Does that activity add value? The answer can provoke friendly debates, heated arguments, tears, hurt feelings, and the occasional fist fight. And that’s just among lean project team members! It can be even worse between lean practitioners and front-line workers, whether they are in a factory, warehouse, retail store, or office.
Think about it from this perspective: How would you feel if someone told you ‘What you do all day long is not a value-add activity’? That is the reason it is important to make a distinction between the person performing an activity, and the activity itself.
Yet despite the difficulty of defining value, it is a key skill for any successful lean practitioner. In the book Lean Thinking by Womack & Jones (1996) they proposed a basic approach to implementing lean that consisted of a five step process. The authors stated that “Specifying value accurately is the critical first step in defining lean thinking”.
In other words, before you can move forward in applying various lean concepts it is important to begin with a clear understanding of what constitutes a value-add – and non-value-add – activity. In the book mentioned above the authors address this topic further by noting that:
“Value can only be defined by the ultimate customer. And it’s only meaningful when expressed in terms of a specific product (a good or a service, and often both at once) which meets a customer’s needs at a specific price at a specific time.”
Several years ago I investigated the topic of value in order to make a presentation at an engineering conference. What I discovered was that different writers had different explanations of value-add. Consider these definitions from that research:
Value is added by changing the form of something or by moving it closer to the customer
Activities that must be performed to meet customer requirements
Value-added time may be thought of as any time spent on actually transforming the product toward its final configuration.
Value-added steps (or activities) are those that matter to the customer (external or internal); all others are nonvalue added. If there is disagreement over whether a step is value or nonvalue-added, it is best to err on the side of calling it value-added.
Any activity that increases the market form or function of the product or service. (These are things the customer is willing to pay for.)
The overarching themes seen in these definitions are two-fold:
1) Change to materials OR information
2) Something for which a customer will pay
In other words, if an activity results in a change to materials OR information AND if a customer would be willing to pay for that activity, then said activity should be classified as value-add. Examples in the world of manufacturing include tasks such as cutting, welding, assembling, and painting. In terms of service processes, examples include checking in a person at a hotel, answering technical questions via a helpdesk, mowing a lawn, and assisting a customer with the use of a new product. In the world of transactional processes, examples of value-add activities include capturing customer requirements, analyzing data, writing reports, making key decisions, and communicating needed information.
Of course, there are always some activities that fall into a ‘grey zone’ in terms of value-add. In the manufacturing arena two examples are tooling costs and setup charges. Many firms routinely charge fees associated with activities associated with these two process steps. Yet neither of them result in a physical change to materials.
Another such example is inspection. In some industries a supplier is required by contract to inspect their product before sending it to the customer. So in essence the customer is willing to pay for this activity. Yet inspection does not result in a physical change to a product. In office processes inspection or review activities are very common. Such steps are often put in place due to some problem that may have occurred months or years ago.
So should these tasks that fall into the ‘grey zone’ be classified as value-add activities? From a lean purist standpoint, I would say no. But from a practical standpoint I would be willing to accept that they are value-add. At the end of the day, it is more important that you agree on a definition of value-add at your firm, and are consistent in how it is used.
In Part 2 of Defining Value we will explain a fundamental lean measure to use when examining the level of value-add in a process: Process Cycle Efficiency. Also covered is an explanation of this measure in terms of both typical and world-class firms for various types of business processes. Finally, Part 2 will include a discussion of how to categorize activities performed due to regulatory and similar requirements.
When setting out on the journey to become a Lean organization, companies often miss the true importance of utilizing Value Stream Mapping. Often companies overlook implementing Step Four (Value Stream Mapping product families), as outlined in Chapter 11 of Lean Thinking. This can be a critical mistake in creating a sustainable Lean Initiative.
Value Stream Mapping should be viewed as the backbone of any Lean Initiative and process improvement endeavors. Simply picking trouble areas for improvement without examining the entire value stream of the product family or families utilizing the resource can create undesirable results long term. Value Stream Mapping provides us with the information necessary to understand the actual flow of materials, resources and information through all processes from start to finish for the family of products or services chosen. By obtaining this knowledge, we can see where flow is interrupted and where to start making improvements that increase the flow across the value stream. Simply attacking a troubled area in the process without understanding the true value stream could introduce additional WIP (work in process) and inefficiencies in the processes, thus increasing the process lead time across the overall value stream.
Value Stream Mapping provides us with a tool to start process improvement through a systematic approach. We start by mapping the current state for a particular product family from start to finish usually within the four walls of a facility. From this current state map, we apply Lean tools to create a future state map with an improve process lead time focused on eliminating waste and creating flow across the entire value stream. This future state map dictates where and what type of Kaizen Events (Improvement Events) will be required to meet the future state map objectives. The results of our future state map implementation are evaluated against the performance metric objectives developed for the future state value stream. The future state accomplished through our deployment of Kaizen Events is now our current state for the value stream. A period of evaluation should be performed and the value stream mapping process repeated to create a new future state map. This process could take place several times in the journey to become a World Class Company. Typically value stream mapping plans should be developed with implementation to be completed within (6 -12) months. This process is repeated for all value streams across the organization to achieve world class improvement results. The true value in value stream mapping is the creation of process improvement plans that can be implemented systematically across the company with sustainable results.