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Are the 8 Wastes Destroying Your
Profits?
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version
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Are the 8 Wastes destroying your profits?
Understanding the 8 wastes is the foundation of lean thinking. Without this detailed
comprehension, you will not be able to see the wastes being generated in your business,
and without seeing the wastes, they can’t be eliminated.
1. Overproduction – Producing materials that aren’t needed
now.
Managers always have excuses for over-producing. I’m sure you’ve heard (or used)
some of the most common. The setup times are long, and since we’ll use it next
month anyway…
So what’s the big deal? It’s true that the setup times are long and we do
plan to use the material soon. But what is missing in this thinking is
that over-production costs money and time. You pay to produce parts not needed
now, and then pay to move them to and from the storage area. Sometimes warehouse
space is rented, and when the parts are actually required, they are hard or
impossible to find. It isn’t unusual to give up and expedite a new production run
when we can’t find the product. And while these excess parts are being made,
stored, and searched for, the production line is running out of the parts we
really need. When the parts are damaged or become obsolete, the investment is
washed down the drain. There is a better way!
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2. Waiting – Not having the materials or resources at the
right place or time to continue the value added flow of a product or
service
One would think that with all those extra parts made to reduce setup times there
would never be shortages. Wrong! There are often so many extra parts laying about
that shortages aren’t even noticed until the line or cell stops producing.
When the equipment breaks down, we wait for maintenance departments to get it
fixed. Perhaps the wrong paint was ordered or the only trained operator didn’t
show for work. Maybe engineering hasn’t completed the design or the paperwork. So
everyone waits. We wait to produce, we wait to ship, sometimes we wait so long
that our opportunity to make the sale evaporates.
But those who force us to wait aren’t limited to production managers or
engineers. We wait on the sales force to fix orders entered wrong. We wait on
purchasing to finish purchase orders on time, or suppliers to expedite the latest
late order. The list goes on.
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3. Transportation – Using resources to move materials,
equipment, or personnel from one workcell, department or facility to the next. It
includes automated movement and manual movement, movement within the plants and
movement between plants.
Even when managers understand how overproduction and waiting are wastes, it can
be hard to believe that transportation can be categorized as waste. But it can.
The physical act of picking something up and putting it down somewhere else adds
no value to the product. It is exactly the same as it was before it was moved.
Often more resources are used moving items around than are spent working on
them.
A factory arranged by processes has built-in transportation waste. Parts are
stamped in the press room, then MOVED to the machine shop, to the
deburring machine, to the paint line, and finally MOVED to pack and ship.
Transportation waste is hidden. We lose track of it, don’t really measure it,
finally becoming blind to its effect and perhaps even to its
existence.
There are many options for moving inventory outside the manufacturing plant; LeSaint.com helps by offering inventory management and logistics solutions.
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4. Non-Value Added Processing – Performing work on the
product for which customers aren’t willing to pay
Many times in the production process, “work” is being done for no known reason.
When asked why such activity is done, a common response is “that’s the way we’ve
always done it” or “it’s our way”. But such actions are waste if they are not
adding value to the customer. Often, these responses mask an inadequate
definition of customer requirements or engineering specifications.
When work is being done on a product solely for the purpose of making the next
process possible or easier, it is likely that an example non-value processing has
been uncovered. Tack welding a part in location prior to finish welding, winding
bobbins on a sewing line, gluing parts together that subsequently are
mechanically joined can all be indications of operations that are non-value
added.
Often the cause of non-value added processing is inadequate design, tool or
equipment maintenance, or processing definition. In many cases, non-value added
processing cannot be easily eliminated. It takes time and effort to redesign
processes, products and tools. Once identified, it is in your best interest to
determine the necessary steps and quickly deal with the issues.
While examples of non-value added processing may seem rare, they are really quite
common. In fact, in many operations, non-value added processing can account for
20% to 30% of the total direct labor utilized.
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5. Excess Inventory – The retention and storage of
finished goods, raw materials, or work in process which is not needed
now.
