The Lean 7 Wastes – Everyday business wastes
We all talk about efficiency at work and initiatives are started to find “better ways to do things”. But often the impact of any initiatives are small with limited overall business impact. One reason is that we often focus on areas that are very self-focused without a wider view of the business or even more importantly the end customer. So we make small improvements in areas where no one really benefits from them.
Recently we published an article on Muda (無駄 – Waste) entitled “Muda, Muri, Mura – Lean Wastes” where we touched briefly on the different types of wastes and the three main categories of wastes. In this article, we want to focus on the 7 Wastes in a little more detail. Waste can be defined as “any activity which does not add value to the customer or that the customer is not willing to pay for”.
To bring this to life, let us look at John. John is an incredibly talented and very busy business analyst. One of his roles is to provide an updated sales report to the Vice President of Marketing every month. Now, he has never actually met or spoken to this particular VP, but his boss gave him instructions to pull together the sales pack and send it monthly. It takes John about 5 days to pull the report together once the end of month figures are closed. And to be honest, it’s a pretty painful experience with John cramming in a few late nights as he breaks down the monthly sales figures into a variety of product families and customer segmentation. He always delivers it on time however and both his boss and him are very happy with the report and the quality.
After having done this for the last 18 months, he gets the opportunity to meet the VP and with the end of month closure having just finished, John crams an all-nighter to get the report ready for the VP the following morning.
Handing over the report to the VP, he is obviously proud as the deck that looks good, the figures are accurate and it was delivered in record time.
As he hands it over the VP, the VP looks up, says thanks and then turns to page 34. He notes down a figure in his notebook and then hands the deck back to John and says “This is a great deck – who uses it?”.
The VP explains that all he wants from this deck was the dollar figure on page 34 for a report he sends to his boss.
In large and small organisations, the reality is that without understanding what your customer (both internal and external) wants, we are often busy fools – doing more than we need to, reworking what was done incorrectly the first time, correcting errors made the first time and so on.
The 7 Wastes are seven different categories of wastes which help us to begin to “see” wastes within our business. In the article below, we will share those 7 wastes and try to bring them to life so that in your work (and play) you can begin to reduce the unnecessary steps and focus on the essentials.
‘Waste is defined as anything which does not add value to the customer, or any activity that the customer is not willing to pay for’
A quick summary of the 7 Wastes
Definition: Moving the product around unnecessarily is a waste of time, effort, and increases the likelihood that it will be damaged
In the office: Transportation waste is everywhere and exists at both the global level of international freight down to the way items are transported around offices or moved around in offices so that we can access an item hidden in the back of the cupboard.
In the home: Think about our kitchens when we walk from one side of the kitchen to the other to collect then mug, then boil the water. Or perhaps to avoid this, you have the coffee next to the kettle or the coffee capsules next to the machine and the cups right next door. Or think about the school run or the after-school activities. For parents, it’s a continual balancing act to optimise time and distance.
Transportation is one of the seven barriers to flow as Taiichi Ohno pointed out within Toyota. It causes delays and when things are being transported they are not being transformed to add value to the customer in any way. Transportation is easily spotted between factories and/or between production areas. But it may also occur between workstations or departments.
Last year, I remember seeing people frantically run around a business in Dubai trying to get the right signatures to approve invoices. As a customer, would you be happy to pay for someone to run around the office for a few hours to get signatures to approve your invoice? And let’s remember that when we price something, the price will include some form of corporate overheads, SG&A or central costs hidden inside the price.
Now, not all transport is necessarily bad. Amazon, for example, could not exist without transportation. But it’s the unnecessary transportation that is the waste and the killer of value creation. Amazon has huge difficulties, like most last mile delivery companies, to deliver first time to the customer. A failed delivery is a waste for both the customer and the company. So it’s not a surprise to see new forms of delivery being tested from drones to deliveries directly to the trunk of your car where its hoped that the first time delivery percentage will increase. It continues to invest in experiments to solve the last mile issue. Read more
So in your office, business or home life, begin to identify “transportation”. Reducing transportation is a great way to save time, save effort and reduce waste, and it directly impacts both your internal and external costs. The challenge is to eradicate as much transportation as possible or to find ways to turn the transportation into a value-add service if at all possible.
Definition: Any unused materials is wasted capital. It is money just sitting around in the form of raw materials (0% complete), work-in-process (50% complete), or finished goods (100% complete).
