Q 478. Many improvement specialists advocate removal of non value adding activities. However operation teams do not remove them by classifying them as business value add activities. What are the guidelines to classify an activity as a business value add vs a pure waste? Also, should there be a different approach to fix the business value add when compared with pure waste activities? If yes, highlight the different approaches with examples.   

 

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I can suggest following guidelines for the operations team:

1. There are seven types of wastes namely Overproduction, Inventory, Defects, Motion, Over-processing, Waiting, Transportation, Underutilised staff which should be taken into consideration. These wastes adds cost without adding any value and does not change in the existing process nor customer will be ready to pay for it.

2. Operations team need to establish an SLA workflows in their system , so that they can prioritize their tickets as per the business impact and customer needs and deliver without delays. Then create a Value Stream Map to understand which are the waste activities which delay the customer delivery and remove it to optimize the flow that adds value (Quality/less defects), reduces cost (Over processing), transforms positive change (Motion) in the product delivery and increases profit & customer satisfaction.

3. Also their should be collaboration of operations team with the customer to give feedback regularly, so that time is not wasted in creating a wrong product or service delivery (Defects/Defectives).

First we need to understand the difference between Value added and Non-Value added activities.

 

These Non-Value added activities (NVA) are called as “Wastes” in the Lean world.

There are 7 classical wastes, which in short was termed as “TIMWOOD”. Of late, an eight waste was added to this list (Non utilization of skill (N)), with which the acronym was termed as “DOWNTIME”.

 

D – Defect / Scrap

O – Over processing

W – Waiting Time

N – Non utilization of skill

T – unwanted Transportation

I – Inventory

M – unwanted Motion / Movement

E – Excess Production

 

These wastes increase the Process Time, thus Increasing Cycle Time, in turn increasing the Lead Time.

Process Time – Time taken to complete an individual activity or process

Cycle Time – Net production time / Number of products produced

Lead Time – Time between the Order received from Customer to Order delivered back to the customer.

 

From Lean perspective, the ultimate goal is to eliminate all these wastes from the process. This will help to reduce the Process Time, and the saved time can be used to produce more products thus reducing the Cycle time. This will in turn help to reduce the Lead time, thus improving the On Time Delivery to the customers. This will provide the competitive edge in the market.

 

In the practical scenario, we can not always categorize the activities as only Value added (VA) & Non Value Added (NVA).

For example:

a)       Quality Inspection is considered as the Non Value added activity from the Lean Perspective. But, we cannot eliminate Quality Inspection and deliver good quality products to the customers. Hence Quality Inspection is a Business Value Added, which in turn is defined in Lean as Necessary Non Value Added (NNVA).

b)      Warehousing is considered as the NVA (from Inventory logic), however, we cannot eliminate the storage of Finished Goods in WH, which will have a direct impact on the Business. Hence this can be categorized as Necessary Non Value Added (NNVA)

c)       Equipment set-up or changeovers are supposed to be a Non Value Added activity (NVA). However, from the business perspective, it is not always possible to eliminate the Changeovers, as this limits the flexibility of the production line. Hence Changeovers are termed as Necessary Non Value Added (NNVA).

 

Unlike the NVA,  we cannot eliminate the NNVA, but we have to reduce them, thus reducing the impact of these NNVA’s in the process time, cycle time & Lead time and at the same time not impacting the Customer Satisfaction.

 

Business Value-Added Activities:

These are the activities for which the customer is not willing to pay for but they are needed for  running the processes and the business. These business value-added activities could include work done on audits, control, reduce risk, for regulation or to support value added work.

 

Taiichi Ohno called all these NVA as Muda ("waste" in Japanese). Business value-added activities are called Type-1 Muda while non-value-added activities are called Type-2 Muda.

 

Some of the critical questions that can help us to demarcate the VA & NVA are:

·         Does the activity transform the form, feature, feeling and function that the customer is willing to pay for?

·         Is it being done right the first time?

·         Is this something the customer expects to pay for?

 

A positive answer to all of these questions indicates that it is a VA. Even a single negative response indicates that it is either a NVA or a business value-added activity (NNVA)

 

Note : When we stop doing the value-added activity, the customers will complain, while eliminating a business value-added activity would lead to internal customers or regulators complaining.

 

Some of the approaches to manage the NNVA or Business Value Added activities are:

 

Approach 1:

 

 

Approach 2:

ElCoMoRe : Eliminate – Combine – Modify – Reduce

This approach talks about Eliminating all the Non Value Added activities, as much as possible.

For NNVA – we can Combine them with other VA so that they can be done in parallel, or modify the way in which it was done (like, automation / outsourcing), or Reduce the time taken to complete this activity.

This approach is also termed as ECRS : Eliminate – Combine – Reduce – Simplify.

 

Approach 3:

Theory of Constraints – this talks about identifying the limiting factor in the process, so that we can focus all the resources to eliminate the NVA  and boost the VA  and reduce the NNVA.

This approach helps to identify the bottleneck, optimized usage of resources and enable quick & effective way to improve the customer satisfaction.

 

Approach 4:

Waste Hunting – this is an approach to hunt down the wastes in the processes, down the value-stream. This a ruthless approach to cut down all the NVA’s from the process. Though this approach is effective, many times we end with conflicts among the different process owners ,as the demarcation between the NVA & NNVA is very thin. Blind implementation of this approach may cut down and create a lasting impact on the business.

 

Approach 5:

Value Stream Mapping & Line Balancing – This helps to visualize the current state Value flow and enables to identify the bottleneck process – from capacity perspective, manpower perspective and Lead time perspective. This method throws light onto the Takt Time, to assess the Customer Satisfaction. This approach is vastly helpful in those process which involves a lot of Changeovers and SMED application is determined from the VSM.

 

One of the effective metric for measuring the non-value-added content in a process is Process Efficiency.

Process Efficiency (PE) = (Value Added Time X 100) / (Value Added Time + Non Value Added Time + Business Value Added Time)

P Balakumaaran has provided the best answer to the question. First there is the definition and comparison of Value add and Non value add activities. Second Non value add activities are further classified as essential and non-essential. Third, there are various methods mentioned to address the two types of NVAs. Well written!