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Vishwadeep Khatri

Non Value Adding, Value Adding Activity, 7 Wastes

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Q7. A Value-adding-activity is commonly defined as one which is not wasteful. We also like to commonly use three checks for value addition. 

 

  1. A value adding activity is one that customer is willing to pay for. 
  2. A value adding activity is transformational by nature. 
  3. A value adding activity is done first time right. 

 

Do you go with these questions as prescriptions for value addition in all circumstances? Or would you modify these questions depending on the process/ situation/ industry? If you think that modifications are needed, please illustrate with some examples.  

 

You may like to carry out research over the internet, talk to your partner, and colleagues while framing your response. Each club may submit maximum two responses, one by each member. Please write the answer in your own words. Please do not copy and present someone else's explanation as your own. As Excellence Enthusiasts, we are against plagiarism. 

 

Remember - Your answer will not show when you submit. It will be made visible only at 4 PM tomorrow. May the best answer win. All the best! 

 

Cheers to the Spirit of Excellence! 

 

This is the Excellence Ambassador Episode 1 - Only registered and approved club members will be able to respond to questions between 4th September and 29th September 2017. One daily question is announced at 4 PM on each working day and will be closed for responses at 4 PM on the next working day. Once responses are locked at 4 PM on next day, they will be made visible to everyone. Each Excellence Ambassador (and other readers) will be asked to vote on the answers of the day by upvoting or downvoting. The voting will close at 6:30 PM and best response will be selected out of ranked responses at 7 PM. One response will be marked as the best answer and will remain on our forum as a reference for future visitors. Together, the Excellence Ambassadors will build the best Business Excellence Glossary.

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I believe we have all the three major factors required to arrive at the true value add activity in our processes. It is applicable to all setups.

 

The “to be” process recommended will have the thorough usage of lean tools. Therefore when we say…

 

A value adding activity is one that customer is willing to pay for – It’s the activity which determines the price customer is ready to pay. This helps us to establish the cost involved running the process and the profits we are targeting to rake in, since Price – Cost = Profit.

 

Exceptions could be the cases when the manufacturer/provider wanted to adopt KANO model and try to DELIGHT the customer. The risk here could be manufacturer’s market competitiveness and customer acceptance.

 

A value adding activity is transformational by nature - the activity in a process has to help the product /service reach to the next phase of realization. The time invested in the effort should assist the product/service attain its entirety.

 

Exceptions are based on the assumptions and the knowledge on the transformation/stages. Continuous learning will rock the boat and force us to consider a detour in the journey.

 

A value adding activity is done first time right – the activity of the process should be carried out with utmost quality. The service/product should be free from failures otherwise it will lead to rework.

 

Exceptions are limited here if we assume that the manufacturer/provider has got the right VOC/CTQ. If the requirements are sorted, quality management should be effortless.

 

I think, in the sequences of new-product-design/ innovative product creation/ unique offerings/ one time projects, we need to modify our understanding of VA/ NVA. In an established process/ repetitive sequences, the original three questions seem to work well.  

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Value” for any product/service is defined by the customer. It could be the quality of product/service (or) the price that the customer pays for (or) the on-time delivery and/or a combination of all three. But sometimes “Value-adding” activities of an organisation may not directly translate to an additional cost paid by the customer. It could result in acquisition of more customers (i.e. increase in market share) whereby the organisation recovers its cost of the “Value -adding” activities. For such “Value-adding” activities, I feel, the 3 universally accepted checks for “Value -add” activities may not be sufficient.

 

In today’s rapidly changing world, some activities which might have been “good-to have” , in the earlier days, are becoming quintessential for organisations. Below, I have identified a few checks and activities which, I feel, can neither be categorised as “Non-Valve Add” nor as “Essential but Non-Value Add” today.

 

Check 1: A value added activity is one that provides a competitive edge or differentiation to the current service compared with competition.

Activity: Signing a new supplier relationship agreement or collaboration agreement with another company.

Explanation: The main objective of Collaboration agreement with another company or Supplier Relationship Management is to establish two-way, mutually beneficial relationships between organisations or an organisation and its suppliers. The collaborative, relationship building is aimed at providing a greater added value to the end customer or a differentiation factor which provides a competitive edge. Another benefit is access to new customers belonging to the other partner/supplier and joint business development activities. This may or may not result in an increase in the cost for the customer, but will result in acquiring more customers. Once in place, this could act as a new starting point for creating more Value-added services.

 

Check 2: A value added activity is one that helps to sustain and enhance the quality of product/service.

Activity: Identify, Enable and encourage the workforce to undergo relevant training and certifications.

Explanation: A trained workforce enables to deliver better (efficient, cost effective, sustainable, innovative) products and solutions to the customer. At times the customers request for certified people.

 

Check 3: A value added activity is one that helps to improve the organisation's public image.

Activity: Implementing and getting certified/audited and becoming members in boards associations dealing with Environmental, Health and Safety standards and policies (other than those dictated by government policies).

Explanation: In the modern world, the social responsibility of organisations plays a very critical role in its existence. These activities project a positive image of the organisational culture and give a feeling that their products and services are more trustable and will be of better quality.

 

Check 4: A value added activity is one that provides customer an additional choice.

Activity: Adding a new item to the menu in a fast food restaurant..

Explanation: Providing the customer more choices is critical especially in fast food business. Chances of a customer visiting a restaurant offering more choices in the same price range say under the Value Menu section, is higher than he/she visiting a restaurant offering fewer choices. Here it may be seen that the though the customer does not essentially pay more but it is still a “value add”. Instead of being a linear value add to a product, this can be seen to be more of a lateral value add to the menu which could result in an increase in the customers.

 

 

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 I feel that one cannot use ONLY any one of the 3 given checkpoints or all of the 3, there are much more different checkpoints that will provide a different level of checks for activities. Each Activity will have its own set of checkpoints, which will give valid results.

Depending on factors and variables like industry, business objectives, timelines, environment including physical and socioeconomic, one needs to devise suitable checkpoints to identify whether an activity id adding value or not.

When looking at the value of the product or service, the goal is to have the value of the end-product or service exceed the cost of producing the product or providing the service.  The cost of the product or service includes all resources used to produce it (e.g., raw materials, labor, storage, transportation, and overhead costs).

