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Nov. 21 2006 02:43 PM

These hidden operational costs consume more time and money than you think

Most companies believe that they are running their operations efficiently enough and do not need to further reduce waste. Yet, nothing could be further from the truth. These hidden non-value-added activities are costing companies hundreds of thousands of dollars a year. In a time with so many companies facing challenges, such as rising fuel/transportation costs, rising labor costs and increasing operational costs, just to name a few, the proactive companies are embracing opportunities to identify and eliminate waste in all areas of their operations. The first thing we need to do is address what is waste and what is not. Typically, there are eight main deadly wastes that EVERY facility has to address. Finally, the facility must develop a Lean strategy to reduce and eventually eliminate these wastes from its processes.


Waste: The Common Enemy

First, lets take a look at what waste is. Waste is defined as any activity that consumes resources but creates no value for the customer. In a traditional manufacturing process, 85% of all activities are non-value-added activities. Thats right, 85%! In a distribution operation, that number is closer to 95% or more. So, I guess you can see why it is critical to first identify the waste in your processes, be able to define it and then develop the action plan to reduce or eliminate it.


Not all waste can be eliminated in a process. Non-value-added activities are broken up into two groups non-value-

added and essential non-value-added. In non-value-added activities, there are wastes that can be eliminated completely and will improve the cycle times of your process and the overall lead time of shipping your product. But in an essential non-value-added activity, you can only reduce the waste, but it cannot be eliminated completely. An example of an essential non-value-added activity is the receiving of raw materials or product into the facility to complete the process. This activity is essential, and time can be dramatically reduced, but it will never be totally eliminated.


The eight deadly wastes are areas of waste that every facility experiences at one time or another. They are as follows:


1 Defects reworking product, re-inspecting product (Quality Control) or dealing with rejected material

2 Overproduction processing before the customer needs or requires it

3 Waiting worker or machine waits for tool, materials or both

4 Not utilizing labor knowledge, skills, abilities and ideas of your employees

5 Transportation repeated handling and material movement

6 Inventory/Staging creating excessive WIP, excessive storage of raw material/product

7 Motions unnecessary motions, searching for tools, paperwork, walking

8 Excess Processing adding unnecessary steps, lack of training, standardization


All of these result in DOWNTIME! One way to think about eliminating waste is to achieve a condition where capacity and load are equal. In other words, focus on creating just the right amount of workers, materials and machines to make just the right amount of product that is being ordered and delivered on time to the customer.


To remove waste, you want to address the following areas:

  Removing waste in the movement

of materials

  Removing waste in the actions of people

  Removing waste in the way people,

     materials and machines are combined


To remove waste in the movement of materials, we need to look at process waiting and lot waiting. In process waiting, the material or part is waiting its turn to be processed. This occurs when the entire lot is kept waiting because of problems in the process itself. A reason this may happen is the capacity imbalances where materials wait because the operator or machine is busy. Another example is material waiting, where an essential part is not on hand to start the process. Finally, operation waiting is where the facility is understaffed, and people are handling more than one work area.


Lot waiting processing is when one part of the lot has been processed and the other has not. This is what happens when you process in lots instead of in a one-piece flow. The reason lot waiting processing occurs is that the changeover times are too long, processes are separated, mass production equipment is used or the operations are hard to balance.


Employees Contribute Waste, Too

To remove waste in the actions of people, you must examine very closely what operators do and find ways to eliminate unnecessary motions in their work. This includes all motion in the operators body that occurs when he or she processes materials: foot and hand motion as well as torso movements such as bending, reaching, lifting, etc. The walking an operator does to complete a process may be very long and time consuming. All of these things add waste and operator fatigue. One way to reduce or eliminate this is to adjust the layout of the cell so the work is close to the operator.


Finally, to remove waste in the way people, materials and machines are combined, design the combination so they work in an optimum relationship with each other. There are three ways that people and machines can work together: serially, partially parallel and parallel. In the serial operation, the operator and the machine take turns adding value. The aim is to simplify the workers share and mechanize the overall operation as much as possible. In the partially parallel operation, operator activity and machine activity overlap. And in the parallel operation, operator and machine work side by side at the same time. This helps to keep the operator separate from the machine.


Lean production provides ways the machine can take over more of the workers task, freeing up his or her time for other areas. You create more capacity without adding a worker.


To ensure that once you have removed the waste in a given process and it remains free of non-value, you must standardize the revised process. The primary purpose of standardization is to create and sustain a waste-free process. You need to establish standard procedures for every operation so that everyone can understand and use them. Standards must be created, documented, well communicated, adhered to and regularly re-assessed. Remember that approximately 85% of all manufacturing processes are non-value-added, and that number is 95% or more for distribution processes. Ever facility can make its operations more efficient, and there are significant cost savings available to the companies who embrace waste reduction activities and continue to seek them out and eliminate them.


Richard Kay is President of RGK Lean Consulting, a full-service consulting firm that provides Lean training, implementation and support. Please contact Richard by email at or visit the website at