One of the primary tenets of Lean is the concept of value added activities. These can be defined as actions which transform raw materials and information into products and services which the customer is willing to pay for. Anything that does not add value can be considered “waste”. These are activities which consume time, space, or other resources, but don’t contribute to making value.
Classic Sources of Waste
Lean practitioners are familiar with the eight sources of waste. They form the basis for lean thinking and are often used to offer a framework for removing waste (and cost) from any process.
- Non-Utilized Talent
- Extra Processing
Waste of Extra Processing
This article will focus on just one of these classic sources of waste – shown at the bottom of the trash can. It is the waste of processing.
Waste of processing can be defined as efforts that add no value to a product or service. These can be enhancements which are mostly transparent to the customer.
It is not difficult to find this source of waste. There are examples all around us. As a consumer, ask yourself if a product feature or service has any value to you. Here are just a few everyday things that fit this definition for me:
- Hotel – having a mint on my pillow and/or turning down my sheets each night
- Restaurant – placing garnish on the plate that is never eaten; having someone open the door and greet me before I get to the hostess stand
- Dentist – giving me a toothbrush when I leave (I use an electric toothbrush)
- Charities – including a stamped envelope in the solicitation letter (I give via credit card or online)
- Packaging – wrapping a shirt in tissue and a plastic sleeve; wrapping tea bags individually
- Grocery – placing bottled water in a plastic bag at the checkout
Of course, some customers may find these things – and others like them – to be of value. In my view, these are a waste of processing.
When is it good enough?
Here is a story that highlights the potential for cost reduction by reducing the waste of processing.
I was part of a group that visited a manufacturer that made commercial processing equipment for the food industry. As we were finishing a tour of the facility, the host mentioned that they had reduced their COGS by over 40% for one specific product. When we asked how they were able to do this, he told us the following story.
“We make commercial ice machines – the kind that you see in the vending areas of hotels. But we were struggling to make these reliable. Some of our customers were becoming frustrated because the ice machines were often out of service. Of course, this also detracted from the hotel patron’s experience. We tried to find the root cause of the failures, but there did not seem to be any single thing that was causing the machine to break down…it was a bunch of things. So we sent a small team to a number of hotels to see if we could learn anything by understanding how our customers set up the ice machines and how they maintained them. We also talked to the hotel patrons and asked them questions about what was important to them. It was in these conversations that we had the aha moment.”
“The most important thing to the hotel patron was that when he went down the hall in his gym shorts or bath robe holding a bucket, there was always ice available. The least important thing? The size and uniformity of the ice cubes.”
“Now, we had great pride that our machines produced the highest quality, most uniform ice cubes in the industry. But….guess what components in the ice machine were involved in almost all the reliability problems. That’s right…the parts that made sure we produced a perfect cube.”
“The rest of the story is obvious. We simplified the design, improved the reliability, and dramatically cut our cost of manufacturing. Our profitability on ice machines increased significantly.”
Is it really necessary?
As you assess opportunities for cost productivity, think about the features and benefits that are currently provided. Is anything over-engineered? Are you including an enhancement that is transparent to the customer, but adds cost or complexity? You may be able to lean out the process and cut costs while maintaining or improving customer satisfaction.
And that would be cool!