In the office: Inventory, unlike Transportation can be immediately visible. Do you have a storeroom, a spare parts store, a pile of papers on our desk or an inbox which is simply overflowing was 1000’s of emails. These are inventory. Within businesses, inventory – of finished or unfished goods – costs money. Any inventory costs money. There are purchase costs, storage costs, depreciating costs, expired costs and this could be both digital and physical costs. Big Data when not used is an inventory cost with expensive cloud storage costs.
In the home: In the home, consider your kitchen cupboard as inventory stores, the garage, the storage room, the draw that still has last years Christmas cracker gifts hidden away. Also, think about that spare room which was essential in the renting/buying decision, that lays empty most of the time and used 3 to 4 weeks out of 52 when parents or children visit. When we buy the 2 for 1 offer in the supermarket, we create inventory and money that could be free for doing other things is now tied up in products that we will use in a couple of months time. There is a great book called “The Life-Changing Magic of Tidying: The Japanese Art” by Marie Kondo on what has become known as the KonMari method for decluttering our lives of inventory – check it out here.
Inventory is a pure cost whether in business or within your home. It costs not only money but time to maintain, physical effort to arrange, labour to maintain and lots of invested capital that could be used elsewhere.
One example that we are recently worked on is where for a large cleaning contract, over $150k of cleaning chemicals and equipment was being held as inventory. The contract itself was worth $400k per year so 37% of the total contract value was being held in inventory alone. This inventory levels caused a negative cash flow which in turn impacted the financing costs of the inventory. And let’s not forget, all this inventory has to be accounted for by the finance department somehow which creates another expensive inventory related cost.
One goal of Lean is to move towards a constant state of flow and therefore high inventory levels impact flow.
So take a look around your office, your home, your desks, your business and begin to identify “inventory”. It’s amazing how much there is everywhere and how many companies push us to buy inventory to so-called stock up just in case!
Definition: The “wear and tear” on the equipment or the people involved in the process. If you are transporting the product around unnecessarily, you are also wasting the motion of the trucks, fork lifts and warehouse workers.
In the office: Motion is endemic in almost every business process. It is the movement of machines or people which is unnecessary and does not contribute value to the organisation. Motion is different from Transportation (discussed above) as motion relates to the people/machines whereas transportation is looking at the goods being transported. Do you have to get up multiple times to go to the photocopier machine? Perhaps you have to walk to the next workstation nearby? To get an idea of motion, just sit somewhere and watch people walking around. How much of that is actually “motion” where no value gets added.
In the home: In the home, motion is a little more difficult to pinpoint. But the kitchen always seems to be a great example as we move between cupboards, the stove, the dishwasher and the fridge for example. If you drew a line on the floor everytime you were busy in the kitchen cooking dinner, what would it look like? Spaghetti maybe. Imagine the supermarket when you miss an item on your shopping list because your list is not in the right order and when you spot it you have to double back 10 isles to find the item you missed.
Motion destroys “flow” and stops the value creation process. In business today, we often destroy flow as we need to wait for people’s motion – travel – to meet up in the same location when we have mobile teams. When teams are widely spread geographically, reducing the motion between stages is very important and webconferencing is helping to do this.
Photocopy/printing machines are notorious for creating motion as the machines get centralised. And then you get the queue at the machine causing waiting and the people who forget to pick up their prints cause inventory to build. Now, I am not saying we can do without printers – only that we have to figure out how to manage the “flow” around them – or in many cases, how to stop printing altogether.
‘Never confuse motion with action’ – Benjamin Franklin
Definition: Time that the product is sitting there – not being transported or processed. Or the time that people are simply waiting for the product to arrive. The largest and most frustrating waste
In the office: If motion is endemic then waiting is a virus. Waiting is without a doubt the most costly of the 7 Wastes. Not only does it continually delay things, but it wastes hours of our teams time. How many “chaser” emails do you send each day or each week? “Have you had a chance to…”
Recently I heard about someone waiting 4 weeks to a signature to be able to move forward with a project. But you could also be waiting on a delivery, on the IT department to sort our your desktop, or on an outsourcer to deliver the latest software update, or just simply on an approval to do what you know you have to do anyway.
And then let’s not forget the time spent waiting for people to turn up to meetings or dial into conference calls on time. And just imagine when you have 10 people on a call waiting for 15 mins for the lead person to turn up, that’s 150 mins of productive time lost and a good amount of salary down the drain. Honestly, I hate losses due to waiting.
