Historically, most companies have viewed their EHS department as a necessary evil that must be retained to avoid regulatory infractions. However, some companies have shifted their thinking to include their EHS departments as profit centers through re-classifying wastes as revenue streams and identifying opportunities for cost reductions and cost avoidance. This transition is becoming more noticeable as companies implement ISO programs, look for ‘Greener’ products and attempt to reduce the use of raw materials. The following include techniques to demonstrate to executive managers that an EHS department can serve as more than just an overhead expense:
And, as always, DOCUMENT, DOCUMENT, DOCUMENT. Without an accurate baseline, results are hard to demonstrate.
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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.
According to Masaaki Imai in his book Gemba Kaizen – A Common Sense, Low-Cost Approach to Management, management’s two major functions are maintenance and improvement of processes. A basis for both is establishing standards.
Standardization is required to build a viable quality system. If you choose to depend on “tribal knowledge”, improvement, consistency and continuity of processes are only as good as our memories.
Last month, TMACer Pat Boutier, presented a webinar overview on the topic of Training Within Industry (TWI). For those of you who may have missed the presentation or were unable to attend, we’d like to give you the opportunity to view the recorded webinar.
If you were able to attend the webinar and would like a copy of the slides used in the presentation you can download them here.
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I’ve learned that most people are skeptical when they’re told to expect significant financial benefits from implementing Lean.
In teams of 3, I used TMAC’s Financial Fundamentals business simulation game to teach finance to non-financial people. During the 6-hour workshop, each team manufactures and sells a common product to a single customer … me. The winner of the workshop is the team with the most income in Retained Earnings.
Imagine a world where a group of employees are able to make decisions and act upon those decisions independently and free of supervision or management intervention. Implementing this idea means a high level of cooperative teamwork with a common mission and vision driving the set goals and objectives. Sounds nice, right? This isn’t the stuff of fairly tales, folks, this is Autonomous Management. There are several successful organizations doing it now. Continue reading “Autonomous Management” »