 

We need to examine each activity within the process and determine the value-added assessment of the activity.  The value added by an activity, in an accounting sense, is simply:

 

(Value of the product after the activity)

minus  

 (Value of the product prior to the activity).

 

 

The value added by an activity should be a positive value.  Ideally, the value added by the activity is equal to or greater than the costs incurred during the activity. Value from the customer's point of view is independent of the cost to produce the product or provide the service.  It is based on the customer's expectations, as identified by the effectiveness indicators for the process. So for me, the questions that I would need to ask, as checkpoints would deter the following categories of “Wastages” or Non value for all activities connected to processes:

 

Broadly, the following questions cover the Checks on the above wastages:

-          Is the process documented?

-          Is there change management processes that ensure traceability of business process changes?

-          Is the process documentation up to date and relevant?

-          Are key decision points defined with the appropriate decision gates and levels of authority?

-          Is the process owner of the process clearly defined?

-          Does the process owner understand the process's role in the value network?

-          Is their information quality processes in place when a process captures or generates data?

-          Is there a continuous improvement program operational?

-          Does the process adhere to all the legal requirements?

-          Are there escalation procedures in place if process execution get delayed?

-          Are business continuity processes defined?

-          Is there disaster recovery processes in place?

-          Is the process outputs requirements clearly defined?

-          Does the process performance relate back to a somebody's performance assessment?

-          Are the process logistic in place to ensure all the process enablers are always available?

-          Is there process performance feedback in place that measures process performance?

-          Are there regular process reviews to ensure the process is executed according to its design?

-          Are there policies in place to regulate process execution?

-          Are process outputs aligned with strategic intent and customer expectations?

-          Are there processes to evaluate reasons for process failures and recommend corrective measures?

-          Is there a risk log that defines the degree of risk associated with process failure?

 

All the checklist points might not be applicable to every business process. But I think this list will at be a good starting point to secure a good flight for the business. Even a short checklist used continuously to ensure consistency can make a big difference to the quality of processes in an organization.

 

The aim for productivity improvement is to enhance  the Real Value addActivity (RVA) which directly contributes to satisfying the customer's expectations/ perception of good product/ Service (e.g., taking customer orders, receiving materials, assembling materials, shipping) And reduce the Business Value add activities (BVA) activities which satisfy business requirements, but add no value from the customer's viewpoint (e.g., preparing financial reports, maintaining human resources records, and ordering business supplies) and to eliminate the Non Value Add activities(NVA)which do not enhance the customer's image of the product or service and do not support the business process and can be removed from the process with no effect on the end product / service 

When looking for ways to reduce BVA activities and to eliminate NVA activities, be creative and innovative. 

 

As an example In the QSR industry , all activities and decisions need to be customer-centric and hence, It is imminent to ask  against all activities whether ;

-          Will the customer be 100% satisfied and perceive value for money??

The customer will be retained and will always add to new customers through word of mouth

 

-          Can the activity be scheduled and repetition can be eliminated-

Eg, the Preventive maintenance schedule- It helps to ensure that there is no firefighting and customer experience is provided seamlessly on a continuous basis.

 

-          Can the activity be measured for timelines and impact-

Most important- all activities need to be SMART, so that we can measure and improve on the same, thus committing to improve customer service at all times

 

-          Is the activity covering the scope for defects and defectives to reduce rejections.

 Eg in a QSR, the products have a defined  time and temperature for cooking and equipment are automated for the same. Thus there is standardization and the customer’s expectation is met at all times

 

-          Is the activity using lesser movement of people-

Eg. In the production area the tables and kitchen layout can be arrangeds in such a way that the staff need not move around too much and find things in “reach” and are able to produce faster. Thus saving time for the customer

These are few examples that I could fit offhand- In conclusion- All the questions need to be answered in an affirmative towards customer satisfaction!!

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Truly the most value adding concept in Business Excellence is Value-adding-activity and Non-Value-Adding activity concept.

 

While the three checks for value addition covers most of the Commercial industries involved in products and services business, it is always  recommended to do value-add check based on the industry/process/situation. Few examples pertinent to the same are enumerated below  :

 

1.      Public sector/Govt. Services: Governments frequently produce or fund products/services that are highly valued by some and harshly criticized by others. Environmental regulations, birth control programs come to mind. Most of such programs do not have direct commercial value.

 

Key check for Value add for such need to be in line of :

 Public value is created when government agencies meet the expectations of citizens and elected officials, that these agencies be accountable for the way they operate; that is, that they be efficient, fair, open, and accountable.

 

2.       Software development :

As per the Value add definition, software testing is Non value added.   But, and this a big BUT, as nowhere in the industry Software can be produced without defects and hence testing and inspection cannot become Non value-add.

 

Also, in many organisations transformational in nature is more arrived by optimum utilisation of internal resources. Like Airline creating hubs to optimise the resources etc.

 

Another example in Heath care industry, where in Emotional quotient of the patient needs to be valued (even if Doctor or nurse need to spend more time)  and Value add activity to be determined accordingly.

 

So, would like to suggest a modification to Criterion # 2 by calling out meeting explicit customer requirement.

 

A value adding activity is transformation by nature and meets an explicit customer requirement.

 

Also, business organsiations in the fields of compliance and regulatory framework need different view of Value add.

           

I look forward to learning more scenarios from experiences of BE Ambassadors in the forum on this subject.

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In assessing a process, it is important to understand which activities in the process actually add value to the end result. All other activities are non value added. Commonly used 3 questions (also referred as 3C method - Customer cares / Changes the thing and Corrects first time) as prescriptions for value addition might not suite in all circumstances. It is indeed required to interpret differently rather than modifying these questions depending on the process/ situation/ industry. When we say interpret differently we need to define VA with respect to Customer value add and Business value add and if required further additional thought probing questions can be added. Critical thinking is the key when we try to understand whether the task/activity is VA or NVA

 

For example in Software industry where the development teams adopts Agile /SAFe frame work for the execution, then exactly asking those 3 prescribed questions might not translate in to what we want to achieve. When we are trying to assess a VA /NVA in Agile development - PI planning/Sprint planning or retrospectives - Customer is not willing to pay for that, which does not mean they are not value added. That is where value added can be thought of Customer value add and Business value add.

