How to identify value to have a leaner manufacturing operation
August 15, 2011 | 10:08 am CDT
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This is the third and final installment in a series presenting lean in a simpler format for those who are not yet comfortable with the concept or process, or just feel they are too small to be involved. For the past two months I have reviewed achieving a lean enterprise (manufacturing, distribution, sales, etc.) by first acknowledging that working toward lean means that one is striving to eliminate all activities that do not add value to the product or service they provide.

This process necessitates change and it is important to remove the causes of resistance in your organization. Everyone in your enterprise must be willing to assist in the Continuous Improvement process that will occur year after year as you continue on the lean journey. Last month I also discussed the attitude of management and the environment that your company must have in order for you to become the employer of choice for those who have the skills, talent, and desire to help move a company forward. If successful, the suggestions of the past two months will allow you to create a culture of change among your employees that will facilitate serious and effective efforts toward lean.

With this in place, the task remains to energize your employees to identify opportunities and to make the interventions necessary to eliminate waste. Ten years ago I developed a simple tool to help smaller companies understand how to begin the journey to lean. I want to share this with you to better understand how lean works — and to use it to begin the journey in your company.

Value-Added vs. Non-Value-Added

I have written on Value Added (VA) and Non-Value-Added (NVA) activities many times in the past because the distinction between the two has a profound effect on the way one must look at his or her business. Generally, VA activities are regarded as a good use of resources because the ultimate customer recognizes the added value resulting from this activity. Conversely, NVA activities are regarded as a waste of resources because they do nothing to add value to your product or service, as perceived by the customer.

All activities have a cost associated with them and thus add to the overall price of the product or service. The question is: Do they add to the overall value as perceived by the customer, or do they contribute to excessive costs and prices and a loss of competitiveness? The challenge is to recognize the difference and intervene.

One simple, but common example I often use is that of moving parts from one operation to another. Most agree that this activity is not adding value to the product and is waste. Another illustration is repairing a scratch or ding in a piece of furniture. Usually about half considers this value-added, because the customer would not accept the product if that defect was not removed. That may be true, but the first sanding of the wood was value-added and the repair was waste because the scratch should not have been introduced in the first place. Repair and restoration of work previously done is always waste.

Identifying VA and NVA

Lean is all about using different tools to identify NVA activities and introducing interventions (or change) to get rid of them. The chart below shows a simple and logical way to accomplish this that you and your employees can use while reducing costs, improving quality and increasing productivity, profitability, and job security — all at the same time.

This is the tool I developed about 10 years ago to help clients understand the process to be followed in order to have an effective lean manufacturing effort. As you learn more about lean and the tools that are available, you will become better equipped and more effective in eliminating waste. However, there is so much low-hanging fruit in every organization that even the smallest company can use this to identify NVA activities and to set priorities for intervention and change.

Follow the NVA Path

First ask if the activity you are looking at adds value. If the answer is no, you have identified an activity that is a priority for intervention. Next, ask: Is it necessary? Many times an NVA activity is not. If this is the case, analyze the activity and then eliminate it altogether. If, however, you cannot avoid it for some valid reason, modify it to minimize its cost.

If the activity does not add value but is necessary, ask if it is the best way to achieve the intended results. This is a logical inquiry to see if it is the best way to handle the task with the least waste. In almost all cases, an analysis will expose a better way to accomplish the necessary NVA task. An example is moving or handling parts from one operation to another. Building to order, one-piece-flow and using tight work cells are just some modifications that can be made to the activity to reduce excessive materials handling and longer-than-necessary process time. Remember, the goal is to always try to eliminate a NVA process.

Follow the VA Path

While attacking NVA activities is the priority on the road to lean, many VA activities can be modified and improved to make them more efficient. Thus, to weed out all waste, you must ask if this is the best way to achieve the desired results. In sanding, for example, more mileage from the sandpaper is just one savings that often follows an evaluation of the methodology currently used. Can you think of others?

If the team that is looking at an operation is satisfied that the VA activity is being done in the best and most cost effective way, you can claim it “lean” and move on. It is noteworthy that the low hanging fruit is found in the NVA activities imbedded within a larger VA activity. This is why it is important to thoroughly analyze each individual operation.

Don’t Say We Can’t

When following the logic in the chart, you will reach a point when you must attempt to eliminate or modify an NVA activity. If it is determined that you cannot do either, the result is waste built into that process. This is represented by the red box in the chart and is a dead-end in the process. This will happen, but I caution you to encourage everyone involved to put forth their best objective effort during the analysis to ensure that all alternatives have been considered.

During an analysis, it is easy for someone to say that this is the way we have always done it. It is more difficult to find a better way, but there is always one to be found. This is when you must rely on a culture of change in your company and utilize employees who believe in Continuous Improvement to get the job done.

After you have eliminated or modified an activity and have gone back through the chart the second time and determined that the activity is now indeed the best way to accomplish this requirement, you can claim it “lean”. I can hear some of you saying, “Tom, you can never reach perfection, and sooner or later there will always be a better way!”

If you are one of these, congratulations — you have recognized why a journey to lean must be based on Continuous Improvement. It is sufficient to make the best effort now and move on to the next challenge. It will become apparent in the future when to re-visit the issue.

Never Too Small or Too Late

I hope these three installments of “Management Matters” have helped you to see that any company can get involved in lean and that it is never too late. If you do not start sometime, you will never achieve a leaner and more competitive company. There is no better time than today to start by using the process illustrated in the Lean Analysis Chart.

Tom Dossenbach is the president of Dossenbach Associates Inc., a Sanford, NC-based international consulting and research firm. Contact him at (919) 775-5017 or e-mail [email protected].


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Tom Dossenbach