According to many authors there is as much as 80 – 90% waste to be realized from non-factory, transactional processes. There are many reasons to improve non-factory processes: improve quality, reduce cost, and shorten lead times are just a few. In today’s competitive market, a company that’s inefficient and has wasteful processes just isn’t going to survive.
Value is defined as anything your customer is willing to pay for should they be aware of it. For instance, are customers willing to pay for the inefficiencies in your processes? Long lead times, errors, lack of standard processes, waiting, etc., all create customer dissatisfaction. Given the choice, customers will select the service that gives them the most value.
Just a couple of days ago, my wife visited several local banks in the area to check auto loan rates. She found two that had rates at or near 4.1%. The last bank she visited had a rate near 8%. As soon as the teller told her the rate, my wife basically told her she didn’t need to hear anymore. The teller then told her as she began to walk out, “I know our auto loan rate is high and we’re not competitive.” Why would anyone get a loan at that bank? Better yet, why would a bank offer the loan when they know they’re not competitive. Doesn’t anyone realize the negative publicity it creates for them?
Waste on the other hand is anything that doesn’t add value to a process or service. It can add friction or completely block the flow of value. When waste occurs, quality and value deteriorates, requiring more time and effort to achieve the desired result.
The four most common forms of waste are:
- · Information waste
- · Process waste
- · People waste
- · Physical environment waste
Future articles will discuss these forms of waste in more detail. As always, your comments are welcome.