use cost-plus pricing. This strategy sets the service price, adding a mark-up to the cost. 

This formula implies that higher costs translate into higher prices. If your service price is higher than your competitors and the service is not much better, you are at risk of losing customers. There is a simple and effective solution to reduce operating expenses. What you need to do is to find waste and eliminate it.

Waste is any activity that does not add value from the customer’s perspective. For example, Company A paints with brushes and rollers while Company B paints with paint sprayers. To finish the job on-time, Company A needs more painters because their process is slower. Are you willing to pay more because their process time is longer?

There are eight types of waste: transportation, inventory, motion, waiting, over-production, over-processing, defects, and underutilization of people. Our friends from Company A have quite some waste in their business. The following are examples of each type.

  • Transportation: moving paint cans in and out storage
  • Inventory: keep enough brushes and rollers for 6-month service
  • Motion: walking back and forth to the truck looking for the right size brush.
  • Waiting: Waiting for the materials truck or instructions
  • Over-production: Painting the fence when it wasn’t part of the request
  • Over-processing: Paint the same wall five times
  • Defects: Use the wrong color paint
  • Underutilization of people: the new guy is wasting paint because he does not have training

One way to identify what areas of your business need change is by identifying waste. You can highlight the waste on the process on your process map and use the information to design a new process.

Do not make your customers pay for your inefficiencies. If you want to improve profits by controlling costs, it is important to learn how to identify waste.

This article was originally posted by Jina Rivera in Organization and Efficiency Solutions.