What is Value Added Analysis? A Guide to Show How it Works
The idea of analysing processes to get more from what you have, is nothing new. Many people new to this, often ask what is value added analysis? I’ll decipher this for you, and show you how do it.
What is value added analysis? Value added analysis involves analysing your business processes to identify the value creation steps. These are the activities that go into changing the nature or shape of a product or service to exactly what the customer wants. Once you’ve found these steps, you’ll notice that the vast majority of all process steps are not adding value at all. The goal is to remove as many of the non value adding steps as much as possible. By doing this, you make the process more efficient and faster, meaning you can process more with no extra resource.
This value added (VA) analysis doesn’t just happen to manufacturing processes. Sure, the VA steps are easier to identify. But whether you’re a manufacturing business or service one, value added analysis is pretty similar. You still have to find and split the VA from the waste.
What is Value Added Analysis? It’s All About Non Value Add and Value Add
A vital part of our value add analysis is to firstly identify what value add actually is, and what it means to you.
When looking at any step in a process, it either adds value or it doesn’t.
If you answer yes to the following questions, then the task is value added:
- Do customers want to pay for this operation?
- Does this operation produce something the customer wants?
Let’s look at some examples:
Examples of Value Add and Non Value Add Operations
In a dentist: the value added steps for filling a cavity are:
- Injecting the localised area with anaesthetic
- Drilling and cleaning the tooth from decay
- Filling the tooth with the composite material
- And setting the composite
The other steps of preparing for the procedure, cleaning the equipment, loading the client’s records, lining up the equipment and mixing the compound are all non value added. They may have to be done, but don’t actually add value.
In a Warehouse: The value added steps are simply:
- The action of picking the product off the shelf
- Packing and labelling the item
All other steps like, sorting for pick order, searching and walking to find the right location, printing paperwork, inspecting other people’s work, moving the items to packing, and then to despatch are non value added.
In a Manufacturing Process: The value added steps are the activities which transform the product, like bending, cutting, inserting, and so on.
Other operations like setting up, getting material, checking paperwork, inspecting the product are all non value added steps.
In a consulting business: the value added steps are the actual service you provide, in relation to the agreement with the customer.
The non value added steps consist of travelling to the client, preparing for the day ahead, entering details into the CRM system, and general administration and paperwork.
The NVA / VA Mix
As mentioned previously, the majority of all tasks within a process are non value add. Taking into consideration the above examples, you’re normally spending a lot more time preparing, sorting, searching and getting things ready to conduct the value added tasks.
Often, as little as 5% of an entire process is value added. The rest is non value added.
The 3 Categories of an Activity
To add a little complication to our value analysis equation, there are one of three categories that a task falls into:
- Value Added Activities – These are activities which the customer is willing to pay for and produces something the customer wants, and which answer a yes to our VA questions above)
- Incidental Waste – These activities are wasteful, but cannot be eliminated due to current technological and / or legislative restrictions.
- Pure Waste – Any activity that is NVA and can be eliminated
The Different Ways to Approach Value Added Analysis
Once you have an understanding of the process and its categorised activities, It’s time to make improvements.
There are 3 types of improvements you can make:
- Traditional process thinking – this involves trying to improve the value added times, by making them run faster. This results in very limited improvements and often high capital expenditure. It’s the non lean thinking way.
- Lean waste reduction thinking – this involves stripping the waste as much as you can and constantly looking for the NVA to remove.
- Lean Transformation thinking – Here, we focus on eliminating the waste as in traditional lean thinking. The added extra being that with the improved capacity, you offer more value to customers. This value could come in the form of faster lead times, more choice and flexibility, better service, and so on.
Once you’ve got a grounding of your process and can clearly see the categories, it’s time to focus on improving the process by removing as much waste as possible.
The model is simple:
- Where there’s pure waste, remove it from the process. You’re now left with incidental waste and VA.
- Take the incidental waste and convert as much of this as possible to pure waste. You’ll need a bit of creative thinking and the willingness to think of solutions that will take many people out of their comfort zones.
- Repeat step 1. Remove this pure waste.
The message is simple. The more incidental waste that’s converted to pure waste, the more efficient your process will be, and the bigger step change you’ll get.
This systematic approach to value added analysis is something that should be repeated on all key processes.
It should also be repeated on the processes you’ve already improved. The goal is to constantly strive for better every day. Once the step changes have been made, it’s often now about making smaller improvements by converting more incidental steps to pure waste.
Get your teams to focus on making improvements when they spot problems or have ideas. And make it a habit every day.
Should I conduct value added analysis on all of my processes? To start with, focus on your main processes. Go after the ones that you repeat over again and which form your core activities. They’ll be plenty to get your teeth into. Once you’ve transformed your business, it does get a little harder. This is when you can broaden your scope and include other processes, as you go.
Can I get on with this today on my own? The best lean projects are conducted with a team of people. If you just do it on your own, your missing the vital element of lean. That is developing the right culture. Besides no process improvement will work if you tell someone to do it a different way, and they haven’t been involved in the process. People must take part and own the ideas and changes. When this happens, you get a transformation that sticks.