 

Customer Value Added – or just VA for Value Added: adding form fit or function to a product or service, an activity that the customer would be willing to pay for in isolation if they knew it was being done – e.g. Creating code, implementing functionality

Business Value Added – non-negotiable waste: an activity that is required to operate the business but the customer is unwilling to pay for – e.g. PI planning/Sprint planning or retrospectives, code documentation, CI CD and DevOps activities.

Non-Value Added: an activity that is not required by the business nor is the customer willing to pay for – e.g. Defects,Waiting for resource allocation, hand offs, Partially Done Work,Task Switching, Relearning etc.

 

Thought probing questions for defining VA & NVA :

Customer Value-Added Questions:
Does the task add a form or feature to the product or service?
Does the task enable a competitive advantage (Enhanced UX, reduce price, faster delivery, acceptable defects)?
Would the customer be willing to pay premium or prefer us over the competition by doing this task?


Business Value-Added Questions: 

In addition to customer value-added activities, the business may require us to perform some functions that add no value from the customer’s view point
Does this task required by law or regulation?
Does this task reduce the financial risk of the owner(s)?
Does this task support financial reporting requirements? (Ex: moving to GST?)
Would the process break down if this task were removed?
Recognize that these activities are really non-value-added but we are currently forced to perform them. We need to try to eliminate or at least reduce their cost or effort


Non-Value-Added Questions:
Does the task include any of the activities: switching between, frequent had offs, inspecting, transporting, moving, delaying, storing, all rework loops, expediting, multiple signatures?

 

So the conclusion it is not important to stick to those 3 questions always for assessing VA/NVA. Depending upon situation and type of industry it is required to modify / interpret them in that context.

Edited by Ramana
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By and large the above is true for all industries and processes however there are certain activities in all industries which may not directly add value to customer however indirectly contribute to the customer satisfaction or business success and therefore there is a need for a category called non-value add but necessary. These tasks or activities do not directly bring value to the customer however enable delivering value to customer. These are also activities that allow businesses to continue to stay in business. The kind of activities that fall into this category are:

 

-       Management activities in projects which involve creating plans and monitoring against plans, providing status reports, tracking metrics

-       Regulatory activities that are required for compliance

-       Requirements specifications in software industry which many a customers don’t particularly like but is a necessary ingredient to successful projects and happy customers

 

The value must be looked at not from just customer perspective but also the viability of the entire business and therefore activities like training, payroll, accounting, audits are essential to successful business and must be considered in a category necessary non-value adding.

 

The overall approach that would work with this situation is:

o    Customer Value Add to be OPTIMIZED

o    Necessary non-value add to be MINIMIZED

o    Non-Value add to be ELIMINATED

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 Value Add:

 

In general, ‘Value Add’ means changing the shape or character of the product. It is the apparent transformation of the item in a process.  Anything that is not changing the shape or character of the product is deemed as non-value added activity. For anything deemed as ‘Value Add’, the customer should be willing to pay for it and it should help us in achieving/providing first-time right quality.

 So essentially a value adding activity will use the 3 checks of

                a). Whether the customer is willing to pay

               b). Whether it is transformational  by nature

               c). Whether is done first time right

 

However there is one more aspect called ’Value Enablers’. They enable in ensuring that your ‘Value Add’ activities are doing their jobs smoothly.  This can make a difference to success/failure in quite a few scenarios. Let me demonstrate with an example.

ABC Organisation was doing a IT development project.  Customer wanted Quality Assurance to be done by a different vendor.  So the customers gave it to QuoxProComp, a leading company in Quality Management .  

 

How the Process looked like before Value Add was applied: AS-IS Process:

image.png.0445657e81bf1f5a02ebe24f06982d1a.png

 

The AS-IS process created issues because there were many defects captured by the vendor QuoxProComp. Customer was very much upset with the poor quality both in SIT and in UAT where customer also did testing and also the reputation of ABC organisation was at stake. In the AS-IS Process, the activity “Rework” is a non-value added activity and customer did not want rework to happen and hence he did not pay for that. So its shown in RED colour. The Green shaded activities are value added activities for which customer agreed to pay.

 

The organisation asked the project team to brainstorm on the reasons for so many defects and to come out with proper solutions.Reasons were obvious:

  a). For a project of such strategic importance , the team could not do a comprehensive Unit testing.       As a result , there were so many requirement conditions/validations that  got missed out .

  b). Certain functionality worked in local box (developer’s machine) , but did not work properly in target environments . That was due to few parameters that needed to be changed before the codes were deployed in those environments.  As a result, build scripts have to be manually modified. Otherwise some functionalities were not working as expected. But they were raised as defects by the QA team, which should not have  been the case as those parameter changes were done earlier.

 

So to counter those 2 problems, the project team came up with some solutions and decided to implement them as value added activities which they felt would naturally fit into.  As a value-add, the project team,

a)      Converted Unit  Testing into an automated unit testing

b).      Upgraded its build script such that the updated build scripts eliminated manual intervention when codes got deployed from one environment (Local box to SIT/ST, SIT /ST to UAT and UAT to Production)  

 

Let us see how the process output changes after applying few Value-added activities:.

image.png.11cfb0c08acb14f76591a4a73bad22d9.png

 

If you look at the TO-BE process, activities with * (asterisk) symbol are the 3 value adds done on top of the existing activities.   In spite of adding value adds, there is still a Non-value add activity in the form of “Rework” .  Does that mean those value adds are not suffice? The answer is yes. The value add brought relief to the project team and the organisation in that, there were less defects and customer was not happy but acknowledged the fact the team is putting efforts to reduce the defects. This time the results were not centred on validations/conditions or any environment related issues. 

 

There were functional defects that bothered them (project members).  The team could think of scenarios only from a developer ‘s point of view. The management understood the pain point of the team and thought that the team needed different pairs of eyes to test the code. So they decided to go for a Quality Assurance team, internal to the organisation. Its job was to test the application in a local server (machine where an Enterprise application server was installed rather than a standalone server)  –which could mimic the SIT/ST environment and raise as many valid defects as possible so that the developers can fix those defects before the SIT/ST date starts .  This was implemented. 

The process diagram post the change looked like this.

