Leading Business Process Improvement at Organizations Worldwide

VA/NVA ANALYSIS – Perfect For Today’s Economy

March 25th, 2009 Posted in Lean Six Sigma

Just about everyone knows that the economy is bad. Organizations are laying off employees by the tens of thousands, and realistically, most of the time this becomes just a numbers game. If we get rid of X number of people, it will impact the bottom line of the organization by Y amount.

Typically, this is not the case. Often organizations end up spending more or incurring additional waste as a result of staff reductions. Processes can become broken and often do not function properly because knowledgeable people have been let go, and the people that remain, do not know what to do. Confusion is rampant – with everyone wondering what needs to be done and how it will happen with fewer people. The word “reorganize” is everywhere; to the point where we are reorganizing so much, we never become organized.

This is where understanding the tools of Lean & Lean Six Sigma becomes invaluable. If companies want to reduce costs and waste in an organization, that is the heart of Lean and Lean Six Sigma.

One of the best tools that can be used is the Value Added/Non Value Added flow analysis. Upwards of 80% of most processes consist of non-value added activities. VA/NVA analysis looks at an entire process and looks at three key things for each activity:

  • Is this activity something the customer is willing to pay for?

    • Storage, handling, extra steps, are all activities that add cost, time, and waste and the customer (external customer & internal business customer) do not want to pay for

  • Is the activity done right the first time?

    • Rework, missing information, incorrect amounts, all add to waste internally

    • Call centers to answer questions, fix problems, not only add cost, but can cause customer frustration

  • Does the activity add value or physically change the product or service?

    • There are many activities associated with processes that change absolutely nothing to the product or service – typically inspection is one of them, but approvals and other things of this nature also do not add to the product or service

To be a Value Added activity, all three of the above criteria must be met. Value added flow analysis looks at a complete end-to-end business process and analyzes each step of the process to see which steps are value added and which are not. This then leads to working to eliminate the non-value added work.

This is a much more practical and logical way to remove waste, than just removing people from the process.

Just reducing people only causes the organization to do the same work that is being done today – Value added and non-value added, but with less people. This is a perfect formula for failure.

What is necessary in today’s economic climate is leadership understanding that the short-term removal of people is not as successful as the disciplined short and long term use of the tools of Lean and Lean Six Sigma to improve processes and improve profitability.

 

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