Value and Waste in Lean Six Sigma

Value and Waste in Lean Six Sigma

Two essential concepts of Lean Six Sigma, value, and waste, are also essential parts of the Lean philosophy. Before the principles of Lean are incorporated into an organization’s way of working, it must begin by defining the value of the product or service it offers from the customer’s perspective.

The customer’s need and voice are represented by the value of a product or service. Value is meaningful when a product or service meets the customer’s needs at a specific price and at a specific time.

A very common problem faced by organizations relates to defining value. Organizations usually focus on their ability to deliver value instead of concentrating on what their customers want.

• What is the Value of Lean Six Sigma?
  
• What is Waste in Lean Six Sigma?

What is the Value of Lean Six Sigma?

In Lean Six Sigma, value is defined as any activity, process, or feature that the customer is willing to pay for. It is the reason why the product or service exists in the first place. Value is determined by the customer’s needs and requirements, and it is what differentiates the product or service from its competitors.

The concept of value is central to Lean Six Sigma because it is the basis for all process improvement activities. By understanding and focusing on the customer’s needs and requirements, organizations can identify the activities and processes that add value and those that do not. This helps to eliminate waste and improve efficiency, which ultimately leads to higher customer satisfaction and profitability.

What is Waste in Lean Six Sigma?

In Lean Six Sigma, waste is any activity or process that does not add value to the product or service from the customer’s perspective. It is any activity or process that consumes resources, time, or effort but does not contribute to the creation of value for the customer.

The concept of waste is central to Lean Six Sigma because it is a significant driver of inefficiency, increased costs, and reduced profitability. By identifying and eliminating waste, organizations can improve their processes, reduce costs, and improve customer satisfaction.

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Types of Values in Lean Six Sigma

There are three types of value additions or concepts related to value as follows:

• Value Added
  
• Business Value Added (BVA)
  
• Non-Value Added (NVA)

Value Added

Whenever there is any additional activity for which the customer is willing to pay, and when performed, it changes either the form, fit, or function of a product or service, or it helps in converting an input into output, this activity is considered to be a valuable addition to the product/service.

Business Value Added (BVA)

It is also known as Type I NVA. This activity when performed adds no significant value for customers, but it is important for business processes. Some common examples of Type I NVA are quality checks and assurance activities, biomedical waste management in hospitals, etc.

Non-Value Added (NVA)

It is also known as Type II NVA. This activity is considered unnecessary because it offers no value for internal customers or external customers. Activities of this type can be eliminated from the process.

Every organization should ideally undertake an analysis of all its activities to categorize them as either waste or value added. Such an analysis is presented graphically in the form of a map, known as Value Stream Analysis or Value Stream Mapping (VSM).

In 1985, Michael Porter, in his book Competitive Advantage defined value stream as a chain of activities that a firm operating in a specific industry performs .in order to deliver a valuable product or service to the market.

In other words, it is the series of activities that are carried out from the point of ordering to the point of delivery of a product or service to make the product/service valuable. Identification and documentation of every step in the value stream are important to determine process owners and stakeholders before it can be effectively challenged for improvement and perfection.

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Types of Wastes in Lean Six Sigma

Any step or activity in a process that is unnecessary and is not required to complete the process successfully is called waste or a non-value-adding activity (NVA). On removal of wasteful activities, the value-adding steps remain, which help the organization in saving resources and efficiently deliver a satisfactory product or service to the customer.

There are generally eight types of waste in any kind of lean organization that include:

• Defects
  
• Over-processing
  
• Excess Inventory
  
• Excess Motion
  
• Unutilized talent
  
• Overproduction
  
• Transportation
  
• Waiting

Defects

Any product or service that does not conform to the required specification is unusable and requires additional resources for correction.

Over-processing

When activities that are not necessary for the production of a functional product or service are carried out, it is said to be over-processing.

Excess Inventory

The stock of goods that are not being utilized in production or are not anticipated to be used for long.

Excess Motion

Unnecessary movement of people, resources, or information owing to discrepancies in the layout of shop floor workspace, ergonomic issues, or displacements.

Unutilized talent

Employees who are not deployed as per their talent and skills.

Overproduction

The quantity of product produced exceeds demand or requirement.

Transportation

Unnecessary transportation from one location to another of items/raw materials/tools/equipment or information that is not needed to perform the process.

Waiting

Lag period between the current step and the earlier step to complete the process.