Eliminating Waste. Waste exists in all areas of a business and every aspect of waste results in a company losing money. If you want to improve profitability and cash flow, you need to eliminate waste.
The thinking of identifying waste and eliminating it is referred to as ‘Lean thinking’.
‘Lean’ thinking was developed by Taiichi Ohno, Chief Engineer at Toyota, who identified Seven wastes, or Muda, that occur in production. Whilst Taiichi was initially focused on eliminating waste from production processes, these types of waste exist in every aspect of a company’s operations.
Waste is any action or step in a process that does not add value to the customer and is any process that the customer does not want to pay for.
The 7 business wastes identified by Taiichi:
- Transportation
- Inventory
- Motion
- Waiting
- Overproduction
- Overprocessing
- Defects
The Eighth waste of non-utilised talent or workers’ skills was introduced in the 1990s and is commonly referred to as ‘TIMWOODS’.
Let’s look at each waste in more detail, and as you work through each one, consider how waste in this area might be costing your business money.
Transport
Transport is wasted time, resources, and cost, when the unnecessary movement of products, equipment, and people occur. Anytime you move a product in your warehouse, other than to ship it to a client would be classified as a waste. An installation team having to return to the office to collect something they left behind, or employees traveling for business rather than using video conferencing, would also be classified as such.
Inventory Waste
Inventory waste results from holding excess stock of a product, having products that have not been fully manufactured, or an unfinished work project. Holding excess inventory leads to waste in many areas through greater obsolescence, damaged stock, and excess rental and interest cost to store and finance said inventory.
Whilst the above examples of inventory waste are more known and visible, a significant inventory waste in a business is when team members start a project or piece of work and don’t or haven’t completed it.
Wasted inventory occurs frequently through:
- Website rebuild that is not complete, resulting in cost with no increase in web traffic
- Processes or systems that have been designed, but not implemented, resulting in time and cost being spent to design and document the process with no resultant efficiency or cost-benefit
- Backlogs in processes result in information that has taken time and cost to create, being unable to add value through management decision-making
- Storing documents that are unnecessary and that create clutter and wasted search time
Motion Waste
Motion is wasted time and effort from unnecessary movements by people, such as walking, lifting, reaching, bending, or stretching.
Wasted motion is very relevant in a factory or warehouse environment, where poor workflow and workstation design results in workers having to reach or stretch to retrieve items, or bend and lift items to do their work. These not only increase the time to complete a task but also have a health and safety risk that could increase injuries and loss of time and cost. Therefore, tasks that require excessive motion should be redesigned to enhance the work and increase health and safety.
In the office environment, wasted motion occurs frequently through:
- Double entry of data is often a common occurrence where processes are not clearly defined, or processes are not trusted by staff
- Searching for documents either in electronic or physical format due to poor filing systems
- Poor email etiquette where people are unnecessarily copied on emails, resulting in wasted motion to open, read and delete the email
Waiting Waste
Waiting is time spent waiting for the next step to occur in a process, or unutilised time due to insufficient available work. Often, employees don’t have enough work to do, and whilst they will find ways to fill their days and might look busy, there is significant waste in available time or capacity that is not being used.
Bottlenecks can also create waiting time and waste. Where a particular step in a production process is unable to keep up, unfinished inventory builds up at that station, causing inventory waste. This can deprive workstations further along the manufacturing process of sufficient work, resulting in waiting time and further waste.
In an office environment, team members may wait for work to be reviewed before they can continue, or are hampered by IT issues, such as slow computer speeds – don’t underestimate the waste in waiting time of employees who have old or slow computers.
Overproduction Waste
Overproduction is waste from making more products than demanded by a customer. Overproduction occurs when you purchase or manufacture a product or a component before it is required, using the ‘just in case’, philosophy, where you manufacture a product in case you need it, rather than using the ‘just in time’ philosophy, where you manufacture a product when you need it.
Overproduction increases the risk that many components will be produced before a defect is detected. Where a component is produced with a defect and used immediately, the defect is picked up early and can be rectified before the rest of the components are made.
Over-processing Waste
Over-processing refers to doing more work, having more steps to make a product delivery or a service than is required. Providing features or benefits that the customer does not require, results in the company incurring costs that the customer won’t pay for.
Overprocessing occurs due to poorly designed processes and workflows, and in many situations, there are no clearly defined workflows or processes. Where this occurs, team members undertake their work in such a way that ensures that they achieve the desired result to keep the customer and higher management happy – they don’t consider whether they are using the best, or most efficient way to do something. It is here that one needs to map out and understand how work is being done and identify duplicate or unnecessary steps that can be eliminated or make use of IT systems to eliminate duplicate steps.
Defects Waste
Defects occur when a product is not fit for use, or the service expectations of a customer are not met. When product defects occur, it typically results in either reworking or scrapping the product, creating waste. Service errors such as delivering the wrong product, not delivering on time, or invoicing errors, all cost time to rectify, which creates a loss of money and potentially results in a loss of a customer.
Defects don’t have to be visible to a customer to result in waste. Inaccurate processing of accounting information results in defective management accounts that waste management’s time in proofreading them and requires them to rework the information.
A franchise owner who attended a GROW workshop that worked through the eight wastes identified that on average, they were having three invoicing errors per day due to the incorrect product being shipped, or because of capturing errors. He estimated that the cost per error was R320.00, meaning that he was losing nearly R1000.00 per day due to invoicing errors – fixing this problem saved nearly R250 000.00 per annum.
Skills Waste
Wasted skills arise from the underutilisation of people’s skills and knowledge. Skills waste is often the hardest to identify, as you cannot measure what portion of a person’s skills and energy you are not getting. Research has shown that more than 60% of employees are disengaged in their work, resulting in significant waste in output from employees.
Disengaged employees and wasted skills occur where management is solely responsible for planning, organizing, controlling, and innovating – an employee’s role is simply to follow instructions. Fear-based cultures, insufficient training, poor incentives, not asking for employee feedback, and placing employees in positions below their skills and qualifications all result in the underutilisation of employee talent.
Management often under-invests both time and resources in ensuring they create a great culture and offer training to develop their employees to maximise the use of their skills.
A good way to check this is to compare the total amount invested in paying employees, to what is being invested to ensure these employees are trained and work in a good environment. Often, companies have large employee costs with very little investment being made to ensure the use of employees’ skills is optimised.
Identifying and eliminating the 8 business wastes
You may have identified from the examples above, some obvious areas of waste in your business that can be eliminated. However, there are many areas of waste that are not as easy to identify. A more detailed process to eliminate waste starts by working backward from the end customer to the start of the production or service process. Then, documenting this process in what we call the “as is” process to identify instances of the Eight wastes in the process, to then develop a “to be” process that eliminates or reduces the waste.
Thereafter, continue challenging your team to find more waste areas and continuously improve your processes. Consider learning more about applying ‘Lean thinking’ and methodologies in your business. Engage with the frontline workers and elicit their ideas for improvement. As your team begins reducing inefficiencies, they will gain more confidence in their problem-solving capabilities, and, over time, reducing waste will become a part of their daily routine.