   

Improved Process that includes Value Enabling Activity:

 image.png.eabf3556b108ab2231c1471416fa8130.png

 

Here in this process, there were no non-value added items, however there were 3 value enabling activities which were internal to the organisation and for which the customer did not pay.  What did these 3 activities bring to the table? The Internal QA team of the ABC organisation did the functional testing and gave a feedback of the system to the developers. This was a welcome change for the project team and based on their feedback, the project team (read development) started to have a different perception of the system that they were working on.  This had a positive impact on the quality of the code developed.

 

So all these extra steps of having a local server, deploying the source into the local server and QA done by an internal team resulted in a quality code delivered by the project team as the team got more and more feedback from the internal QA team of the organisation. This reflected in the SIT/ST testing as well for subsequent phases and the rework effort was within the SLA agreed with the customer, keeping in line with the dictum “no product would be 100 % defect-free “ . In UAT also, there were only cosmetic defects/changes that were needed.

 

This resulted in high customer satisfaction and the management team felt that the project was on track and was a relieved team.  The key takeaway point here is that the value enabler activities did the job for the team.  Customer did not ask for those activities but they were necessary for the project to do the phase-wise delivery with high quality and on time.

 

This is the reason why i feel , that apart from focusing on the 3 check conditions for making an activity as  a Value Add , we also need to see if there are Value Enablers which can ensure that they add support to the smooth functioning of the work expected from the Value add activity. This may not be in every case, but like the above example , there could be some cases. Else , getting the first time right may only be a dream.

 

 

 

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I would with the above 3 statements. And feel that there could not be any specific modification required as per different industries / processes. There is only 1 possibility on 3rd point.there cannot be always a value dadding service done right at first time as there would be cases where a company might have modified there service more aftr its initial launch in market to compete in global market as well as based on customer reviews or feedbacks.

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Value added activity may not be transformational always. Example in case of customer call support though it adds value to customer, it may not be transformational in all contexts. It would help customer feel good and would add value. In the same context customer call support may not be able to add value  first time itself if the customer concern needs more time and investigation, that does not make this activity non-value adding. It might still be needed to get all required information. Customer's will to pay can be a common factor to decide on the category of the tasks.

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The popular definition of "Value Adding" process using the three essential conditions viz. "Customer must be willing to pay for the process", "Process must be doing a transformation" and that "it should be first time right"..... has been one of the early interpretation of a VA process in Lean Management. 

 

This has been a very useful definition to drive the point very clearly that we would not be performing our processes the best possible way... in fact, in our profession, we all must have experienced the realization that we are living with process having steps that have been built in right from beginning to get it going and we rather overdo than miss out, especially when we are trying to sell an new product / service. Another possibility is that over time, we have brought in patches of modifications to overcome certain complaints or special requirements. This could have resulted in additional steps creeping in. We then become busy in managing our deliveries, TAT and output Quality, that we do not often question ourselves whether we are running our processes as efficient as it could be. That's when these 3 criteria helped our thought process in questioning each step and the relevance of each step towards to 'value add' definition.

 

While going by these 3 guidelines for identifying VA steps, several debates spring up. in many of our lean studies we have ended up classifying that as per definition, over 90 percent of the process steps are "Non Value"add. Such studies raise high expectations among the  management that the processes can be leaned upto 90%. While there would most likely be certain low hanging steps that can be addressed for either elimination or simplification, many other steps that fall in the NVA category by definition, may not be dispensable easily. For instance, one of the most common activity that is considered as NVA is inspection and rework.  Very often, Quality Practitioners double up as Lean specialists as well..The responsibility of driving Lean at the same time being accountable for Quality falls upon the same professional. Some times this situation leaves them with an unenviable challenge!.  We may have interim inspections and corrections in the process, without which there is high risk of errors being passed downstream. We can eliminate these steps only if the capabilities of the preceding process(es) are assured and sustained. . So they end up being NVA process that are 'necessary' for the time being.

 

One of the modifications that we did is to introduce a sub-category for the NVA, and call such steps as "Value Make-up" steps. "Value Make-up" process steps are those steps which are inserted to "make-up" for the value deficiency of preceding process steps. The "Value Make-up" process steps can be reduced or eliminated by improving the inherent process capabilities of the preceding processes.

 

Apart from the above discussions, it is also seen that there may be certain activities introduced in the process flow, that may not satisfy the VA definition, but are considered as "Enablers" for other value added process. It is difficult to imagine that the customer would agree to pay for such processes, but they are considered essential. It is already a prevalent practice to name such process steps as Value Enabling activities. For example, to process a health insurance policy, the customer may be expected to fill in a declaration form on his / her current health. Though this may not fall into the VA definition, this process step would enable faster processing of the policy.

 

It is also debatable on the third criteria, i.e. whether the activity is being done right the first time. As per this, an inspection and rework activity is considered NVA. However, some times the very fact that there is a powerful detection and correction system in place drives customer confidence and they may even be willing to pay more. Even in many advanced process in Japanese companies, 100% inspection has been automated or robotized, despite the advanced process capabilities they are known for. Passengers get higher confidence in travelling in an airplane due to the 100% security screening, though as per definition the screening activity does not qualify as a VA process step.

 

We can go on with more examples and discussions, but to conclude I would say that the common 3 checks for defining VA process holds good and is certainly a great starting point and ongoing guide in the Lean Journey. However, the thought process need to be oriented that...... for all the NVA activities, there are always opportunities to find a way to eliminate or simplify them, with out compromising the output value. This is an area for continuous improvement with the right checks and balances. 

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From a customer's point of view, value-added work is a process that adds value by producing goods or providing a service that a customer is willing to pay for, the step that transforms the product being produced, and if it’s done properly the first time.

 However, muda (Japanese word meaning "futility; uselessness; wastefulness") is a process that consumes more resources than needed, which causes waste to occur. “Waste” therefore can be defined as any activity that does not add value to a customer.

Muda are broken down into:

 

Muda Type I: non-value added activity, necessary for end customer.

They are usually hard to eliminate because although it is classified as non-value added activity, it is not necessarily muda.

In manufacturing a car, for example, a value-adding step would include attaching the door. The customer is, of course, willing to pay for a door and to have it attached properly. There can be a lot of waste associated with the simple action of attaching a door, though, manufacturers aim to reduce as much of it as possible

 

Another example is  the quality inspection process for critical process is needed at car assembly, to ensure the car quality and fulfill safety standards before sending it to the end user; however, from customer point of view, these actions are necessary and do not contribute to the assembly process which add values or to the car assembly.

