Amidst COVID-19, many companies are making radical changes to accommodate remote working and / or to make their working environments safer. COVID-19 has also resulted in many company owners re-think their business model and questioning many of their previously held assumptions about how things are done. This shift in mindset affords a great opportunity to review core business process and remove wasteful activities.
I am using the word “wasteful” deliberately as it comes directly from Lean. Lean Thinking provides useful insight into the types of activities that occur in a business, and how best to deal with them. Before we look at the Lean forms of Waste, let us first look at the type of activities found in business processes.
There are three types of activities in any business process. These activities are defined by the value that they do (or do not) add:
Value Adding Activities – These are the activities done within a process that adds direct value to the customer. In most cases, we are referring to the business’s external customers (often called clients), but this could also be an internal customer (i.e. the customer of an internal IT department). The bottom line is that the customer must be able to understand the value and be willing to pay for the activity to occur. It is also important to note that a Value Adding Activity is only value adding if it is done correctly the first time.
Value Enabling Activities – These are activities that do not add direct value to the customer but either:
- Enable a Value Adding Activity to occur later in the process. An example of this is the scanning and indexing of incoming mail. This activity, although not adding direct value to the customer, allows for that mail item to be handled more efficiently later in the process.
- Are required by legislation.
- Add direct value to the business such as the formulation and execution of strategy.
Just like Value Adding Activities, the customer should agree that Value Enabling Activities are indeed required. They must also be done correctly the first-time round.
Non-Value Adding Activities – These are activities that do not fall into the other two categories. In other words, they do not add value to either the customer or the business and do not enable value anywhere else in the process. If a Value Adding Activity or Value Enabling Activity is not done correctly the first time, the rework of these activities is also classified as Non-Value Adding.
The first step in removing wasteful activities from your business processes is therefore it scrutinise the processes and classify each activity into one of the above categories. Ideally, we want to simply stop doing Non-Value Adding Activities, but it may take some time and planning to achieve this. We should also not just brush over Value Adding Activities and Value Enabling Activities as there may be optimisation opportunity to be had. Just because an activity adds direct value to a customer does not mean it is being executed as efficiently as possible! There may also be opportunity to radically change how the activity is performed through digital transformations such as robotic process automation, self-service, artificial intelligence, etc.
Eight Forms of Waste
OK, let’s talk about Waste. There are eight forms of Waste defined in Lean. The forms of Waste can either apply to a whole activity, or to individual process steps within an activity. In other words, it is possible (and common) for an activity that is classified as Value Adding to still contain several wasteful steps. The eight forms of Waste are:
- Inventory – Excessive inventory ties up resources and space. There is also a risk that items in inventory may become obsolete. Although it is common to think of Inventory in terms of manufacturing, it is just as problematic in business processes. Just think about how many old, obsolete emails you have sitting in your email box! What about cupboards full of pre-printed forms that are at risk of being obsolete if the form is modified.
- Waiting – An item that is traversing a process can only be in two states. It is either being processed or it is waiting to be processed. Waiting is therefore any time that the item is not being processed. In business processes, it is very common for items to spend more time waiting to be processed than actually being processed. While waiting often does not cost the company any money, it does impact the amount of time that a customer must wait for their item to be completed – resulting in a poor customer experience.
- Defects – Any time that an item is not processed correctly the first time is considered waste. Either the defective item must be scrapped or it must be reworked. In both cases there is a measurable amount of material, machine and/or human waste associated with the defect. In business processes, the real cost of defects is often hidden and a defect in one department becomes new work in a different department (often in the poor contact centre).
- Overproduction – This refers to producing more than the customer wants and is willing to pay for. While this is a major problem in manufacturing, it is not that common in business and service processes.
- Over Processing – Whereas Over Production talks to producing more than the customer wants, Over Processing talks to the execution of more steps to produce the final item. In business processes, this can include excessive meetings, paperwork, and the approval of work.
- Motion – This refers to any excessive movement of items within a process or the motion of people in the execution of the process. In a business process this normally refers to the physical motion of people such as getting up and walking to a printer on a regular basis. It can also include the movement of documents (either physically or electronically) around an organisation.
- Transportation – This typically refers to the transportation of raw materials in manufacturing processes. In a business process, it can include the physical transportation of forms and other process artifacts.
- Under-utilisation of Talent – This refers to not maximising the talent in an organisation. We often do not realise the full potential of our employees either because they are in the wrong role, or we do not delegate enough authority down the command chain.
A lot of efficiencies can be gained by scrutinising business processes to identify and remove the eight forms of Waste. Not only will you gain process efficiencies (and hence cost savings) but the chances are that your customers will receive a much better experience.
4IR Consult have extensive experience with optimising business processes and can perform this analysis for you.