PCI Logo

Are the 8 Wastes Destroying Your Profits?
Click here for PDF version

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!

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.

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.

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.

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.

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.

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.

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.

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.

View site map


©Process Coaching Incorporated
2009 All Worldwide Rights Reserved