Understanding lean manufacturing ‘value’

Every other day, in the context of software testing, there is a discussion about ‘value’.  “Do testers provide value”, “Testers should provide value” and the related, “Can we eliminate testing?” or “Testing is dead”.  In many cases, the word “value” is used colloquially (gold is valuable; dirt isn’t) and even casually (value is value), without much thought to what it really means.  In the context of lean (manufacturing), value has a very specific definition/meaning.  I think it is essential to understand the meaning of ‘value’ in lean, before using the word in other [technical] contexts.  In this post I will not refer to software development.  For this discussion you can think of creating a product like a bolt in a factory or parts of a car.  I will also refer to the process of visiting a doctor.

In the context of lean, any activity used to produce a product or a service can be one of three categories:
1. value added
2. non value added
3. non value added but necessary

There are some activities which are obviously non-value added.  In the context of a visit to the doctor, a patient waiting for the doctor is non-value add.  Mistakes in a doctor’s lab report, which requires rework, is non-value add.  In the context of manufacturing, defective parts requiring rework is non-value add.

The categories for some activities are not obvious, e.g., suppose an administrator delivers lab reports to the doctors in the clinic – is that value add?  Can you prevent delivering the reports?  Suppose you keep records for defective parts in a manufacturing facility – is that value add?  Can you avoid keeping those?

In lean manufacturing, in order to qualify as value-add, an activity must meet the following three criteria:
1. It must change form or function of the product or service
2. The customer must be willing to pay for it
3. It must be done right the first time

Even with this definition, it can be challenging to figure out if an activity is value-added.

In the context of lean, when we discuss if the customer is willing to pay for it, we are not discussing personal preference.  It doesn’t matter if the customer likes red pens or not.  In the case of manufacturing, whether a customer ‘likes’ an item is a problem of it’s design or marketing.  That is not relevant to the discussion of ‘value’.  In the case of software, engineers are responsible for the design, and it is important that target customers see ‘value’ in the design.  I won’t discuss software in this post.  It’s enough to keep in mind that a customer’s willingness to pay (in lean manufacturing) is more related to wasteful activities, such as defects or excess inventory.

There are some activities which are not value-added, e.g., they do not change form or function of products, but which are necessary.  For example, sales and marketing of products or services.  Although these will not satisfy the three conditions for value-add, a business will not survive without these activities.

Why is value important (in lean manufacturing)?
When people pursue process improvement or try to make processes more efficient, they focus on the small percentage of value added activities – “make it faster”.  Instead, eliminating NVA can give much higher gains with less effort. Typically only 10 to 15 percent of steps in a process add value, and more often than not, these steps represent as little as 1 percent of the total process time (From Lean Six Sigma for Dummies).  Consider a typical visit to the doctor’s office, there are large periods of waiting with relatively little productive time spent on filling forms and talking to the doctor.  Focusing on reducing the wait times will result in higher gains compared to improving the time taken by the doctor.

Here are some of the ways to eliminate waste in a doctor’s office.
– have broad roles for admin staff, eliminating unnecessary hand-offs
– making sure physician’s have all the information needed to focus on the patient
– avoiding rework by different admin staff, the nurse and physician
– using technology to avoid mistakes and rework

Identifying activities which create value is the first step in applying lean (More on lean later).

The concepts of lean can be applied to any industry.  If you would like to know more, you may want to start with understanding how it is applied to health care/hospitals/doctors.  If you don’t have experience with manufacturing it may be easier to understand how lean concepts are applied to a doctor’s office.  There are many references on the subject available on the Internet.


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