 

Muda Type II: non-value added activity, unnecessary for end customer. The aim is to eliminate this type of wastage. They are non-value added activities which contributes to waste and incur hidden costs.

 

By planning to reduce manpower, or reduce change-over times, or reduce campaign lengths, or reduce lot sizes the question of waste comes immediately into focus upon those elements that prevent the plan being implemented. Often it is in the operations' area rather than the process area that muda can be eliminated and remove the blockage to the plan. Tools of many types and methodologies can then be employed on these wastes to reduce or eliminate them.

 

The plan is therefore to build a fast, flexible process where the immediate impact is to reduce waste and therefore costs. By directing the process towards this aim with focused muda reduction to achieve each step, the improvements are 'locked in' and become required for the process to function. Without this intent to build a fast, flexible process there is a significant danger that any improvements achieved will not be sustained because they are just desirable and can slip back towards old behaviours without the process stopping.

 

       The Seven major categories of office waste with some examples are as follows:

     Category of Waste

Examples

1.Transportation & Handling

Movement of paperwork, multiple hand-offs of electronic data, approvals, excessive email attachments and distributing unnecessary cc copies to people who don't really need to know

2. Inventory

Purchasing or making things before they are needed (e.g. office supplies, literature...). Things waiting in an in-box, unread email and all forms of batch processing create inventory

3. Human Motion

Walking to copier, printer, fax... Walking between offices. Central filing.

4.Waiting

Slow computer speed. Downtime (computer, fax, phone...). Waiting for approvals, waiting for customer information or waiting for clarification or correction of work received from upstream process create much waste in office and business systems.

5.Overproduction

Printing paperwork or processing an order before it is needed. (things can change) Any processing that is done on a routine schedule - regardless of current demand

6.Overprocessing

Relying on inspections, rather than designing the process to eliminate errors. Re-entering data into multiple information systems, making extra copies, generating unused reports, and unnecessarily cumbersome processes.

7.Defects

Data entry errors or invoice errors. Engineering change orders, design flaws, employee turnover and miscommunication are all ‘defects’ in office processes

   

Every employee in the organization has the ability to identify and eliminate waste in their work. Empowering staff to be change agents by providing them with the leadership, methodology, and tools they need to improve their work results in a sustainable culture of continuous improvement.

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A Value-adding-activity is correctly defined as one which is not wasteful. The 3 checks of value addition, namely

 

  1. The step transforms the item toward completion
  2. The step is done right the first time (not a rework step)
  3. The customer cares (or would pay) for the step to be done

a exhaustive to cover all possible circumstances. These may be slightly modified depending on the unique nature of a process/situation/industry. For example, in an accounting service scenario,  the customer will pay the price for the final product i.e.financial statements. Any changes in the existing book keeping process, any enhancement, any rework that the accounting firm does the cost of it wont be borne by the customer but by the accounting firm itself. Hence, the improvements in this case will be a value add to the accounting firm since it will help them with time savings but the end customer would not benefit out of it.

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When we talk of Value adding or Non Value Adding or the Essential Non Value Adding activities we tend to look only form the client point of view and generally we apply binary conditions to the decisions to segregate between VA, NVA and ENVA. There may be situations wherein there might be a condition between binary 0 and 1. There may be a grey area between the black and white of VA and NVA activities.

 

We need to look at the activity from the value it adds to your own organisation rather than looking only from the client point of view. A few activities may be helping in creating an environment which are enablers to the VAs. For example we have team leaders, project management, HR management or generally the management team who undertake activities which may not satisfy the 3 golden conditions. They may also not be necessary for legal compliance like the accounting activities which are classified at Essential NVA (ENVA). These are however Value enablers which create an positive environment to create value for sustainability of the organisation.

 

For example, a elaborate recruitment process, motivational activities undertaken by HR, exit process to collect feedback for improvement from the exiting employees Or the planning, control and monitoring activities undertaken by the project management team, the quality assurance activities like the writing and continuously updating the Quality Manual and the procedures itself may not directly fit into the conditions listed in the question. However without these activities the ratio of VA/NVA would be lower in turn generating considerable amount of waste. 

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I will go with questions 1 and 2 as such. But I will suggest to change question 3:

  1. A value adding activity is one that customer is willing to pay for. – Yes. To ensure the right first time delivery, customer will be willing to pay for.
  2. A value adding activity is transformational by nature. – Yes. Based on the activity value addition, it may tend to change by treating as Muda at one point of time and to include in other areas or to be modified based on the current requirement.
  3. A value adding activity is done first time right. -  I suggest to change this question as “A value adding activity is for delivering first time right”. Every activity will have the error zone. Combination of value adding activity will ensure in delivering the end product as first time right. 

 

For example, capturing the financial data after interpretation as single eye may/will lead to error. A second eye check will help in ensuring the correctness of the data. The second eye check is the value adding activity.
 

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The given prescriptions for value addition is right generally.

But when come to specifc, the prescription may vary slightly.

In Service industry:

1. Value Adding activity – any activity in the process that is essential to deliver end output for the customer.

For example: In a reconciliation process, for the open items – investigate, reaching out to multiple teams/bank’s, perform multiple follow up’s leads to reduction of open items. Which will create impact on the Balance sheet and P&L (profit and loss). Here the client will not pay for performing follow up’s – but its least expected from client side that this need to be done to reduce the open item. In this case, it’s a value addition which is essential to deliver the end output of completed reconciliation with less open items.

 

2. Value Adding activty – any activity where the client is getting benefitted out of that

For example: In the competitive market, the BPO inorder to sustain the business or get the new business – they have to give more to client than what has been agreed. The client will pay only for the work which you had been agreed say processing 1000 transactions in a month and + or – of 5%. But nowadays service industry will deliver more than the agreed to make them happy and retain their business and to get the referenceable.

Performing analytics for the client, creating some automation for the client and share the productivity benefits – with all these we are not getting paid.. but we are doing these for client benefit. These are treated as a value adding activity.

