One of the first steps in applying Lean concepts on a path to operational excellence is identifying and eliminating waste. In the old days of manufacturing this might have been called scrap. The Japanese TPS system, upon which Lean is modeled, focuses on delivering value to the customer. TPS uses the much broader waste concept of “muda” as anything that does not add value in the eyes of the customer. In fact, Lean articulates seven different types of wastes identified in TPS. Some use the acronyms of TIM WOOD or WORMPIT to remember each type of waste.
Seven Wastes Was Not Enough
In recent years, an eighth waste has been added to the list to ensure that organizations recognize the importance of not wasting the contribution humans can make to operations. Respect for People was already built into the Japanese systems as one of two key pillars for the Toyota Way (along with continuous improvement), so it didn’t need articulation as muda in TPS. However, after decades of automation in U.S. industry, a prompt to think about the value added by individual humans is a good reminder.
Every process has each of these eight wastes, or at least the potential for these wastes. Operational excellence efforts first identify the contribution and systematically reduce and eliminate them. We can use a mnemonic to remember each of the eight waste types: DOWNTIME. Keep in mind that downtime per se is not waste, but this acronym is a super way to keep from forgetting any of the eight.
Defects involve scrap or material that is thrown out or reworked…and much more. Concessions may be made to a customer or fire-sale pricing may be used so defective material can be sold. In addition, the quality control system that must be put in place for an out-of-control process has high inspection costs.
Paperwork (including electronic) tracking for defects and waste removal isn’t free. Defects that actually reach the customer can cause greater pain, with loss of not only that customer, but many others from viral word-of-mouth dissatisfaction. Some experts estimate defects have a 10x negative impact on a company.
Overproduction is making something too soon, making too much of something, or making something faster than is needed. This may not sound like a big deal, but it’s actually very important because it hides other elements of waste, such as undetected defects in runs of inventory, product damage from warehouse stocking and removal, defects introduced by high-speed processes, strain on human interaction with machines. (Think of Lucy and Ethel at the chocolate factory.) Operating in a just-in-time mode provides visibility to numerous opportunities to improve.
Waiting involves delays to process steps, often extending customer leadtime. This may include waiting for authorization from a superior, even though the authorization is a rubber stamp rather than critical input. It can involve inefficient changeovers, poor communications, large batch processing, and uneven workstation loading.
4. Non-utilized Talent
Not fully utilized people represents the waste of talent present in many organizations. Because operators are close to their processes daily, they can often recognize problems or opportunities that staff or superiors just don’t see, but the workers may never be asked for their input. They may also have outside talents that aren’t formally part of their assigned jobs, but could be of use. The recommendation? Value people for their brains, not just their brawn.
Transportation deals with unnecessary movement of products. From a customer perspective, transport adds NO value to the product. In fact, transportation can sometimes even reduce value. The more times a product is transported, the more likely it is subject to mishandling and damage. Even cosmetic packaging damage may cause customers to reject product. If it looks bad outside, might it be bad inside?
Inventory may not seem like a bad thing. After all, a supplier never wants to be in the position of not being able to meet customer demand. However, the waste aspects of holding large amounts of inventory are many:
- The product made may not be what the customer ultimately wants.
- The product may go bad or become obsolete before the customer purchases it.
- The inventory may contain large blocks of nonconforming product that slipped through quality control.
- Holding inventory costs money (estimate 20 to 30 percent carrying cost).
- Tying up money in inventory limits opportunities to use funds elsewhere.
Motion involves movement by people. Even small non-value-added motion can be very costly. Think of an extra twist of the wrist on every item many times a day that leads to a repetitive motion injury, with lost-time and disability costs.
Excess processing might be extra steps in a process, unnecessary customization, inefficient routings and other things not necessary or valued by the customer. Organizations may want to provide the shiniest, most sparkly widget, but anything beyond a customer’s spec is non-value-added, or muda.
Eight Wastes In the Real World
Waste is not just a manufacturing concern. Waste also occurs throughout service organizations, including healthcare, retail, finance…in fact, everywhere.
Learn to See Waste
Lean is often identified as the process of “learning to see,” of looking at your operations from the perspective of the customer and noticing things that you might normally be so used to that you simply ignore them.
Running an eight waste “learn to see” exercise can provide very useful training. Teach employees the eight-waste acronym DOWNTIME, with plenty of explanation of each item. Do an oral quiz to be sure each individual can recite all eight wastes.
Then send the team as pairs into the workplace armed with clipboards. Charge each pair with identifying at least one (or three!) examples of waste in each of the eight categories. You’ll get some great results. You’re likely to have dozens of observations of waste situations that really should be corrected. (Be sure to have a tracking and management system so these issues can be assessed and acted upon.)
More importantly, the team members will remember what waste really is and hopefully internalize the ideas of identifying, preventing and correcting these eight wastes wherever they see them in their operations.
If you would like to take a deeper dive into a few concepts associated with lean management systems, and how you can incorporate them into your business, click here to view the recording of our recent webinar: Making Lean Assessments Work For Your Business.