CI Tools

What is customer value and how do you define it?

The journey to transform your business into a continuous improvement enterprise should start with the definition of value. The CI business management model defines the value of a product or service from the customer’s point of view. How much your product or service is worth for the customer? What are the expectations?

How do you find the answer to those questions? Only the customers themselves can tell you. There are a couple of ways to get their input, talking with them, or using social media. The best time for a conversation is right after they received the product or service. Ask about their experience. What do they like? Do they have any suggestions? Listen to what they have to say and watch their demeanor. Social media accounts are another way to receive feedback from customers. Review the comments and ratings often. You can also create polls to survey their opinion.

The information from these three different sources will give you the value definition from the customers’ point of view. Value definition is a critical piece to start your continuous improvement quest. You will use it to classify each process as value-added or non-value-added. Value-added activities are those that transform input into output or change materials or information. In other words, the customers are willing to pay for it. Everything else is non-value-added or waste.

When you go to a restaurant, you expect to receive on a reasonable amount of time the plate you ask. You also expect that the staff follows any special instructions like cooking the meat the way you request it. You will pay for the food and the service without hesitation. If the restaurant messed up with your plate, that is a defect. Now they have to prepare a second plate, which is overproduction. Both things are waste or non-value-added activities. I bet that you, the customer, are not willing to pay for them.

Businesses need to complete various processes that are critical for operation but do not add value to the customers. Examples of necessary non-value added activities are hiring, payroll, and month-end financials.

The entire flow from the customer order to product or service received is drawn using a value-stream map (VSM). VSM is a special type of flow chart where you can visualize the flow of information and materials. This map is a tool that allows you to see waste and plan how to eliminate it. How to create a VSM will be the subject of a future post.

The priority of continuous improvement is to eliminate waste. Waste elimination will create faster and bigger results. Second, it is to challenge and reduce the necessary non-value-added activities. Minimize the quantity of non-value-added steps will further improve flow and reduce costs. Finally, you will work on optimizing value-added steps.

CI 101

What is a system?

A system is a set of principles or procedures working together to achieve a defined goal. Continuous improvement or Lean is a business management system designed to create customer value with fewer resources. Each part of the system has a purpose or objective. Many times only one or two lean principles are implemented, but not the system. Perhaps that is the reason why the expected results are not obtained.

The goal of lean or continuous improvement is to provide the customer with the highest quality, at the lowest cost, in a shorter time. The foundation of the system is stability and standardization. The pillars to achieve that goal are delivery time and quality. The heart is involvement, highly flexible, and motivated team members that are always improving.
Each program or principle connects with one of those components. For example, 5S and standardize work are critical for process stability. Continuous flow is one of the activities to achieve shorter delivery times.

How do we take care of the system’s heart? One of the most important principles of lean is respect. It is important to treat our team members as human beings and not a commodity. We show respect by taking the time to develop their skills and helping them to be successful. Create opportunities to learn using lean tools and encourage them to improve their work. Employee participation in improvement activities is a way to increase engagement. It gives them a chance to win achieving success in their efforts to create simple and safer processes.

Little by little, I will continue to share other activities or tools connected with the goal, foundation, pillars, and heart of the Lean System. Continuous improvement is not a supermarket of tools to pick and choose those you like more. You don’t need to use all the tools available, but you have to support all the system components. What makes Lean good is not the effectiveness of individual tools, but the synergy between them to achieve the goal.

CI 101, Customer Satisfaction

What are your business goals?

One of your goals as a successful business owner is to deliver high-quality products to the customer at the lowest cost. The goal of lean or continuous improvement is to provide the customer with the highest quality, at the lowest cost, in a shorter time. It sounds to me that both goals are the same, what do you think?  

Continuous improvement achieves the goal by continuously eliminating waste, and you need to learn what it is and eliminate it. Waste is any activity that the customer is not willing to pay. They don’t have problems paying for activities that transform materials into finished goods or processed information. We call those activities value-added.  

The customer does not pay for the cost of fixing errors, waiting time, or excess inventory. These activities are non-value-added or waste, and the target of continuous improvement is to eliminate them.

Waste has seven categories: transportation, inventory, motion, waiting, over-production, over-processing, and defects. There is another category added later, which is underutilization of people’s talents.

  • Transportation is an essential part of operations, but it does not act any value from the customer perspective. The goal of CI is to minimize transportation to the minimum necessary.
  • Inventory of raw materials is also a necessary evil, but you do not want to have excess inventory. Excess inventory is at risk of being damaged or become obsolete.  
  • Any motion of a person’s body that is not related to adding value is waste. Poor ergonomic designs make people move their bodies more than necessary causing safety and productivity issues. 
  • Waiting for materials, for approvals, for a phone call, or for shared equipment to become available are all examples of waste.  
  • Over-production is when we make too much because we are producing ahead of the real demand. Over-production creates more waste in the form of inventory, motion, waiting, and others.
  • Over-processing is doing more than what the customer requires. A common example of this is when you receive items in a box that is three times the appropriate size.
  • defect is when we make a mistake, or produce defective items. Fix defective products comprise time, material, and other resources.  
  • Underutilization of people’s talents is not letting people work at their full capacity. Examples of this are lack of training, not trusting in their capacity to improve processes and siloed thinking.

You can highlight the waste on the process while drawing your process map. Make sure that you eliminate or minimize waste while designing the new process. Your strategy to increase profitability is to eliminate waste.

What are your business goals? Is one of them to deliver a high quality product at a low cost? Are you targeting to increase your business profitability? Do you want to grow your business? If you answer yes to any of the last three questions, then continuous improvement is the business strategy you are looking for. Contact me, and we will work together to improve your business processes from the customer perspective.