On average, most business processes are inefficient and create an unhealthy amount of waste: once you learn to see the process waste all around — with Lean Thinking as your worldview — you will notice overprocessing, transportation, overproduction, waiting, inventory, motion, and defects. Aside from our processes producing waste, our processes also create burden on our people and also burden on the earth.
A company that I once did some work for was very concerned about the burden it was placing on its people and on the earth. In what follows, I will show that a firm can still be enterprising, care about people, and care about the earth.
As a review, let us first discuss Value, Waste, and the perspective of the customer.
What is a Process?
A process is an systematic activity comprising of smaller activities that culminate in an outcome — service or product. A process can take up time, space, and resources. All processes can be categorized into the following categories: Value-added, Non-value added but necessary, and Non-value added.
From the Customer’s Perspective:
- Value-added: This step in the process adds form, function, and value to the end product and for the customer.
- Non-Value-Added: This step does not add form, function, or assist in the finished goods manufacturing of the product.
- Non-Value-Added-But-Necessary: This step does not add value, but is a necessary step in the final value-added product.
(2) & (3) naturally create waste, of which there are 7 types:
- Over-Production: Producing more than is needed, faster than needed or before needed.
- Wait-time: Idle time that occurs when co-dependent events are not synchronized.
- Transportation: Any material movement that does not directly support immediate production.
- Processing: Redundant effort (production or communication) which adds no value to a product or service.
- Inventory: Any supply in excess of process or demand requirements.
- Motion: Any movement of people which does not contribute added value to the product or service.
- Defect: Repair or rework of a product or service to fulfill customer requirements.
It’s important to understand “Value” in terms of the customer. From the customer’s perspective, “Value” could be defined in the form of a question:
Which process steps (and associated costs) do our customers not have to bear?
It’s a revealing question — most companies are glad that they do not have to reveal how their product or service is created, for fear of their inefficient processes and wasteful operations revealed to the customer. This stance is sometimes aptly called “not revealing how the hot dog is made”, amicably referring to the unknown contents of the hot dog.
Burden on People; Burden on Earth
It is easy to see how the 7 Wastes above add substantial cost to the firm, reducing it’s margins, and negatively impacting the customer. But, what is less obvious is the burden that inefficient processes have on the earth.
I was on the Supply Chain and Logistics side of this company. This company aimed to reduce usage of packaging and wrapping material through simplifying specifications for packaging and wrapping and by promoting the use of returnable containers or bins. As a result of the efforts of a lot of caring people, this company reduced its volume of packaging by 15% than the previous year. Below is a picture of the results:
What is remarkable is that by lessening the burden on people by reducing the weight, bulk, volume, and material used for packaging, the earth also benefits because there is less CO2 used and less material is required to the same work. What is not highlighted is that safety and ergonomics was also a huge benefit — people now deal with less weight, bulk, and volume, which makes for a safer work environment.
This reduction of material used is a big win for People and for the Earth. What is also important, though less important than People or the Earth, is that costs were reduced by a substantial amount, which increases the gross margins of the firm, making shareholders very happy.
A False Dichotomy
Contrary to popular thought, there is an opportunity to be a good steward of the earth, take care of people, and also be an enterprising capitalist. The example above is a case study that supports that fact.