Monday, May 16, 2016

The Value in Non-Value Added Activities

With the wide-spread acceptance of Lean Manufacturing and Lean Enterprise principles, the term “non-value added activities” has come into the business lexicon.  These are the activities that an organization performs that do not directly contribute to the generation of customer value.  Within the context of manufacturing, these activities are categorized as one of these types of waste.
  • Over-production, ahead of demand – wasted effort.
  • Waiting for the next process step – wasted time.
  • Unnecessary transport of product or goods – wasted effort.
  • Over-processing of product due to poor process design – wasted effort.
  • Inventories greater than necessary – wasted cost.
  • Unnecessary movement of employees (looking for tools, paperwork, help, etc.) – wasted effort.
  • Producing defective parts – wasted time, cost, and effort.

The Lean Value Stream Map categorized all of the activities in a business process into either value-added steps or non-value-added steps.  Even the value-added steps are further analysed and the time spent conducting that step is divided into value-added time and non-value-added time.

Implementing Lean has led to improvements in productivity and cycle time.  This has often transformed an operation; improving both customer satisfaction and profitability.  But sometimes, implementing Lean has not resulted in dramatic improvements for the business. 

Of course there are the Lean implementation failures, which seem to occur at least 50% of the time.  These are often due to poor management commitment and understanding, inadequate training, and the difficulty of culture change.  But I would like to discuss a different type of failure.  This is the failure to see improved customer satisfaction and the increase in sales and profitability after a “successful” Lean implementation.

This condition occurs when the company misunderstands the elements of value from a customer perspective.  Yes, there is value in the efficacy of the product.  The customer wants it to work to the expected level of fidelity and be reliable and durable enough to continue working through the expected life.  The Lean manufacturing definition of value-added activities will cover these elements of value. 

But many customers also want other aspects of value that are not directly tied to product performance.  These include brand affinity, ease of doing business, and a sense of personal engagement with the company. 

Let me give you an example.  Many companies have “Leaned” their customer service and help desk functions.  Now when a customer calls the company with a question or complaint, they are routed into an endless series of “push this number” and “select this number” until they finally are placed on a lengthy hold, waiting to talk to a live body.  Often that live body can’t answer any questions, but can only read from a script.  So while the company thinks it has “Leaned” customer service by eliminating non-value-added effort, the customer feels abandoned, belittled and unwanted.  Activities the company categorized as non-value-added because they did not support the manufacture of product, were activities that were very important to the customer.  The result is a customer who experiences a reduction in value, not an improvement in service.

An internal, product-centric view of “value” can lead a company to remove activities and functions that are important to overall customer satisfaction and that build a strong relationship with the customer.  A Lean initiative needs to start with a true understanding of what the customer values.  This should not be determined by the design engineers, manufacturing managers, or even the Lean consultants.  This needs to be determined through voice of the customer analysis. 

In many industries today, the new competitive advantage is creating and establishing a personal relationship between the company and the customer.  “Leaning” these customer interaction processes can destroy competitive advantage.  Strong positive relationships take time and numerous positive interactions.  Lean processes that minimize and eliminate interactions are eliminating value-added activities – even though the activities may have nothing to do with the product.

So let me propose, as an adjunct to the list of activities used in Lean analysis to define a waste, a list of activities that define value-add.
  • Activities that directly answer specific customer questions.
  • Activities that provide special privileges and offers to existing customers.
  • Activities that measure customer engagement and satisfaction with the company and its products and services.
  • Activities in the company’s operations that create or add to the functionality of products or services.
  • Activities that build customer confidence in the company’s brands, products and services.

I’m not suggesting that a company should abandon Lean or ignore the attributes of waste.  I am suggesting that a company should embrace the attributes of value.  Prepare a value stream map for the attributes of value and ensure that these value-adding processes are operating smoothly.