Value added activities

One of the most important parts of switching to lean manufacturing is to cut waste from the manufacturing and production processes. Most businesses cannot figure out how they are going to cut any sort of waste but there are always things that can be done to make the system much more efficient. The primary goal of lean manufacturing is to create a product which creates as much value as possible at the lowest cost. Value is anything that a customer is willing to pay for. All processes in lean manufacturing are supposed to either cost as much as the value they produce or should create more value than they cost. Any process that actually costs more than the value it produces should be eliminated. However, lean manufacturing is not simply about cutting waste. It is about producing as much valuable as possible at low cost. If you want to create more value you need to look for what are commonly known as value added activities.

Value added activities are things that add value to the final product such that the total value is greater than the cost. Imagine, for example, that you are building a car through a manufacturing process. Currently your manufacturing and distribution processes cost more than the final value of the car. You are loosing money and need to find a way to create value quickly. You systematically go through all of the manufacturing processes and locate places where more cost is created than value. You either eliminate these processes or streamline them so that they are more efficient. You then find new processes that create value for the customer. This could be something like a new engine or a new design for the car. It could also be a new way of marketing the product or delivering it. Anything that adds value to the finished product is a value added activity.

A good way to measure if a process is a value adding activity is to subtract the value of the product before the value adding activity from it after the process has been finished. For example, a car which has the new engine added to it might be worth twice as much as it was prior to the change. However, adding the new engine does not increase costs. The difference between the values of the cars before and after the change, depending on the total costs is the value added. Another way to add value is to streamline a production process so that the total cost goes down, and thus the total value goes up.

Remember that value is not simply associated with the final matierial product. Value for the customer is based on some complicated factors such as the customer's expectations. These expectations can often be outside of your control, but in many cases the way your company markets its product will change expectations. Think in terms of the customer and not simply in terms of cutting costs in manufacturing. It takes all sides of a business to figure out how to complete value added activities.

Brainstorm with all parts of your business to find great value adding activities. Don't limit yourself to ordinary business ideas. Keep your eyes open for new ideas circulating throughout the market place. If need be you should higher a lean manufacturing expert to consult with your business. By carefully streamlining and thinking only about things that will add value for the customer you will see your business grow exponentially. Companies that focus on value added activities are far more likely to succeed in today's market.