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Manufacturing Waste 


PART I. 

 

If we are going to win the war of global competition and survive and thrive in the years ahead, then we are going to have to declare war on waste. Waste is anything we don't need or want, activities that don't need to be done or should not be done. It's things that add cost and do not add value to the process or the product. It's the things the customer wouldn't knowingly pay for. It's what we need to get rid of—eliminate—so it does not continue to add unnecessary costs and make us uncompetitive. Yes, we need to eliminate waste if we are to win the global war (see Figure 1).

In any business process or product process there are things that add value and there are things that add cost. If you really look at any process with a different set of eyes you will see that a majority of the activities in any process are cost-added activities—they are waste and could and should be eliminated.

The current traditional wisdom that we should improve or even continuously improve everything—is wrong. It is also incorrect thinking. If we look at things with a new pair of eyes or a new pair of dimes (paradigms) we can see that some things need to be improved continuously, but some things do not need to be improved—they need to be eliminated!

There are two kinds of improvement activities that are undertaken in most companies—superficial and fundamental. Superficial improvement is improving the obvious, the surface issues, but not digging deep enough to find the root cause. It's easy, it pacifies, but it doesn't make for significant change. Superficial improve­ment is also improving that which should not be improved but that which should be eliminated.

There is nothing so inefficient as doing that which does not need be done very effectively—Peter Drucker

On the other hand, fundamental improvement is managing the process by first looking for the cost-added activities and eliminat­ing them, then looking for the value-added activities in the process

Cost Added = Waste

Figure 1. Fundamental Principle

Cost Added versus Value Added

 

and fundamentally improving value-added activities and funda­mentally changing the process.

The significance of this paradigm shift is that it produces a substantial change in the long term cost structure and provides a leap frog breakthrough in global competitiveness. We are no longer working on improving only the value-added activities (30%) by, let's say, 10% (net improvement = 3%). We also are working on eliminating (or let's say a 50% reduction of) the cost-added activities (70%), which produces a 35% improvement. That is 10 tifries the improvement over the traditional approach and it's equal to eliminating all of the value-added activities. Wow, what a paradigm shift! What a new way to look at fundamentally improving costs for the long term.

Just what are these cost-added wastes that we should be working on to identify and eliminate so that we can substantially and fundamentally improve our long term cost structure? There are a number of them in any company. Many of them are the same in all companies. Some may be specific to your company. Here is a list of several cost-added waste activities that can be found in most all companies. Maybe you can add a few of your own to this list (Figure 2).

1. Inventory

10. Rejects

2. Setup

11. Downtime

3 . Lot sizes

12. Transactions

4. Overproduction

13. Reporting

5. Queue

14.

6. Material handling

15.

7. Transportation

16.

8. Storage

17.

9. Inspection

18.

Figure 2. Cost-Added Wastes

To be Continued


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