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Most Business Processes Are 90% Waste and 10% Value-Added Work

A good place for any company to begin the journey to lean is to create continuous flow wherever applicable in its core manufacturing and service processes. Flow is at the heart of the lean message that shortening the elapsed time from raw materials to finished goods (or services) will lead to the best quality, lowest cost, and shortest delivery time. Flow also tends to force the implementation of a lot of the other lean tools and philosophies such as preventative maintenance and built-in quality (jidoka). A lean expression is that lowering the “water level” of inventory exposes problems (like rocks in the water) and you have to deal with the problems or sink. Creating flow, whether of materials or of information, lowers the water level and exposes inefficiencies that demand immediate solutions. Everyone concerned is motivated to fix the problems and inefficiencies because the process will shut down if they don’t. Traditional business processes, in contrast, have the capacity to hide vast inefficiencies without anyone noticing—people just assume that a typical process takes days or weeks to complete. They don’t realize that a lean process might accomplish the same thing in a matter of hours or even minutes.

To illustrate the fact that most business processes are full of waste, let’s say you have been promoted and you place an order for new office furniture with a genuine wood desk and ergonomic chair and drawers and compartments galore. You can’t wait to get rid of that old scuffed and stained furniture you currently have. But don’t turn in the old stuff just yet. For one thing, the promised delivery date is eight weeks out and, if you investigate further, the furniture is likely to be late by another month or so. Why does it take so long? Are skilled craftsmen slaving away at each piece of wood so it looks perfect? A nice thought, but quality has little to do with the delays. Your inconvenience is a result of a clumsy manufacturing process called batch and queue. Your desk and office chair are mass-produced in stages. Large batches of standardized material sit in a queue at each stage of the production process and wait for long periods of (wasted) time until they are moved to the next stage of production.

Consider the custom-made office chair that is delivered two months after you order it. The value-added work (i.e., the work actually performed) in the assembly process consists of putting together the upholstery and cover with the standard foam cushions and then bolting together the chair. This takes a few hours at most. Actually making the fabric and foam and frame and parts, which are done in parallel, takes another day at most. Everything else during the two months you are waiting is waste (muda). Why is there so much waste? The department making seat covers, the supplier making springs, and the plant making foam are all making big batches of these items and then shipping them to the furniture manufacturer, where they wait in piles of inventory. Then you, the customer, wait for someone to pull them from inventory and build the chair. More wasted time. Add several weeks for the chair to get out of inventory at the plant and through the distribution system to your office and you have been waiting months sitting in that uncomfortable old chair. In a TPS/lean environment the goal is to create “one-piece flow” by constantly cutting out wasted effort and time that is not adding value to your chair. Lean initiatives in companies like Herman Miller and Steelcase are cutting that process of making chairs to days.

In Traditional Process Improvement vs. Lean Improvement, we summarized the eight non-value-adding wastes that Toyota continually seeks to remove from its processes:

  1. overproduction
  2. waiting
  3. unnecessary transport
  4. overprocessing
  5. excess inventory
  6. unnecessary movement
  7. defects
  8. unused employee creativity

(In Level Out the Workload (Heijunka) you will learn about two other sources of waste, muri and mura, meaning “no value added beyond capability” and “unevenness.”)

How do you distinguish the value-added work from waste? Consider an office where engineers are all very busy designing products, sitting in front of the computer, looking up technical specifications, and having meetings with co-workers or suppliers. Are they doing value-added work? The answer is you cannot measure an engineer’s value-added productivity by looking at what he or she is doing. You have to follow the progress of the actual product the engineer is working on as it is being transformed into a final product (or service). Engineers transform information into a design, so you look at such things as 1) at what points do the engineers make decisions that directly affect the product? and 2) when do the engineers actually conduct important tests or do an analysis that impacts those decisions? When you start asking these kinds of questions, you’re likely to find that typical engineers (or any white-collar professionals) are working like maniacs churning out all sorts of information. The problem is that very little of their work is truly “value added,” i.e., work that ends up actually shaping the final product.

Consider the example of an engineering analysis group. They generate and accumulate various complex analyses for a project. Then what happens? The reports sit and wait in an information warehouse (inventory) until someone from another department accesses the reports. If we continue to follow the path of the information, you’ll most likely find that any decisions based on this data could take months and go through several people, processes, and/or departments. Or the decision makers may not even know the analysis was done and make the decisions without the information. Your value-added work, which in this case is the flow of information as it is being transformed into a design, is being delayed by a number of inefficiencies because the process is organized around the old rules of batch-and-queue manufacturing. In this example, engineers and departments are mass-producing information that sits around, is inefficiently accessed, and is pushed along to the next stage. This is how most white-collar work (and blue-collar work, for that matter) is organized. What’s the alternative? Flow.

Flow means that when your customer places an order, this triggers the process of obtaining the raw materials needed just for that customer’s order. The raw materials then flow immediately to supplier plants, where workers immediately fill the order with components, which flow immediately to a plant, where workers assemble the order, and then the completed order flows immediately to the customer. The whole process should take a few hours or days, rather than a few weeks or months.

An example of this is the fact that Toyota engineers new vehicles in Japan in less than one year. Their competitors take over two years. The reason is that Toyota’s engineering work is organized into a flow, and efforts are constantly made to reduce waste in this flow. Its engineering work, design decisions, prototype construction, and tool construction seamlessly flow and “communicate” from the beginning to the end of the vehicle design process. No one produces anything before it is needed by the next person or step in the process.

Of course, the ideal of one-piece flow is not reality and Toyota is steeped in reality. So you will not see Toyota just throwing together machines and suppliers and forcing one-piece flow where it does not fit. Taiichi Ohno wrote that it takes time and patience to achieve flow. And as we will see in Use “Pull” Systems to Avoid Overproduction and Level Out the Workload (Heijunka) , inventory buffers are used judiciously where continuous flow is not possible today. But the ideal of flow provides a clear direction. At Toyota it means that using small lots, having processes close together, and keeping the material moving through processes without interruption is better than producing large batches of stuff and having them sit and wait.

Toyota managers and engineers do not have to do a detailed cost-benefit analysis every time they want to implement something that will improve the flow. Cost is obviously a factor, but the bias is to create flow where it is possible and continuously improve in the direction of better flow. Even when Toyota strategically sets up inventory buffers in places where pure one-piece flow is not possible the focus is still on reducing the inventory over time to improve flow. In fact, inventory buffers in the right places can actually allow for better overall flow across the enterprise.

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