In the home: In our personal life, waiting is just as bad. Ever waited for someone to turn up at your home for dinner and they turn up an hour late? What about when you sit around at home waiting for a delivery to arrive? Or what about waiting in a traffic jam on the way to work? And then there is the doctor’s waiting room – another magma of waiting and lost time.
In our home lives, we can transfer “waiting” into value by finding things to do to fill the gaps, but waiting is just that and often what we fill our time with is just something to keep us occupied to ensure we don’t get too frustrated.
A few months ago, I purchased a new plug and play microphone. For some reason after a few months of using the device and really enjoying the quality, my computer stopped recognising the device. So, I raised a case on the relevant website on the 12th July.
Today, as I was updating this article (20th August), I received a response with a return authorisation form to send it in for repair. Its been 6 weeks.
During that time I have used other microphones and tested other products which are actually better than I thought they would be and might be good enough for my purposes. The slow, 6-week response has given me enough time to test new devices and form new habits with competing devices.
In NPS terms (Net Promoter Score) I was a Promoter of the first device and would have easily recommended it. But today after waiting so long, I am now “passive” – and may or may not give the word of mouth promotion I would have done previously. The product is still the same – the quality is still the same and I really do not mind too much that it failed to work as that can happen – but 6 weeks to respond is simply too long to be waiting. If the product was not as good as it was, I would be a “detractor”, telling people to avoid the product. That is the cost of waiting.
Waiting happens because two independent processes are not syncronised. It does not matter if suppliers are delivering late or customers arriving early, waiting destroys flow and destroys value.
Waiting for me is one of the biggest and the most frustrating of the seven wastes. The cost – both in terms of dollars, time and frustration – are enormous and grossly underestimated by senior management. Our goal has to be to find out where “waiting is hiding” and then begin to look at ways we can synchronise the processes to avoid as much as possible.
Definition: Doing more to the product than is necessary – Doing more than the customer is actually paying for
In the office: One of the key problems with over-processing is that we often think we are being “nice” to the customer. We take the product or our service and we do more than is necessary.
Over-processing has two main issues. One is simply that when we overwork something, we do more than the customer is paying for and it costs the company time and money. Secondly, while not all over-producing is bad (sometimes it might be necessary to maintain a customer or to stand out from the crowd), if we deliver a product that is better than agreed and if we do it regularly, it becomes an expectation.
Over-processing is as much an issue among internal customers as it is with external customers. In the example above we looked at John who produced a high-quality internal sales report for an internal customer. The internal customer did not need the entire report. The customer just wanted one figure. This is a clear example of over-producing.
In Lean Six Sigma deployments, we often talk about the goal to achieve six sigma quality – 3.4 defects per million opportunities – but does your six sigma program need to achieve that level? The costs of going between four-sigma to six-sigma explode? If you are in the aviation industry then yes, but in the service industry, could four-sigma be sufficient?
To give you an example within parts of the PR industry, many clients are charged based on an agreed number of hours worked and not on an output or value-based pricing principles (learn more here). The hourly rate depends on the seniority of the person so the hourly costs vary from a junior Research Assistant through to an Account Manager and upwards. What is fairly common is what is called “over-servicing” – simply that we agreed to 8 hours with the client but we did 12. We agreed to use a research assistant but ended up using an account manager. The quality was obviously much better, but we delivered above and beyond the customers’ expectations and we suffered from over-producing.
It can be as simple as agreeing on a level of quality and delivering a better quality than required at a greater cost. Or perhaps having 5 levels of approvals when 3 is actually sufficient.
In the home: Over-processing in our personal lives is a little bit more complicated to identify I find and I am struggling with examples. One area that is clearly identifiable is with the way many manage our digital photographs. We store them locally on the computer or on the device. We then transfer them to a backup physical drive and then we upload them to a virtual drive with DropBox, OneDrive etc. Often the cost is minimal but I am sure that someone in most households is the nominated expert. Or it could be simply taking the car to the garage too often for a service.
Over-processing is often difficult to identify especially when the customer requirements are not clearly identified with clear specifications. So the real starting point for identifying this and most of the other wastes is with clear identification of the customer’s needs and what the customer actually values. And remember, this refers to internal customers as much as external customers.
Definition: Making more than is necessary or needed by the customer or the next step in the process
In the office: Over-production is incredibly common across all areas of business. We overstock our shelves full, we print a few more than required “just in case” and we produce a little more than is necessary thinking we are doing the right thing. The key issue with over-production is that when we produce more than is needed, not only are we “looking busy”, but we are forcing these items down the process causing excess inventory along the way.
