In the “lean” world, a lot of time is spent in determining which of your processes are “Value Added”, “Non-Value Added but Necessary” or “Non-Value Added”. There are a lot of definitions for these phrases depending on which consultant is trying to sell a new book this week. I try to keep my definitions pretty simple.
VA versus NVA
Value added is something that people are willing to pay for.
If a red wagon is important to my image as a red wagon consumer, I will probably be willing to pay a higher premium if it happens to cost more because of the paint or availability. Not having that red wagon would mean that my perception of need has not been met and I will probably continue to be less than satisfied. Frankly, having a yellow wagon back in the day was kind of dangerous where I grew up. Don’t even get me started on pink.
Value added may also mean the addition of something else which improves the performance of my purchase. As you can imagine, having large wheels in the back and a more ergonomically dynamic handle will ease my work. Both parts are more expensive than the stock model, but I value my long term health care issues (bad back and so on) and I also want to get the job done quicker and more effectively. Time is money after all. So I am again willing to pay a premium in order to achieve these needs and desires.
In the wagon factory, there are steps that must be completed which add value in and of themselves.
As an educated consumer, I understand that there will need to be some machines and manpower to operate them. I hope that the wagon maker has been doing his or her best to minimize those activities which should be reflected in my price. I had a Radio Flyer as a boy and it was sturdy, able to haul pretty large sizes and weights, and the paint looked nice.
There were other wagons of course. Some were cheaper. Some had wheels that were not so decorative. Some rusted out well before their time. But it was well known that the Flyer could be left out overnight (even in the rain) and be ready for work again the next day. I expected my parents to understand all of this as I left my Christmas suggestion list at their breakfast plates and in most cases I was not disappointed. I had very smart parents and I believe that they were very aware of the value of value added activity.
Santa spoiler alert: if you are reading this blog with your favorite child at your knee, you may want to have them go to the other room now and watch Sponge Bob Square pants to distract them. No use ruining Christmas for everyone…
What I was not aware of at that age was the idea that there were other costs in making the wagons that are considered non-value added (necessary or not). Frankly, it was none of my concern. If the Sears Toy catalogue advertised a Deluxe Radio Flyer with white wall tires and an elongated pulling arm at a certain price, I really had no concern at all about what additional costs may be involved. Frankly, I held onto the notion that Santa and the elves were responsible for the entire package and strongly believed some sort of magic was involved. (What is frightening to me today is that some plant managers I have worked with still believe in the “magic” part).
What other costs?
Transport. Without a magical sleigh to deliver the products with no damage or other quality issues, some one has to move the raw materials to the assembly point and then all the other activities involved in a cell or assembly line. The parts need to be inventoried, accounted for financially, moved between work stations, inspected, re-inspected, and on and on. To care for the staff, we probably do the assembly in a factory somewhere which depending on the climate may need heat or AC (for the machines and product preparation of course). I am sure that Santa’s workshop had to have some kind of expenses even if for no other reason to deal with the Reindeer poop.
The trick in cutting costs:
is understanding which of those non-value added activities you can reduce or live without altogether without sacrificing quality, cost, deliver, safety and customer expectations. That’s where value stream mapping can be a big help. I will not go into more details now, but I can promise you that as material costs climb, energy cost continue to rise, and labor/support become more expensive, your company had better be looking at where your opportunities are right now and every day.
You need to educate and train your workforce to be passionate about finding the low hanging fruit in your workplace now and the harder stuff long term. You can be assured that your competitors will be doing that or finding more “creative” ways to out play you in the market you live in (i.e. Slave labor, currency manipulation, government subsidies, hiding illegal or banned material in the products and on and on). Wait, don’t we have treaties??? Oh never mind.
It brings us to the question in the title. Are you value added?
Do you bring something to the table every day to make sure your customer is getting the best bang for their buck? Do you read new books on the latest trends? Do you challenge yourself and your workforce to do everything they can to overcome issues in a systemic way? Do you even had a formal problem solving methodology and is it routinely used?
As an adult, I still cling to my fantasies about Santa’s workshop. The main difference now is that when I imagine it, I see shadow boards for tools, everything is placed in such a way to achieve maximum flow, the workforce is dedicated and inspired to do the best they can every day to achieve continuous improvement and yes, Reindeer really do fly. I still haven’t figured out what to do with the reindeer poop though.
Ho Ho Ho
Mister Mac
I was trying to do a value stream map of the current legislative leadership and the administrative function. For the life of me I am having a great deal of trouble finding very much that is Value Added. Especially on Pennsylvania Avenue. Sorry, Couldn’t help myself.
theleansubmariner 