Value added versus non value added activities
- Published: Saturday, 21 January 2012 18:30
- Written by David DeCiero
There are two types of actions performed in a business, value added and non-value added. Successful businesses will focus on value added tasks, whereas less successful ones will have non-value steps scattered throughout the process. The companies with a lot of non-value added tasks tend to be the ones that fail. The question becomes, how do I recognize and improve a process with wasted effort?
The first thing to understand is the meaning of “value.” Value is anything for which a customer is willing to pay. It can also be thought of as an activity that can create a comparative advantage for your company. A couple examples may make this clearer. When looking at a winery, a customer will obviously pay for the finished product, wine. So, when we look at the process to make wine, we find multiple value added tasks. The first is sourcing the grapes or juice. Since this step is very important in the quality of the finished product, then it is a value added activity. The same can be said for a retail store that sells wine. Sourcing the wine, either from importers or producers, is very important since it will appeal and sell to your customers. You can also think about these activities in terms of comparative advantage. If your winery or retail store is able to source the better grapes or better wine than the competition, that will give you an advantage. Therefore, it is these activities that should receive the focus of your time. I am sure that every business owner can provide an example of a non-value added task. These are the time wasting activities that provide nothing to your customers, but do consume your limited time. The main thing is to focus on “value” and strive to create it at every step you or your employees perform.
Once the meaning of value is understood, then you want to analyze your business processes to identify any effort wasted not creating value. One can do this in multiple ways, but it is best done using a methodical approach to understanding the process. This level of analysis will yield a full picture of any issues in the process. This will uncover any unnecessary steps or identify better ways to perform the activities. The goal is to reduce the amount of time and effort spent on non-value added activities, mainly to free up time to focus on value added activities. If you feel that you are utilizing your valuable time for low value tasks, please contact us at D1R Consulting to take advantage of our expertise. We will identify and help you improve your processes so that you can focus on those items that create value for your customers and improve your business.