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Value added activities change the form, fit or function of a product or service. These are the things for which the customer is willing to pay

 

Typically Non Value Added Activities account for 95% of total lead time, so by eliminating NVA we tend to make the process lean and value adding. 

 

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We can eliminate, reduce or simplify Non value add activities to make a process efficient

 

A telecom example would be a customer’s visit to Retail showroom for a new connection and following activities done by the executive, now after a specific point the activities are NVA, which delays the process.

 

1.       Explain about the Tariffs & Plans

2.       Explain about the documents  Requirement

3.        Assist the customer in Filling the Customer Application Form

4.       Collects the documents

5.       Closes the sales

6.       Collects the money

7.       Prints the receipt

8.       Send CAF for Order Entry

9.       Follow up for the activation

10.   Attend the customer on his revisit

11.   CAF gets rejected

12.   Request customer to give the missing documents again

13.   Handles Customer Escalations

14.   Goes to customer home to collect missing document

15.   Resends the Customer Application Form

 

Beyond point no. 9 to 15 all the activities are NVA (marked in red), which is not adding the value to the process and instead it’s a waste in a process. Hence to ensure VA in a process, the activities in a process need to be done first time right.

 

Ideally if a Retail executive does the activities first time right, then it is value added for the customers.

 

By stop doing “non value added” activities and by eliminating waste & the process is more effective and efficient which adds value to the customer.

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The other Value additions are as follows.

 

1). Leaders and managers may not be directly involved in adding value to the product or service. Leaders add value by engaging employees in ways that will help them continue to add value for the customer.

2).In case of educational institute, The difference between the predicted performance and the actual performance represents the value added by teacher's instruction.

3). In case of hotel industry,   Loyalty program, inclusive package, personal touch,  Extra support are tangible and intangible value addition.

4). Value added in Health care as, providing at lowest possible cost, a successful "high-tech," "high touch" approach through the combination of process re-engineering and employee training in customer relations.

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1. A value adding activity is one that customer is willing to pay for - This stands true in every scenario depending on the process/ situation/ industry.

 

2. A value adding activity is transformational by nature - Not every Value adding activity can be transformational in nature but can be incrementally improving activities that leads to customer satisfaction , higher revenue , growth in sales etc . For e.g. In IT industry, renovating an application which is not transformational is still a value added activity & innovating for a new software application which is transformational in nature is also a value added activity.

 

3. A value adding activity is done first time right -- Not every value adding activity is done first time right. FTR is only when a process, software or product is stable & predictable, whereas when we improve or innovate a process or a product out of the box thinking is required which leads to experiments and hence baseline for FTR cannot be determined initially. 

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Value is the regard that something is held to deserve; the importance,worth, or usefulness of something. It's the relationship between satisfying needs and expectations and the resources required to achieve them and getting what you require for what you will pay.

 

Activities can be value added; non value added and essential non value added. The eliminated non value added activities might be reduced, or simplified by becoming lean(muda).

 

Some non value added activities may be necessary to comply with certain standards/or regulatory requirement.

 

Some activities perform functions that do not change the form or function of the product or service, and the customer is not willing to pay. Example- Rework. T caused by errors of the he customer expects to pay for the printing of a document, for instance, but does not want to pay for corrections caused by errors of the supplier. 

 

The elimination value added activities present opportunities and/or management through economics of scale and scope realized using shared service models.

 

Optimizing value added activities is a consideration for improvement where applicable and relevant. Automation is also relevant for both value added and essential non value added activities

 

  

 

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The concept of value is not universal. It depends on the perspective of the customer, situation and the nature of the industry in general.

 

Let me illustrate a few examples where the traditional definitions might not hold good:

 

1. During these times of increased security risk, we have authorities perform secondary checks at ladder point in many airports. Going by the standard definition, this would be a non value added activity as it would mean that the first check was not done correctly (not first time right!). But I would argue that it is value adding as it reduces the probability of dangerous elements gaining access to an aircraft and putting the lives of passengers at risk. Here, the "value" is the reduction in probability of an undesirable event, though it might seem to be intangible.

 

2. Consider the delivery of a luxury car in a showroom. We can see the sales representative making a detailed inspection of the car to make sure that it is spic and span, no loose ends are visible etc. Mind you, this is not a technical check on the functioning of the car, which would have been done already by the technicians. This would be followed by the sales manager making another final inspection of the car to check for neatness and presentation. The multiple checks might seem redundant and non-value-adding to a quality professional but for an extremely discerning customer, a stray mop lying on the back seat might be enough reason to never come back to that showroom again. It would be silly to ask the customer to pay for each round of inspection as the customer is already paying a premium. The "high level of service" is an integral expectation. The "value" in these checks is in ensuring customer delight.

 

3. In the software industry, it is common to have multiple rounds of testing - unit, integration, system, performance, security etc. For especially sensitive systems like financial services, these tests would be even more stringent as the loss arising out of a security breach or unplanned system downtime could be disastrous. These tests are not transformational, rather they are destructive.In such cases, having redundant systems and multiple quality checks would be the "price to pay" for good quality of service.

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A Value-adding-activity is commonly defined as one which is not wasteful. We also like to commonly use three checks for value addition. 

 

1.      A value adding activity is one that customer is willing to pay for. 

2.     A value adding activity is transformational by nature. 

3.      A value adding activity is done first time right. 

 

Do you go with these questions as prescriptions for value addition in all circumstances? Or would you modify these questions depending on the process/ situation/ industry? If you think that modifications are needed, please illustrate with some examples. 

 

Value-added steps in a process are those in which you add something to a product or service for which the customer would be willing to pay. These activities are where you gain the most from expending your resources when providing a product or service.

 

Yes. It must meet the above said criteria’s in order to satisfy the customer, retain the customer from competitors and to delight the customer by transformation.

 

Criteria

A value adding activity is one that customer is willing to pay for.

A value adding activity is transformational by nature.

 

A value adding activity is done first time right.

 

Definitions

 

Customers can pay for things in a variety of ways, including the following:

Premium Price – Having options on products that customers can choose in exchange for paying a higher price.

Customer Retention – When customers demand a certain feature and will go to a competitor if the product doesn’t have it.

 

A conversion of inputs into output with a process adding value to the customer. Transformation will lead to the following:

Customer Attraction – Having a particular feature will attract customers away from competitors.

