Value added analysis | Value added process vs Non value added | Value Added vs Non Value added Lean
Value vs. non-value
A non-value, also known as a waste, is anything that does not currently add value to a good or service and has never done so. Anything used in excess of what is absolutely necessary to produce a good or service is a waste. Waste can be materials, equipment, money, time, people, or parts, depending on the situation. Any action or procedure that does not actually alter the product or improve its profitability by satisfying the needs of the customer is considered waste.
What is a value-added process?
A company determines which operations and procedures add value to their goods, services, or overall business through the value-added process. The customer ultimately determines whether an activity adds value to a product or service because value takes into account the price a customer is willing to pay for a good or service. To better understand this concept, here an example:
Your business sells calculators with free telephone customer service available around-the-clock. Your business pays several knowledgeable technicians to take customer calls seven days a week, 24 hours a day in order to provide this free service. This service is a value-added process.
Your calculator was the most popular item customers chose to buy for a very long time. Then a new competitor started selling the same calculator. The rival offers email support with a promised response in 72 hours and charges 7% less than the cost of your calculator.
Over the following few months, your business loses a sizable number of clients to your rival. Customers have made it clear that they prefer the less expensive calculator over 24-hour customer service by using their purchasing power.
Although the 24-hour customer service once added value to the product, it now serves as a waste because it no longer adds value. The service itself and the wages paid to the skilled technicians by the business are no longer of added value.
Areas of value
A business typically develops its own definition of what adds value as well as its own method for determining whether something adds value. Many businesses develop simple guidelines to assist them in determining whether certain business activities add value or are a waste of resources.
Common guidelines regarding areas of value ask the following questions:
The activity in question is not a value-added process if the answers show that it is expensive or difficult. Companies can consider eliminating these activities.
Categories of waste
Some of the biggest and most popular non-value-adding or wasteful activities fall into the following categories:
Defects
When this happens, the goods or services are either damaged or the customers no longer find them acceptable. Defective services waste time and money because workers must repeat them in order to get them right. Defective products waste time and money because they must either be repaired or discarded. Companies can prevent this type of waste by implementing efficient methods for minimizing defects.
Waiting time
Employees waste time when they are waiting for something to happen before they can work, such as the completion of a product or the processing of information. There are ways to improve and reduce waiting time, including better employee scheduling and filling this time with other beneficial activities.
Product overproduction
When a business produces an item too quickly or too soon, it engages in “product overproduction,” which results in an excess of inventory. Product builds up when a business produces more than it can sell, which causes issues with inventory storage. Most of the time, product over production leads to waste. Building up a sizable supply ahead of a spike in sales during the holiday season is an exception to this rule.
Inventory storage
When a company does not efficiently store materials, finished goods, or information, it could be a waste. For instance, improper storage of excess inventory results in waste because it consumes storage space, raises the inventory’s taxes, increases the risk of shrinkage, and raises handling costs. Maintaining only the bare minimum amount of inventory is considered best practice.
Non-utilized talent
This happens when a company overlooks or disregards the skills and knowledge of its employees instead of using it to address issues. To ensure that employees are achieving their full potential, employers can set up procedures for identifying their talents.
Needless transportation
It can be a waste of time and resources when a business moves materials, equipment, or supplies unnecessarily or frequently. Transporting goods needlessly might involve moving them over long distances on a production floor or from one storage location to another in a warehouse. It may be possible to reduce unnecessary transportation by redesigning the warehouse for the best storage or the manufacturing floor to improve workflow.
Extra processing
When workers must redo a step in a process or there are more steps than necessary, it can be a waste of time and resources. This additional work’s time and effort are wasted. This is particularly true if the client does not require, care about, or wish to pay for those additional processing activities.
Excess motion
This relates to unnecessary actions like handling products, machinery, or equipment excessively. By establishing clear protocols for usage and streamlining mechanical processes, businesses can minimize or eliminate wasted time and effort.
Required activities
Required activities, which are those that don’t necessarily add value but that the organization must complete, are not included in the categories of waste. Observing government regulations or adhering to industry standards, for instance, are not waste categories. However, businesses can still look for ways to optimize and be more efficient with the necessary activities.
FAQ
What is a value-added process step?
Three conditions must be met for something to add value: the process must alter the product’s or service’s shape or function. The customer must be willing to pay for the change. The step must be performed correctly the first time.
What is meant by a value adding process within an organization?
A process or step that converts raw materials or work-in-progress into much more valuable downstream goods and services is referred to as value added or value adding.
Why it is called value addition process?
Manufacturing is referred to as a value-added process because it involves a number of steps that transform raw materials into useful products. The intended consumer finds the product valuable, and they are subsequently satisfied
What are examples of value-added activities?
The transformation of raw materials (such as plastic, lithium, and copper) into a finished product that the customer is willing to pay for is known as a value-added activity. Some examples include molding, cutting, drilling or assembling parts.