Over-production becomes more serious as customer requirements continually change faster and faster. 20 years ago you might have been able to produce 500,000 units and spend 2 years selling them. But in today’s world, the chances are those customer requirements will change meaning any over-production will become obsolete and will require disposal. And if over-production drives inventory then let’s take a look at where the products, produce and other items are stored – just sitting and waiting to be used.
In the home: Within our homes, we also continually suffer from over-production. When preparing a meal, we always do a little more than necessary just in case. If shopping is production, then we all buy more than we need and then end up with inventory and expired inventory in our cupboards. And we continually fall for the 2 for 1 offers that often do nothing else than increase our required cupboard space.
One of the principle’s of Lean is to design processes to “flow”. Flow requires small batches and aligned processes. However, Over-Production stops flow through the creation of inventory. This, in turn, hides so many underlying issues that many refer to over-production as the worst waste of all.
There has been a massive movement away from bulk processing to just in time delivery over the last few decades led initially by the automotive industry. Supermarkets and the way they manage their inventory are a great example of trying to align a complex supply chain to deliver exactly what the customer wants when they want it and in the quantity, they want it with massive inventory everywhere. Amazon uses demand prediction to ensure the right products are in the right place at the right time to limit what it holds in stock.
We – humans – do have a deep “fear” of missing out (FOMA) or in other words running out of an item which we need. This fear, even in our daily work and home life decisions often drive the over-production problem.
People like to keep busy or appear busy as well, so when we run out of work, we have a habit to do a bit more and producing a few more items. And as businesses, we often are the culprit as we have a tendency to incentivise over-production with a bonus scheme for employees based on the number of units made or transactions processed or sales achieved. And let’s not forget the absolutely insane behaviour at the end of the year when we buy “stuff” or produce more simply to ensure we have spent our yearly budget.
Definition: Imperfect production that requires re-work, or doing work again
The last of the seven wastes is the one everyone can more easily identify with – Defects. Defects by definition are any step within a process which is not done correctly and requires some form of re-work or to be done again.
In the office: We are all swamped with Defect’s every day at works and it can range from a simple form which has been completed incorrectly through to a key product not working and requiring rework. Many organisations have large after-sales centres which handle issues, complaints, service requests.
And without doubt, defects cost every business a huge amount of money and effort to correct. The rule of thumb is the 1:10:100 rule which says that an error spotted immediately will take x$ to fix. If it’s missed and caught at the next step in the process it will be x10. If that is missed and its caught even later in the process it will be x100. For a great example of this think about vehicle recalls when major manufacturers must recall 1000’s of vehicles when a critical defect has been identified.
Scrap is also a defect – whether it be scrap paper from the printer or scrap material from large production materials.
Driving an open culture to help highlight defects and then figure out how to fix them is critical. But for this to actually take place, we need to be willing to put our hands up when we make a mistake knowing that others will not assign blame.
In the home: Our personal and home lives suffer from exactly the same thing as our workplaces. How many of us have done some home improvements either by ourselves or through some professional company only to notice that the quality of the work was poor – a defect? On the other side, how many of us have tried to claim repairs for items under warranty? It takes hours to resolve all because of a defected item that should have been right the first time.
As mentioned, defects cost businesses huge sums of money and resources. They cause customers pain and when customers experience pain they go elsewhere.
The 8th Waste – People & Talent
Definition: Not using people’s capabilities, talent and interests
The last waste – the eighth of the seven wastes – deserves a complete article of its own. Every business has a huge amount of untapped talent that today, an ultra-competitive and fast-moving market can make the difference between long-term survival. We have people stuck in roles which do not match their strengths. We have people at work who are bored and using LinkedIn to find their next challenge.
We often hear “people are our greatest asset” so this waste should never exist but it does and I personally believe it’s getting worse, not better.
Summary of the Seven Wastes
The “seven wastes” are not an all-inclusive list and should not be treated as such. These seven wastes (and 8th with Talent) are categories that can help you begin to look and identify wastes across your business.
The Waste Walk is a fantastic tool to start with. It is a simple one-pager which allows either an individual or a group of individuals to walk around a production area and begin to identify wastes. But identifying wastes is not enough. The benefit comes when teams can work together to eliminate the waste and find better ways of working.
You can download our Waste Walk template here.
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