The investment in inventory in many facilities can reach millions of dollars. The
fact that the capital investment in these products is reaping no returns is bad
enough. While we convince ourselves that this inventory is an asset, it is in
fact a liability. Much of the material in inventory stores is obsolete, damaged
or well past its shelf life. In isn’t unusual to find that 20% or more of the
material has no value. But it is still managed, counted, adjusted and moved.
Floor space that could be used for value added activities is dedicated to storing
this inventory.
Even the inventory stores which will eventually be used cause problems. Time is
spent managing, counting, sorting and moving the items. It masks problems within
the production system that we should be solving.
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6. Defects – Production of components which do not meet
standards. These could be industry standards, customer standards, or product
which does not meet the expectations of the customers.
Products which cannot be used or sold because of damage or defects have no value
to you or your customers. Products that have to be reworked, repaired or even
recalled eat profits.
But in many processes defective products are accepted as the norm; rework efforts
are integrated with regular production and it becomes difficult to discern where
production ends and rework begins. Final inspection stations are established to
check products before they’re released to customers. Rework stations are added
into the production line, or torque checks are reviewed by the “inspector” to
ensure the product meets requirements.
This tacit acceptance of producing defective products is costly. Labor is
expended to produce the product; inspectors are paid to find the defects.
Depending on the nature of the error, parts are scrapped or time and money are
spent to rework or repair the product. If the defect isn’t found and repaired
within the facility, it gets even worse. A recall becomes necessary, a repair
campaign is started or perhaps employees are sent into the field to fix the
defects to placate justifiably irritated customers.
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7. Excess Motion – Unnecessary motions, movements, or
activities within an individual work station or work cell.
Work cells should be designed so that materials, tools, and equipment are close
at hand and easily accessible. Operators shouldn’t have to walk for supplies,
reach for tools, or search for materials. Work cells must be designed to prevent
injury or ergonomic strains. When workers leave the workcell to retrieve borrowed
or lost tools, or go to the storeroom to get materials which should have been
ordered and already delivered to the workcell, it is wasteful.
It is the responsibility of management to ensure that the proper tools and
equipment is in the work cell and is maintained in good condition so that
operators can produce products in the time allotted that meet the quality targets
of the customer.
However, a note of caution is called for here. Most of the effort eliminating
waste in a factory occurs at the work station or operation level. Projects are
designed and capital is expended to improve the output or productivity of an
operation. Since most of the past efforts have already drastically improved the
operations, the opportunities for great savings can be much smaller.
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8. Underutilized Resources – Capital, equipment, or human
resources that are not being fully deployed or utilized.
Of all the 8 wastes, perhaps underutilized resources are the worst.
The purchase of equipment which isn’t utilized or effective can cost a company
greatly. Even worse, misguided capital acquisitions can prevent us from making
necessary process improvements. Who wants to own up to making an ill-advised
investment? Once an investment of thousands or even millions of dollars is made,
it becomes difficult for managers or executives to have the courage to make
necessary changes. Once the investment proves to be underperforming, most
managers will redouble the effort in a fruitless quest to make it live up to
expectations.
This is so common that there is specific lean terminology to describe it. The
term “monument” is applied to capital equipment and investments which are nice to
look at, offer little value, and are difficult to remove.
The most knowledgeable people in most manufacturing operations are the
production, maintenance, and quality associates. But managers routinely change
processes, revise or replace equipment, change designs, or implement other
“Continuous Improvement” ideas without utilizing or even consulting these
resources. This is a mistake. Even in the unlikely event that the ideas of the
managers are superior to those of the workers, the results will be better when
the workforce is involved in the decision making and planning of the
changes.
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So, do you recognize your operation in these 8
wastes?
In many organizations, as much as 40% of the production effort is spent on these
wasteful activities. How much of your time do you spend fighting the fires,
expediting parts, or other activities which do not help reduce the waste in your
operation, but merely allows you to make it through another day? Employees,
managers, executives and corporate investors will all succeed when the 8 Wastes
are removed from your company.
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