There’s waste in every organization.
Waste is defined as anything that adds
cost to a production process that does not add value to your product. Ignoring
waste in your organization puts your business is at a competitive disadvantage.
“As an external auditor, I have the opportunity to see across the entire enterprise when
I work with clients,” says Pat Ross, principal
with Haskell & White LLP. “That holistic,
external view of the company’s departments
has helped me identify the best practices for
recognizing and eliminating waste in a company’s production process. Companies that
engage in waste elimination on an ongoing
basis reduce costs while increasing efficiencies. Ignore waste in your production
process and a more astute competitor may
just beat you in today’s global marketplace.”
Smart Business spoke with Ross about
how CEOs can identify the sources of production process waste and develop an action
plan to eliminate them.
What are the major categories of waste in a
production processes?
While many of these waste categories apply
to manufacturing processes, these elements
exist to some degree in all processes, so even
CEOs of service companies can benefit from
reviewing the list. The list was categorized by
Toyota after years of research.
1. Overproduction: The tendency to produce more than what’s needed or to produce
it before it is required. Companies often over-produce when they follow the ‘just in case’
manufacturing principle instead of the ‘just in
time’ manufacturing practice.
2. Waiting: This occurs whenever time is
not being used efficiently. Waiting happens
because the material flow may be poor, the
production run too long or the distances
between work centers too great. It is not
unusual for a product or service to spend 99
percent of its time waiting to be finished, and
time is money.
3. Transporting: Any delay in the process
of delivering the product or service to the
customer is a nonvalued cost. More importantly, every transport event is an opportunity for damage or loss to occur and quality to
deteriorate.
4. Inappropriate processing: Think of the
analogy, ‘using a sledge hammer to crack a
nut.’ Are you using the right tools and
processes for the job and the right people?
5. Unnecessary inventory: This is often
referred to as work in progress (WIP), and it
is a direct result of overproduction and waiting. Reducing WIP allows other production
process problems to surface.
6. Unnecessary motion: This is related to
ergonomics, and it means adding additional
worker motion to the manufacturing
process, such as repetitious bending, stretching or reaching. Adding motion not only
slows down manufacturing, it can increase
workers’ compensation claims.
7. Defects: These can be internal defects
found before the sale that result in scrap,
rework or delays, or they can be external
defects after delivery, which result in warranty claims, repairs and lost customers. As a
rule, the cost of a defect increases tenfold for
each production or supply chain step.
How can CEOs determine if these waste categories exist in their companies?
Brainstorming with your team is one of the
best ways to uncover sources of waste in
your processes. Certainly CEOs can hire outside experts, such as consultants, but I find
that many times starting with the internal
team is best because the people who work
on the front line frequently know the sources
of waste. They usually have solutions, as
well. Consider offering a financial incentive
or other recognition as a way to encourage
employees to identify categories of manufacturing process waste.
What is the next step?
Estimate the cost to your company for each
waste category you’ve identified, and estimate a time frame for reengineering the
process that’s producing the waste. Prioritize
which items you’ll tackle first, by selecting
the top three items that will provide the greatest financial impact and where change can be
achieved within six months. Then, develop
an action plan to initiate improvement
through elimination or reduction of your targeted waste sources.
What constitutes a good action plan for manufacturing process waste elimination?
There are best practices for drafting and
executing an action plan designed to eliminate waste:
- Develop realistic and achievable action
plans. - Assign specific accountabilities and time-lines for each step in the change process and
appoint a coordinator to work with those
responsible for implementation of action
plans. - Conduct weekly meetings to review
progress with formal presentations. - Develop disciplinary outcomes for non-achievement of actions and benchmarks.
- Increase accountability by holding regular sessions where each team member
reports on his or her individual contribution
toward successful attainment of the action
plan. - Celebrate your results. Recognizing
members of the team for eliminating waste
will increase employee engagement and
encourage them to identify other sources of
waste within your organization.
PAT ROSS is a principal with Haskell & White LLP. Reach him at (949) 450-6362 or [email protected].