Larger profit margins can be boiled down to two actions – increasing output and improving efficiency. Frequently, businesses choose to increase their capacity to drive output, hiring staff and investing in new tools. They can also look for ways to work more efficiently with their existing resources. Reducing waste is essential in order to make processes more efficient.
Costs from wastes are ultimately passed on either to your customers or your business. Putting prices up can mask waste costs to a certain extent, but the market determines what your customers will pay. When customers find your product too expensive – or when a competitor tries to undercut your price – waste directly attacks your profit margins. Lean Manufacturing defines three wastes that must be reduced or eliminated: Muda (not adding value), Mura (unevenness), and Muri (overburden). In this article, we’ll take a look at the first waste, Muda.
What is Muda?
Muda is the Japanese word for waste. One way to describe a wasteful process or activity is “something that adds no value”.
And why should customers pay for waste? If you purchase a faulty product, should you be charged the cost of a replacement? If a table you buy has been in storage for twice as long as usual, should that extra storage cost be passed on to you? The concept can (and should) be applied to any line of business.
In some cases, determining what adds value and what does not is not so cut and dry. Business activities can be split into the three following categories:
- Value-adding
The steps that turn your raw material or concept into finished products, services and applications. Designing, developing, constructing, manufacturing are all value-adding activities. - Non-value-adding, but necessary
There are some business activities that your customers will not want to pay for, but are nevertheless essential. Activities related to compliance with government and law regulations fall into this category. These are not wastes, and cannot be eliminated – they can only be made more efficient. - Waste
Activities that do not produce value and are unnecessary are classed as wastes. These are what you need to reduce and eliminate to make your business more profitable.
Lean Manufacturing Mudas
The Toyota Production System, the precursor of Lean Manufacturing and Kanban, identified 7 Mudas or Wastes: Transportation, Inventory, Motion, Waiting, Overproduction, Overprocessing, and Defects. As the system has evolved and been adopted in knowledge work sectors, an 8th Muda has been added to the list: the waste of human potential.
Let’s take a look at how each Muda affects your business and what steps you can take to reduce waste and increase the profitability of your business.
Transportation
Unnecessary movement between stages of a process
In a manufacturing environment, this means the literal movement of raw material and stock from one place to another. Nevertheless, the concept still applies to knowledge work. Consider how a task moves from development to testing, or from writing to editing. What triggers the move from one state to the next?
Signing documents, reviews, sending emails – could any of these steps be made more efficient or even automated? One example could be setting up Trello notifications to notify other collaborators rather than manually sending emails. Another source of transportation waste is tasks moving back and forth due to miscommunication, unclear requirements, or poor quality of execution.
Inventory
Idle materials, products or work in progress
Inventory is the accumulation of work in progress. It can also mean an accumulation of finished product that has not been sold or delivered to your customer yet. In Kanban processes, this primarily appears in the form of WIP items splitting your team’s focus and causing a bottleneck. Inventory build-up indicates that your flow is being hampered. This waste is reduced by adhering to Just In Time principles and only pulling a task through when your team has the capacity to work on it.
Motion
Unnecessary movement within process stages
Whereas transportation focuses on unnecessary movement between stages of a process, motion waste seeks to reduce unnecessary movement within it. Making each motion as small and ergonomic as possible is crucial in a manufacturing setting. But how can you reduce motion in knowledge work? There are hundreds of wasted motions – manually inputting data, chains of emails, searching, and filing. Document management systems and business process automation are some methods used to reduce the waste of motion.
Waiting
Idle tasks
The Muda of waiting is easily the most obvious form of waste in a Kanban process. It frequently appears in two forms. First, tasks are idle because team members can’t handle all of the WIP. Secondly, tasks are queueing to enter the next process stage because there is not enough capacity to pull them through. Some methods to reduce waiting waste are making sure WIP limits are suitable for your team and establishing explicit Kanban rules and pull policies in your process.
Overproduction
Producing too much
This waste can negatively affect your business in multiple ways. Your customer may not need all of the product features developed – the effort spent on a high throughput is wasted! Overproduction equally ties up time, effort, and money that could be better spent on other value-adding activities, and leads to further waste by increasing Inventory/Work In Progress. Matching delivery to demand in timing as well as quantity is the core principle of Just in Time production.
Overprocessing
Doing more than is necessary
Overdelivering can be seen as a virtue, but in most cases, your customer will not be happy to shoulder an extra cost or wait additional time. The overprocessing Muda often comes from defining the specification or scope with your client too loosely – team members strive to deliver 100% when your client might only need 75% to reach their goals. This often comes from a misunderstanding of why customers buy your product, and what looks better to the product owner might look worse to the customer if the necessary market research and customer satisfaction data aren’t present.
Defects
Doing things wrong
The Muda of defects has costs which increase proportionally to how long it takes for the defect to be noticed. A defect that makes it through to your final product leads to poor customer satisfaction. Other costs include redoing the work correctly. Reducing this waste requires testing and quality assessments at each stage of your process to ensure defects are caught immediately after they occur.
Human potential
Underused talent, ingenuity, and creativity
Kanban strives to make processes more efficient and productive. All too frequently the human factor is overlooked. Your team members work on your process every single day – they will have many insights to contribute. Encouraging your team to give their input and help solve problems is a key part of Kaizen culture.
The Kanban method relies on the cumulative effect of multiple small changes. There will be hundreds of opportunities across your business to reduce waste a little bit at a time. However, to quantify the effect of a change, you must make sure you are accurately tracking your Kanban metrics. Rigorous measuring and analysis ensure you know which actions make the biggest difference to your customer satisfaction and your bottom line.
Which wastes are the biggest problems for your process? What steps have you taken to reduce them? Tell us about your experience in the comments!