 

In a service organization, the most efficient method for cutting waste is to attack anything and everything that is not done right the first time. This concept, known as first time right, involves making sure that all activities are carried out in the right manner the first time and every time.

Examples

A core concept of Lean is: “If it doesn’t add value, it just adds cost or delay.”

Eg.

In any hospital, a patient is taken for CABG surgery, but on the table, a valve been replaced for its full functionality depending on the customer’ s well-being. A value adding activity but transformational in nature.

In a restaurant, default silverware can be kept in stands or bins so that the waiter simply has to pick up one from each bin to ensure that all the tools are served correctly.

Defects 

Correcting mistakes

Eg. Correcting an omission from an order.

Efforts Caused by rework/ scrap or incorrect information…

Eg. A reused valve used for the patient.

Any service rendered to a customer that is not first time time is a defect.

Eg. Wrong order served to a table in restaurant.

Overproduction

Making or processing more than needed.

Eg. Provided 3 -4 copies of food bill to the customer in a restaurant.

Producing more than is needed or before it is needed.

Eg. Performing a gall bladder surgery along with Heart surgery

Services have a tendency to overproduce to make up for transactions that do not go first time right.

Eg. A package mis-delivered results in an extra pick-up and delivery to the correct destination.

Over-Processing

Adding more work than the customer is willing to pay for.

Eg. Inspecting work to make sure it is done right, or doing more than is necessary when the customer does not want the service.

More work or more quality than the requirement by customer.

Eg. Performing a surgery on minor blocks along with Major blocks.

A lot of processing happens in service industry to prevent defects at the customer point.

Eg.  In a bank, employees may check an account-opening form at multiple points during the process before generating the new account number. Inspection is a pure non-value-adding activity.

Waiting

Delays caused by shortages, approvals or downtime.

Eg. Idle time in any process waiting for action, or idle time maintained by Coder while processing a chart before submitting to client.

Wasted waiting time for the next step to process.

Eg. Waiting for recovery room

Any customer who waits if the service or product is unfinished at first time.

Eg. Delay in hotel room cleaning up / waiting for loan disbursement due to incomplete loan application.

Inventory

Item/product waiting to be processed. For example, allowing orders to accumulate waiting to be processed, or allowing transactions to queue up ahead of other steps.

Excess products and materials being processed.

Eg. Having pacemaker along with a new valve replaced.

Inventory stands as excess than what is required.

Eg. No Excess capacity to process the corrections to improve billing accuracy if it is done first time right.

Motion

Excess movement and/or poor ergonomics. For example, requiring extra movement because of a poor workplace layout.

Unnecessary movements by people

Eg. Having people moved for materials required for surgery

Any excess movement of people than required.

Eg. A person moving up and down to rectify the issue for his loan rejection.

Transportation

Moving an item/product/information from one place to another. For example, walking a customer request form to another department in a call center.

Unnecessary movements by products/materials.

Eg. Moving the instruments from one operating room to another.

Any excess movement of any product / service than required.

Eg. Any incorrect income calculations / incomplete forms requires multiple handovers and approvals if the loan is rejected.

Lean model

Continuous flow, 5S, Pull system rather than pushing, doing first time right, Standardizing the work & Kaizen blitz.

 

To be a value added action the action must meet all three of the following criteria:

1) The customer is willing to pay for this activity.

2) It must be done right the first time.

3) The action must somehow change the product or service in some manner.

You will need to look for the “7 elements of waste” and when categorizing need to break out your % split into:
% True Value Added,
% True Non Value Added, and
% Necessary Waste (i.e legal requirement).

If your processes are typical then the %VA will be less than 5%.

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Yes, these 3 questions are sufficient enough to find the value added activities in any industry/process/situation. But at the same time definition of Non-value added activities change. There can be many activities that does not fulfill the three question to be value added but are important for business. Those activities are categorized as NVA but required. There are different names for those NVA , like Business NVA, Supportive NVA, Essential NVA

     

Some examples

  • Inline inspection in any process
  • Preparing some reports
  • Maintaining employees data etc.

 

If we put them under VA activities, than we will be limiting our scope for improvement. People will always think that they are VA so we should not change them

 

All this BNVA, SNVA, ENVA can be reduced or eliminated over the period of time when we change the process or machine.

 

An example of withdrawing money from a bank

 

 

 

Few years back, the process of withdrawing money from a bank took about 3-4 hours depending upon the bank and which day you went to bank.

     1.      Drive to bank àSNVA (15 minutes)

     2.      Wait in line à NVA (15 minutes)

     3.      Complete transactionà VA (2 minutes)

     4.      Banker count the cash à SNVA ( 2minutes)

     5.      Banker again count the cash àNVA ( 2 minutes)

     6.      You count the cash àNVA (2 minutes)

      7.      Drive Home à NVA (15 minutes)

Note:- Time taken here are
bare minimum.

 

Out of the total of 53 minutes, only 2 minutes are value added, rest of the activities are either Supportive NVA or NVA.

 

Nowadays, with ATM available at every corner of a street, we can withdraw cash in about half an hour.

Total time is reduced to 34 minutes. Which gives a saving of 19 minutes. Still, there are some SNVA and NVA in this process.

 

 

1.      Drive to ATM à SNVA 15 minutes

2.      Withdraw cash àVA 2 minutes

3.      Count the notes à NVA 2 minutes

4.      Drive to HomeàSNVA 15 minutes

 

With online net banking, we can do the transaction sitting at home which further reduced the NVA and SNVA.

 

Thus, in my opinion, those activities for which we have a doubt that they are VA or not they should be categorized as SNVA (Supportive NVA), so that in longer run we can improve upon those.

 

 

 

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To provide any product or service, you have to use resources like money, materials, labor, time, and information.  The goal is to provide the greatest amount of value to customers while utilizing the least amount of your resources.  This idea of adding value to products and services is a key concept of Lean.  It is defined as anything for which the customer would be willing to pay.  If what you are providing is not something the customer would be willing to pay you for, then you are not providing value to the customer.


