Value-Added vs. Non-Value-Added Activities

In every manufacturing business – and indeed any company in any industry – there are two types of activity: value-adding and non-value-adding.

It’s an idea borrowed from Lean management methodology. Based on cutting out anything that doesn’t add value, lean thinking “trims the fat” by targeting non-contributing operations and actions.

Related: Are Lean principles useful for my small manufacturing operation?

But manufacturing is a complex business. It can be daunting to think about reviewing your operations to weed out the value-add opportunities. And how do you even define value across your operation?

Let’s look at Lean to identify those opportunities and Jobman to implement the changes.

First Things First: Defining Value

Ultimately your customers will decide whether what you do is worth paying for.

In end-product terms, it’s pretty clear-cut. Does your customer think the product is worth paying for at the price you’re demanding?

But other value-add opportunities aren’t as obvious. These things might be important to your customers:

• Being better at after-sales support than your competitors
• Fast turnaround time on a quote
• Shortening delivery times by 1 hour or 1 day
• Higher quality components
• On-site assembly
• Getting it right first time

If the customer is willing to pay for it, it’s valuable. If they’re not prepared to pay a higher price, or you’re losing customers to your competition, your customers don’t see the value.

8 ways to waste value

Lean thinking defines non-value-adding activities as “waste”, and there are 8 types of activity here that you can look to cut out:

1.     Transportation costs

2.     Inefficient inventory

3.     Movement time

4.     Idle resources

5.     Underutilised potential (in people or machines)

6.     Overproduction

7.     Over-engineering

8.     Defects

These 8 activity types are found in surprising places. Overordering raw material can reduce storage space. Workers walking between stations – or worse, driving parts around the factory on a forklift – are often unnecessary transport costs or unproductive moving times.

For a detailed guide on getting started with lean manufacturing and to see how Jobman can help, check out our previous post here.

Looking at your value opportunities

You’re looking for two things that can transform your bottom line:

1. Value-adding opportunities
2. Waste to eliminate

To do that properly either takes a lot of time or the right tools. Because your operation is complex and there are lots of people, processes and equipment in play at every stage, you need a clear picture of what’s going on at every level.

That’s where enterprise resource planning (ERP) software crosses over with value stream mapping.

Value stream mapping in manufacturing

Value stream mapping breaks a process down into its component parts, with the 8 waste areas and 3 value-adding criteria. Using a made-for-manufacturing ERP like Jobman allows you to call up data on each of those processes to find latent value opportunities.

For example, you can monitor stock levels to find out what’s occupying valuable storage space and spot idle time when your machines could be used to complete another task.

We’ll go into value stream mapping more in a future post, but for now, just remember there is a formula for trimming the fat.

Jobman: where it all comes together

Yes, it takes some work to add value and eliminate waste. But the effort is well worth the rewards.

And with Jobman on your side providing easy access to all the decision-making data you need, the process is much easier than you might imagine.

See how Jobman improves manufacturing productivity or contact us to arrange a one-on-one consultation.