Value, Value-add and Non-Value add in the context of LEAN THINKING
Anand Deshpande |

Value is the starting point in Lean thinking.  It is important to know who defines value , what is value-add and non-value add? Value is defined by the customer .It could be the quality of product, the price that he pays for or the on time delivery and/or a combination of all three.

''Value is the change in the fit , form and function of the product or service that customer is willing to pay for''.

Any activity that does not change the fit, form and function of product or service is non-value add. Non-value add  is also known as WASTE

Any work that takes place on the manufacturing or service floor constitutes a series of processes.These processes are either value add or non-value add. An operator could be performing a simple assembly of an engine or car part. The walk time which he takes to fetch the part to assemble is non-value add. Similarly, in service process the waiting time to download information from the system is non-value add. On the airport, the time we spend in the queue before a query gets answered is non-value add time.

The purpose of an organization is to:

  • Satisfy the existing customers
  • Grow  by adding new customers
  • Improve profitability

Satisfying customers, aids organizational effort in surviving the onslaught of completion, globalization and recession .However, it is the growth that propels organizations to greater profitability and sustenance in an unpredictable and often demanding market.

A gap exists between customer expectations and organization delivery against those expectations. Operational Excellence aims to translate the Voice of the customer (VOC) into measurable metrics across the value chain with a view to addressing these gaps. An introspection into these gaps reveals their existence because of non-value add (NVA) steps or activities across value chain. Organizations should aim to Eliminate and Reduce the NVA’s across value chain.

Non-value add(NVA) is classified into two types.

Type I waste (ENVA)

ENVA is an abbreviation of Essential Non-Value Add. It signifies the activities carried out in the process that do not add any value to the customer but required for process completion

Typical examples of ENVA

  • Backing up of computers for data storage purposes does not add value to the service, but mitigates risk of data loss.
  • Downloading information before processing data, observed in service environment is an ENVA.
  • Processing tool of a CNC machine searches for axis position between processing steps. Searching is absolutely non-value add, but is required in the context of starting next processing step.

Type II Waste (NVA)

I call this ‘’Pure waste’’. It signifies the activities carried out in the process that do not add value to the customer and not required by the process

Typical examples of NVA

  • Defects: Any defect that occurs during the manufacturing or transactional process causes rework leading to delay in product or service reaching the customer.  Weak error detection after rework, can cause defect to reach the customer causing dissatisfaction and loss of reputation
  • Transportation: You may have observed operators on the shop floor walking long distances, moving parts between operations. The walking with parts does not change the fit, form or function of the part being manufactured. It is pure waste

Organizations that implement Operations Excellence in its true sense, seek to eliminate pure waste first and then focus on eliminating and further reducing ENVA. Accumulated experience suggests that 5-10% improvement in Delivery and Quality is quite possible by eliminating Type II waste only.

Operational Excellence aims to eliminate this waste (non-value add) .

The focus is creation of value-creating steps interlinked in a flow