Under the Lean concept, there are 8 wastes that exist in business. All process waste can be categorized into one or more of these categories. The rule of these wastes apply whether you are in a manufacturing or non-manufacturing industry.
Before we talk about the 8 wastes, let's define what "waste" means under Lean. It is important to understand that when we use the term "waste", it doesn't mean that it is "trash" and we should throw it out. It just means that it is not adding any value for the customer. If there is any way to get rid of the waste, it should be done. If there seems to be no way to currently remove the waste, methods should be found to reduce the waste and eventually remove the waste altogether with creativity and technology. This will become clearer as we talk about the 8 wastes further on this page.
Under the Lean concept, if something meets ANY of the following criteria, it is considered to be waste:
- does not change the information or product
- is not done right the first time
- the customer does not care about it or is not willing to pay for it
This makes good sense because if whatever you are doing in the process does not change the information or product that is being worked on in any way, then it definitely will not add value for the customer. If it is not done right the first time, then the work that is already done will either be completely lost or you may have to spend more time and money for rework. And if you do or add something that the customer doesn't care about, that is definitely not going to make a difference to the customer. For example, if you had to check and double check a transaction to ensure it is correct, would the customer be willing to pay you twice for it?
Now that we know what waste is, let's take a look at the 8 wastes. They are:
Initially, there were seven wastes which were defined and popularized under the Toyota Production System. The eighth waste, unused employee creativity, was added in the late 90's by Canon. Most Lean experts agreed, and we now know them as the 8 wastes.
Defects This waste is quite self explanatory. Whether in a manufacturing or a service environment, a defect will definitely be waste because it is something that does not meet the customer's requirement. If your customer orders 1,000 red leather cases and you deliver 1,000 maroon leather cases, this will be a defect. The customer could reject all your goods, costing you all the time and material that was put into it. Perhaps they may accept it with a discount if you are lucky.
On the service side, if the customer actually deposited $1,000 in the bank but due to some error only $100 is deposited…that would be a defect. This would lead to complaints from the customer and extra processing (which costs time and money) to set it right. It could even lead to the customer switching banks.
Good quality management and six sigma tools can help reduce this waste.
Overproduction Making something that nobody is going to buy is definitely a waste. Old school production thinking used to be that a factory should always be running at full capacity and utilization. The thought being that the sales team would catch up and sell the products eventually even if at a discount. Unfortunately what happens is that a lot of other costs (and cash flow worries) get added on with this strategy. This also leads to some of the other 8 wastes such as inventory and non value added processing.
Today production thinking is much different and smart companies produce to customer demand. In times when demand does not give 100% utilization to the factory, other productive tasks are performed such as training or factory cleaning.
Pull production systems, demand leveling strategies, and takt time analyses can help reduce this waste.
Waiting If you are waiting, nothing is being done. Quite simple. This waste is so simple but is overlooked most of the time. If product is sitting in the line waiting to be worked on by a machine, there is no value being added there. There is only value if it is being worked on by the machine.
If bunch of invoices are sitting in tray waiting to be signed, that is also waste. If you are part of a multi-step process and you cannot do your work because you are waiting for a previous step to finish their work, this also leads to the waste of waiting.
Waiting is usually one of the easiest of the 8 wastes to identify and remove. It, many times, also yields some of the biggest benefits. Lead time and efficiency can be greatly boosted through the removal of this waste.
Workflow balancing and pull production can help reduce this waste.
Non-value added processing All businesses are made up of multiple processes. Perception is usually that all of these processes are required. But in reality, many of the processes are just currently required because there are certain root causes or problems that require these extra steps. For example, many companies we have seen do a 100% inspection on their products (sometimes even 200% or 300%).
Inspection is always considered to be a non-value added process. Why? Because if everything was done right in the first place there would be no need to inspect. If you have a Six Sigma process, you could also do away with inspection (unless your customer has a higher requirement than that, which is very rare). Why bother inspecting when there will only be about 3 defects for every million pieces you check? Chances are you will miss a good amount of the defects anyway…making the inspection process pointless.
