Understanding What Adds Value
In a Lean Six Sigma project, analysis of customer value-added (CVA) time leads to identification of efficiency issues within the process. After all, if we are doing work that isn’t important to our customer, we are adding expense that we can’t recover. In this article we will examine what constitutes non-value-added activity and suggest methods to remove this waste from the system.
To understand a value-added analysis we need to establish operational definitions for value-added, business value-added, and non-valued-added. For a process step to be considered of value to the customer, three conditions need to be in place: value, change, and done right the first time.
If these three conditions are not met, then our first conclusion is that the activity is non-value-added. However, is it business value-added enabling the process, or does it simply offer no value to anyone? Business value-added is defined as an activity necessary for the process to operate even though the customer doesn’t directly receive benefit (BVA).
Finally, non-value-added is an activity that offers no benefit. The analysis should be performed by the project team working from a detailed flow map of the system. Each step is analyzed separately beginning with the question: Does the step meet the criteria above of a value-adding step?
If the step is not value added, does it then enable the process to function? Care should be taken at this point because we typically see what we do as important to getting the job done.
A clarifying question then would follow the form of: Is there any other way to do this step? An example of the trap here would be in a loan approval process, after underwriting the application it is put into a file and physically delivered to the next processing step. Internal transportation is not of value to the customer; however, getting the information to the next step is critical for the process to function. The second question about doing it any other way might lead to electronic transfer or vocal transfer though a phone call. In that case, the actual step as performed is not enabling (BVA) and is therefore NVA.
In a non-Lean enterprise we typically see CVA time as only a small fraction of the time spent in the process, typically in the 2 percent range. Removing the NVA time we spend in a process will improve our process efficiency. We will produce more in a shorter time without adding resources.
The results of the analysis are to identify NVA activity and remove it from the process. Then we identify BVA activity and reduce the time spent doing it, and identify the CVA and optimize it. Lean thinking offers numerous tools to accomplish these goals including actions like process flow balancing, set-up reduction, and process flow optimization. Using a cross functional team to brainstorm the to-be state of the process will greatly enhance the efficiency and stability of the process, and then the statistical side of the Lean Six Sigma will be able to continue the optimization.