Module 01 Waste

Defining Value and Waste

 What is Value from the customer’s perspective

 What are value adding and non-value adding activities

 Eight types of wastes

LEAN is : “Providing Value to the
customer with less resources”.
The classical definition of Lean:

“Lean provides a specific way to specify value by lining up value-

creating actions in the best sequence and conducting these activities
without interruption whenever someone requests them, and
performing them more and more efficiently.”
What is “Value”

Value is a sum total of those attributes of a goods or service received or

experienced by him in relation to what it cost a customer to avail it.

Value is what a customer is willing to pay for, in order to get what he wants, when
he wants it and at the price he is willing to pay.

From the customer’s perspective, ALL other activities are WASTE.

Three kinds of waste

The Toyota Production System defines three kinds of waste:

1. Muda ("non-value-adding work") , which is all forms of waste;

2. Muri ("overburden"), in the form of overloading people with tasks

beyond their physical capability, running machines in excess of
their designed capacity etc;

3. Mura ("unevenness"), of manufacturing processes, unbalanced

production lines, unpredictable need to increase production
suddenly etc.
What is Price

Picture: Nuts mixed up – re New motorcycle

graded – Rupees spent-
tank damaged at
Customer does not pay
production
?
Tank changed
Rupees spent
Customer does
not pay for it?

VALUE + WASTE + PROFIT = PRICE

Value-Add Activity and Waste
All business process activities can be divided into:

 Value Add Activity or,

 Non- Value Add Activity or a
 Non- Value Add but Required Activity

Value Add activity is:

Any Activity that changes the form, fit or function of a goods or service in order to
meet customer requirement.
Value-Add Activity and Waste
In order to simplify the process if defining a Value Add activity, we ask the following
three questions.
1. Is the customer willing to pay for the activity performed by the supplier?
2. Does it transform the good or service?
3. Is it done for the first time? (Differentiating it from a repair or re-work.)
FLOW CHART OF CASHEW NUT PROCESSING - VA
Non-Value Add but Required
Activity
These are some of the activities that do not add value but need to be performed to
conform to systems or due to technical, organizational or legal requirements.
e.g; A tool needs to be changed to enable the next tool to be mounted on a
machine. While only the cutting time of the tool is Value-add, the tool change time
and approach to the cutting point are Non-Value-Add but Required.
e.g; All the forms that have to be filled out before getting admission in a hospital do
not add any value to the patient’s treatment. But they are necessary in order to
trace further treatment on the patient, to the particular patient.
e.g; Every establishment has to ensure that attendance of all employees is marked.
This could be for the establishment’s own requirements, or conform to legal
requirements. The customer is not concerned whether this activity is carried out by
the supplier, but the supplier has to conduct it as a requirement.
Non-Value Add but Required Activity
Customer
is willing to NO
pay?
FLOW CHART - NVAR
PICTURES – CASHEWNUT PLANT – CHANGE OVER

Transform
? NO

Necessary
to done? YES
Non Value Added Activity

All other actions and unwanted features are, by definition –WASTE, adding no value to customer –
simply raise costs in our business.
There are various forms of waste that have to be identified and systematically eliminated
e.g; Material waiting to be processed by the next machine
Patient waiting in a queue for the nurse to see her
Continuing to polish your shoes after they have begun to shine!
The answer to our questions will be thus:
Is the customer willing to pay for the activity? NO
Does it transform the good or service? NO
Is it done for the first time? NO
Coming back to the cashew nut processing plant, let us say that grading of the nuts for size has been
done and there is a mix-up in the graded nuts because of incorrect storage or instructions. Therefore
grading has to be done once again.
The customer is not willing to pay for this re- work, this re-grading does not transform the nuts- and it is
not done for the first time. Therefore this activity is pure waste.
Typical Value Add time
In the manufacturing industry or in the most businesses, how much do you think is
the Value Add time? 20%, 30% 40%

