How to define value added activities & non-value added activities?

Categories of all activities:

  • Value added activities
  • Non Value added activities
  • Required Non value added activities

Value added activities:

The process is defined as the conversion of input into output by using the resources. But what is important here is Value addition in the process. So those activities which change the shape as per customer requirement & add value are called value-added activities.  

Welding

For example in the manufacturing industry Stamping, welding, machining, painting & assembly of parts etc. So as we do these activities within a process, the product changes shape into a complete product as required by the customer. Customer values these activities & pays for them.

Value is added when the product is physically changed for the customer’s requirement. Also value is added when a service is provided for which the customer is willing to pay.    

Non Value added activities:

Those activities for which customer is not willing to pay for are called non-value-added activities. When we do these types of activities, there is no change in shape or size. If we do not add value, we add cost or waste.

Non value added activities

Examples of waste include unnecessary time spent in material storage, material movement, motion & inspection etc. Normally it is common to do the inspection at many stages due to machine, tool, material & operator errors. But the customer needs products that are defect-free.

Actually customers do not care how many inspections are taken for dispatch of the defect-free product. So when an inspection is required it is also considered waste. because customers will not pay for extra inspection.  

Required Non Value added activities :

Those activities which are essential to make the product but do not add value are called required non-value added activities.

Required non value added activities

As customers do not find value in these activities so do not want to pay for these activities.

These activities include loading, unloading of material in the machine, internal audit, product testing etc.   But it is necessary to perform these activities. So the best way to deal with them is to minimize or eliminate these activities. We can perform these activities automatically.    

How to check value added and non value added activities:

  • If the customer is willing to pay for it, then it is value added activity.
  • If the process or activity physically change the product in some way, then it add value.
  • If the activity is eliminated & no effect on customer then it is non value added activities.

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VA and NVA example by Dr. Shingo:

Dr. Shigeo Shingo

Image from google  

Dr. Shigeo Shingo was once walking in a factory with some engineers. Suddenly he stopped in front of a press machine & was watching operators loading & unloading sheets. Then he asked the engineers “what percentage of the time are they adding value & what percentage of time they are adding waste”  

One engineer said they continue working so it is 100%. Another engineer said it is 50%. Dr. Shingo laughed & said only 14% after looking in his stopwatch. It is adding value only when it is bending the metal sheet otherwise rest is the waste.    

Then Dr. Shingo asked, ” what can you do to improve the ratio?” Then one engineer told that they can put the blank sheet onto the leveler to maintain the height. So that bending time to pick up the sheet can be reduced. Another engineer said that they can put a spring at the back of the press to automatically eject the formed sheet after an operation.  

The genius inĀ  Dr. Shingo was to understand what was waste & to stay focused on its removal. He knew that there was real power in asking the right question and not in just telling the people what to do.

Read the Story about Value added activities.

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