Any time you begin analyzing a process, you want to look at each step and determine if it is contributing to the value of the desired output.  Each step can be classified into one of three categories:


*Value-added
*Non-value added, but necessary
*Non-value added (waste)


Value-Added Steps:
Value added steps in a process are those in which you add something to a product or service for which the customer would be willing to pay.  These activities are where you gain the most from expending your resources when providing a product or service.  Take the Sun Card, for example.  There are several steps in the process for applying for and receiving a Sun Card, but the customer is only willing to pay for the physical card with their name, ID number, and photo on it.  In this case, only those steps in the process that contribute to the actual creation of the card would be considered value added steps.


Non-Value Added But Necessary Steps:
Just because a process step is not value-added does not mean it is a bad thing.  Processes all include steps that do not add value, but are necessary to make the product or service happen.  It has been my experience that the majority of activities in service processes fall into this category.  They do use resources, so you want to reduce the amount of non-value added work whenever possible.  Often, this type of activity fulfills some sort of administrative purpose such as enabling value added steps, maintaining organizational records, or meeting legal or regulatory requirements.


Looking at the Sun Card example, when a person wants a Sun Card they must fill out an application.  As far as the customer is concerned, this is a non-value added step because it does not directly result in the creation of the physical card itself and they would not be willing to pay to fill out a form.  This step is necessary because it enables the Sun Card staff to start the process, verify that the customer is eligible to receive a Sun Card, and locate their information in ASU’s database.   Without this step, the creation of the physical card would not be able to happen.


Non-Value Added Steps (Waste):
The third category that process steps can fall into is pure waste.  In these steps resources are expended, delays occur, and no value is added to the product or service.   Customers are absolutely not willing to pay for these activities.  These steps should be eliminated from the process.  The Sun Card process does not contain any pure waste steps.


Lean identifies seven or eight types of waste, depending on whom you talk to.  I am one of those who identify eight types of waste.  These are:
*Unnecessary processing or steps in a process
*Transporting materials or information over long distances
*Delays / waiting
*Idle inventory / resources
*Unnecessary or excessive *motion/movement of staff
*Rework/ fixing defects that should not have occurred in the first place
*Producing more than needed to meet demand
*Underutilization of staff, their knowledge and/or skills


The underutilization of staff is the type of waste that does not appear on every list.

Value-added Activities Performed at Logistic Zones. 

 

 


DIAGRAM 

 

 

 

 

 

 

 

 

The main value-added logistics activities are part of what can be generally referred as warehousing, which can involve a wide array of activities:

  • Simple storage, distribution, and order picking part of the inventory management systems of manufacturers, distributors and retailers.

Quality control (inspection) and testing of products before being sent to customers.

  • Transloading international load units into domestic load units. This applies notably to container transportation.
  • Receiving goods, breaking shipments and packing (preparing for shipment). Can also involve packaging were goods are broken down into retail units.
  • In part related with packaging, labelling provides information on the product for consumers such as brand and price. More advanced activities involve the tagging of units using RFID (Radio Frequency Identification) for distribution or retail purposes. 
  • Light manufacturing tasks such as assembly and customizing to country-specific (or culture-specific) demands, which includes adding parts and manuals.
  • A variety of reverse logistics activities such returning empty packaging, the recycling of used goods back into the commodity chain or the cleaning of containers to be reused.
  • Providing specialized storage facilities, such as to support cold chain logistics.
  • The transport activities of pickup and delivery are also part of the added value process since they support logistical activities and provide employment. Both flows can be terminal-related if long distance transportation is involved (e.g. maritime, rail) or directly related to suppliers or customers.

 

A value adding activity is one that customer not willing to pay:


Packaging helps protect and preserve products, but these days companies tend to over-package and over-protect. Excess packaging illustrates the waste known in Lean methodology as over processing. Added processing that doesn't bring value to goods or services in the customer's eyes creates unnecessary waste.


When trying to eliminate over processing waste, start by focusing on standardized work. The first step is creating standard operating procedures (SOPs). With today's technology, it is easy to create SOPs that include digital photographs of important steps in a process, as well as simple written instructions—often in more than one language. These SOPs should be easy to understand and follow, and kept in a visible place in the appropriate work area.


Developing SOPs can be incorporated into a Workplace Organization Kaizen event or part of the Standardize step (the fourth S in the 5S process). They reduce variability to improve quality and minimize unnecessary overprocessing.
The logistics and transportation sector presents many opportunities to reduce over processing. A good example is the value-added services typically performed by third-party logistics providers. These activities include assembly or kitting processes as part of a postponement strategy.


These value-added processes are often one-off events where little effort is put into developing SOPs and minimizing overprocessing. If we spend a little more time focusing on reducing non-value-added activities such as overprocessing, we can both reduce costs and improve quality.
 

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The general definition of Value is  "Value is a value only if the Value provided is Valuable to those who value it". Considering definition,below three checks can be evaluated.

  1. A value adding activity is one that customer is willing to pay for. 
  2. A value adding activity is transformational by nature. 
  3. A value adding activity is done first time right

CHECK 1, 2 is important as both have the power to remove non value add activities in a Process, Solution, developing the Product or rendering a service.

CHECK 3 is a self check to create value when one is taking ownership to drive it. So it is more of personal value addition in the WORK that is done , rather than overall big picture. 

 

Since Value is real ground perception of the consumer/ customer ,there has to be a feedback seeked from the consumer/customer to check how much of value was realized . That would be the real measure of value.

This could be consumption made easier, reduction of effort, heightened delight, reduced cost, efficiency, quality and many more.

To measure this , one more question should be asked.

4. Is this activity adding up , to the promised value to the customer .

 

The lesser the difference  between promised value and actual value , the more the value is Valuable to Customer

 

 

 

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Most of the VA or NVA activities can be verified against following 3 criteria

  1. A value adding activity is one that customer is willing to pay for. 
  2. A value adding activity is transformational by nature. 
  3. A value adding activity is done first time right. 

But, apart from these verification criteria, still there are many activities which are VA activities but doesn't fit into above criteria. One example of such activities is Business Value Added (BVA) activities. BVA are those activities which add value to the business but from customer point of view they are not VA activities. One of such example is Inspection activity, it may be required for business but customer would prefer your process so perfect that the requirement of Inspection can be done away with, which will save some cost. Some other examples of BVA are preparing financial reports, maintaining human resources records etc., all these activities are such that the customer is not willing to pay for them and these activities are not transformational also. However i do feel that the third question i.e. a VA activity has to be first time right is always true.

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