There are also examples of other non-value added processes such as cutting of metal items and then going through a de-burring or linishing process to get rid of the rough edges of the cut. If smooth cuts could be made in the first place, those extra processes would not be required.
Office and service processes are usually filled with non-value added processes. The problem is that they are much harder to see and identify in an office environment than on the production line. Still there are good transactional mapping tools that can be used to highlight these processes. A good example of this waste in the office is the requirement of having many signatures on a request. The time it takes to sign a piece of paper might just take a few seconds but by the time all the four or five signatures have been received it could take days. There has to be some underlying root cause of why so many signatures are required. If we can find the root cause and eliminate it, you could be saving days on your lead time and avoid irritating the management with little pieces of paper to sign.
Value stream mapping and root cause analysis can help reduce this waste.
Transportation This is one of the 8 wastes where many people start to squint and scratch their heads. After all, if I don't transport my materials to the customer, how will they receive it? How can it not add value for the customer to have items transported to them?
This brings us back to a point made at the start that just because it is categorized as waste, it does not mean it is pure "trash" and needs to be thrown out. While product is being transported, it is not being worked on and no value is being added to it. Creative ideas need to be used to either reduce this waste or remove it altogether. Some companies have had success removing transportation by producing product inside their customers' plants - a very creative way to remove this waste. They rent the space from their customer, produce the products and send it straight into their assembly line. Of course, this can only be done if the customer is big enough to warrant a mini-factory in their factory.
Other technologies have also helped us reduce transportation immensely. Transporting product today is much faster than before. If you look at the office side, the transportation of information is much faster today. From hand delivered letters to the postal service to telex, phone, and fax. Now the internet can get information passed from one place to the other (or even multiple destinations) at phenomenal speeds.
Hopefully when the day of "Beam me up, Scotty" becomes a reality, even materials can be transported in seconds and this waste may be forgotten and taken out of the 8 wastes altogether!
Value stream mapping, supply chain optimization, and linear programming can help reduce this waste.
Inventory Inventory is considered to be the most evil of the 8 wastes. Why? Because this waste can lead to many other wastes. Inventory leads to waiting (if product is in inventory it is not being worked on, right? It's just waiting…), can lead to defects from expiries, is a form of overproduction, and usually requires some non-value added processing.
Inventory is product that is there due to some inefficiency or uncertainty. And most important of all, it is not doing anything but taking up your working capital and space. Inventory, at least in the factory, is one of the easiest wastes to see. That is good for us because once we see this, we can usually uncover a lot of other wastes in the same area. Inventory is harder to see in an office or transactional environment, but it is there. Unread mails in the inbox is a form of inventory. There may also be a pile of purchase orders that have not been attended to because the purchasing officer is busy. The pile of purchase orders in this case would be the inventory.
Of course the ideal is to have zero inventory and have material pop up exactly when it is required. It is almost impossible to achieve that in the real world due to variation and uncertainty. But inventory optimization can be conquered if the variation and uncertainties in the business are handled well.
Supply chain optimization, capability studies, variation studies, inventory modeling can help reduce this waste.
Motion If you can limit motion while doing a process, you can reduce the time and energy required for that process. This is quite a simple waste to understand. After all, you'd rather sit on your couch and control the tv with a remote rather than get up every time you want to change the channel or increase the volume. The waste of motion is usually one of the harder ones to reduce significantly and does not provide as big an impact to the total value stream as removal of the other wastes do. However, it is still a waste and in obvious cases should be removed.
Time and motion studies can help reduce this waste.
Unused Employee Creativity This concept was added in as an 8th waste not too long ago. Most companies now realize that their biggest assets are their employees. The employees of a company can make or break it. So why not make the most out of them and get the best utilization out of them? This doesn't mean to work the employees to death. This means that we ensure that their ideas are heard as you never know who can come up with a great idea when. Encouragement of ideas is paramount to the success of companies in the new millennium. Some of the most successful companies today have been started by previous employees whose ideas were rejected at their place of work.
This is, of course, the hardest of the 8 wastes to see in an organization. So the best way to tackle this problem is to just encourage employee creativity as much as possible without trying to measure this waste.
Brainstorming sessions and idea gathering techniques can help reduce this waste.