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
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).
3 . Lot sizes
6. Material handling
Figure 2. Cost-Added Wastes
To be Continued
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