Value
added

5
%

Typically 85% of Total Lead Time is Non-Value

Added 10 to 15% NVAR and only 3 to 5% is Value
Added.
Non-value
added
 A look at the Pie chart tells a different fact. Generally, Value Add
time is observed to be around 3 to 5%.
 About 10 to 15% of the process time is Non Value Add but required.
 Which means that about 85% of the total lead time is NVA, or pure
waste.
 There is a huge opportunity waiting to be acted upon.
 By eliminating or reducing waste it is possible to reduce lead times
by a large extent.
 It is necessary to remember that we should be looking at waste from
the customer’s perspective
Typical &World Class Value Add time in
different industries:
Typical Cycle World Class
Application
Efficiency Cycle Efficiency
Machining 1% 10%
Fabrication 10% 25%
Assembly 15% 35%
Continuous Manufacturing 30% 80%
Business Processes- 10% 50%
Transactional
Business Processes – 5% 25%
Creative/Cognitive
Identifying different types of Waste:

 The focus of LEAN is on ‘Elimination of Waste’. Let us understand and learn to

identify the different types of waste.
 Lean considers 7 conventional wastes that need to be eliminated and an 8th
one that has been added in the last decade.
 DEFECTS
 OVERPRODUCTION
 WAITING
 NON-UTILISATION OF PEOPLE
 TRANSPORTATION
 INVENTORY
 MOTION and
 EXCESSIVE PROCESSING.
 We shall examine and understand each of these eight types of waste.
Defects

lead to scrap or rework and hence are a waste.

They also lead to lost work time, sorting, loss of customer confidence
amongst other wastes.
Even a typographical defect can lead to substantial losses, especially
while ordering, specifying or designing.
The customer really benefits when all processes building his product
have been done right the first time
SHOW DEFECTIVE GOODS
Overproduction

Essentially means producing more than needed or before it is needed.

It results in higher inventory and unbalanced work/flow.
SHOW SHOPFLOOR WITH HEAPS OF GOODS PRODUCED
Waiting

Waiting for people with the right skills, materials, waiting and watching
machines in auto cycles or computers doing their processing is a
waste. In transactions, waiting for signatures, permissions and
clearances are other forms of waste.
SHOW MATERIAL AND PEOPLE WAITING
Non-utilized people
Non-utilized people is the eighth waste – capabilities of people are
often undermined resulting in a loss of excellent contribution in terms of
ideas and strategies from employees.

Employees are respected as individuals who could think.

They are trained to identify and eliminate waste and

Empowered to improve processes.

Employees do not have to be told what to do.

Are encouraged to work together in teams and make improvements.

SHOW PEOPLE WITH LIGHT BULBES ABOVE THEIR HEADS

Transportation

Excessive transportation of materials can happen due to bad layouts,

multiple handling, sorting before usage and unwieldy processes that
do not have a unidirectional flow. This can happen in transactions too,
by way of requiring multiple signatures etc.
SHOW PICTURES
Inventory

Carrying excess inventory has a cost attached to it, direct cost being the
cost of capital blocked in excess inventory. Additional costs are space
blocked, possible damage to inventory, loss of focus on non-moving
inventory and the cost of even counting it, which is a waste.

High Inventory on the shop floor or in finished goods stores poor efficiency
 Piled up inventory can indicate
 poor planning, or
 bad vendor development, or
 unbalanced work flow, or
 poor ability to forecast market demand.
5S
Excessive movement of people due to sub-optimal layout or motion of
their body due to non-ergonomic design of workplace is a waste that
also leads to fatigue, and subsequent loss of efficiency. A 5S workplace
reduces fatigue to a large extent.
Excessive processing

Excessive processing happens when the degree to which a process is

to be carried out is not defined, e.g; polishing, cleaning, washing etc. It
could also be processes that the customer is not willing to pay for as
they do not add value.

SHOW PICTURES
Conclusion
In this module we have understood the meaning of Value from the customer’s
perspective.

• The opposite of Value Add is Waste

• Value Add, Nov- Value Add and Non-Value Add but Required activities

• We also know that the biggest opportunity for reducing process times lie in
eliminating Muda or Waste

• There are eight types of Waste that we can understand and identify. In the
following modules we shall understand how to eliminate or reduce Waste –
that is, Non-Value Add and Non- Value Add but Required Activities.